SALE and leaseback options might have been popular in the commercial property boom, but they are looking a distinctly less attractive option for loan-starved Tees Valley companies wanting to release equity for investment.

Jonathan Simpson, associate director in the Middlesbrough office of Sanderson Weatherall, said that Woolworths, which went into administration last week, was a prime example of how sale and leaseback deals had been used in the past, but ultimately it proved a cautionary tale.

The high street chain was made a hostage to fortune by parent group Kingfisher’s decision to sell and leaseback more than 180 Woolworths stores in 2001, raising £614m for Kingfisher but committing Woolworths to 25-year leases with a minimum annual rent rise of 2.5% a year.

Even if rents fell elsewhere on the high street, Woolies’ continued to rise.

“It all depends on the company’s individual circumstances and its business plan.

“If you’re comfortable about the next five to 10 years fine, but companies have to be mindful that investment yields have definitely moved out,” said Mr Simpson.

“Over the last few years, investment value has been superior to capital value, but now there’s nothing in it.”

Which may mean companies cannot realise as much as they once did from swapping their owner-occupier status for leaseholder.

That said, Tees Valley prices across retail, industrial and office space were holding up well, said Mr Simpson.

“Teesside’s always been steady and away.”

He warned though that investors were taking a much closer look at a company’s circumstances before taking a punt on their property.

“Sale and leaseback was a trend three or four years ago when times were really good and property values were buoyant.

“I think people have seen through it a little bit.”