As the size of stores and car showrooms emerging on the Romanian market is expanding, the funds demanded by these investments have sparked a search for more advantageous financing methods.
Sale & lease back has been one of the most frequently sought financing alternatives lately, starting to account for an increasing part of the deals concluded by leasing companies.
“Large corporate clients are the ones most frequently turning to this product, as they have established financial practices and are aware of the benefits this product, which is less known on the market, can have for a company”s cash flow,” stated Septimiu Postelnicu, general manager of HVB Leasing.
The principle is simple and allows a company to turn the property right it has over equipment or a building, into working capital.
Practically, instead of tying up several million euros in a car complex or a large store, companies sell their properties to a leasing firm, from which they subsequently buy them through a regular leasing contract.
“This is a financing alternative for all companies,” believes Dan Ostahie, chairman of the Altex group of firms.
The group has already resorted to this kind of financing system for the large store it opened last year close to the Orhideea trade centre, Bucharest. The store involved investments of almost 5 million euros in land and construction.
The same financing method will be used for the most recent large Media Galaxy store, opened as part of the commercial centre on the outskirts of Brasov. “We will resort to sale & lease back for stores that are going to require considerable investments,” Ostahie added.
The Brasov store, opened about a month ago, entailed investments of 4 million euros, being the first greenfield project of the Media Galaxy network. In 2004 the Altex group, leader of the electronics and electronic home appliances market in terms of sales, undertook an aggressive expansion policy, including the introduction of the Media Galaxy store brand for large and very large stores.
There are also other players on the electronics and electrical home appliances market interested in this financing method.
“We haven”t yet resorted to simple leasing or to sale & lease back, but we are already considering this for future developments. It may happen in 2006,” suggested Lorand Szavardi, general manager of Domo store network.
Retailers of electrical home appliances are not the only ones attracted by sale & lease back.
The first car complex opened by Premium Auto, importing the Jaguar and Land Rover brands for the domestic market, was in its turn
the subject of such a contract, according to the representatives of the importer. ionut.bonoiu@zf.ro; marius.anton@zf.ro