GlobeSt.com: Can you be a bit more specific?

DuGan: Some of that is anecdotal; it's just a sense of the status of the market, the transactions we see and the total potential that's out there as well as the specific deals we've done. That being said, we averaged $400 million in acquisition volume over the past three years. Five years ago it was between $100 and $150 million.

GlobeSt.com: Sale/leasebacks can't be as lucrative to the corporate holder in a down cycle. What's their justification?

DuGan: They gain the financing solution they seek. This is not a real estate play for them. They may look for fair-market value, but they're relatively insensitive to whether the market is going up or down. Besides, if they sell it for more, their rent will be higher.

GlobeSt.com: Will you take any and all deals?

DuGan: It's hard to quantify the number of deals we've passed on--such as telecom hotels, where the fundamentals--cash flow and tenant creditworthiness--are so bad it just becomes too difficult an asset to manage. They're almost venture-capital plays.

GlobeSt.com: What other asset types will you tend to avoid?

DuGan: Assisted-living. Despite the fact that there's always a market, we haven't found our comfort level there yet. For whatever reason, operators are quite heavily leveraged and there are too many question marks. At the same time, we look at everything from a risk/return standpoint, and we'll get into markets that others wouldn't.

GlobeSt.com: Such as?

DuGan: We recently completed a three-property leaseback with Rave Reviews Cinemas. You couldn't find a more troubled industry, but we liked Rave because they were a new operator and they didn't have a lot of old theaters. We purchased three theaters--in Dallas and in Port St. Lucie and Pensacola, FL. Even on the downside, all of the theaters had adequate coverage; on the upside, we'll take an equity warrant on the company's stock.

GlobeSt.com: How often do you go after the warrants?

DuGan: We'd do it every time if we could; it's a great kicker for the investors. But companies tend to be very tight with their equity, so we do it where it's particularly opportunistic.

GlobeSt.com: What sort of hold does Carey look for in the properties you buy?

DuGan: We have a liquidity horizon of eight to 12 years, but we're willing to sell assets in a shorter period. We just sold a San Diego office property to Bea Systems for $31 million, four years after we purchased it. We bought it for roughly $21 million.

GlobeSt.com: So what's ahead for the sale/leaseback market?

DuGan: I expect it to pick up, even if the economy improves. Capital markets and lending won't pick up as quickly, which means that corporations will still be searching for those alternative financing options.

GlobeSt.com: And when the credit crunch is over?

DuGan: We still have the fundamental trend I referenced before--corporations have been shedding real estate for the past decade. As long as corporations want to clear their balance sheets, sale/leasebacks will grow in popularity.