Local REITs Close 1.2 Mil SF in Net-Lease Deals

NEW YORK CITY-Two Manhattan-based REITS have closed purchase deals totaling more than a billion sf in net-leased industrial properties.

Real estate investment banking firm W.P. Carey & Co. LLC has completed the acquisition of two net-leased properties on behalf of member company Corporate Property Associates 14 Inc., a non-traded REIT. Both facilities were purchased from Atrium Cos. Inc. for $16.2 million. Included in the deal are a 400,000-sf manufacturing and distribution facility in Welcome, NC and a 165,000-sf plant in Murrysville, PA, also a manufacturing and distribution center.

Meanwhile, Lexington Corporate Properties Trust has acquired two warehouse properties in Hebron, OH in a $13.6-million transaction. The first property is a 400,522-sf warehouse built in 1999 on 21.6 acres. It is leased to Owens Corning until 2009. The second facility is a 250,410-sf warehouse built last year on 13.6 acres. Its lease, also with Owens Corning, expires in 2010.

Sale-leaseback deals have become increasingly popular as the economy continues to flounder, providing sellers with quick liquidity and buyers with low-maintenance properties and creditworthy tenants locked into long-term deals. Lexington on Monday expanded by $200 million an existing joint venture created specifically for the acquisition of net-leased properties.

Lexington president T. Wilson Eglin says he expects a near-term increase in sale-leaseback investment opportunities. “In a slow economy we see more sale leaseback opportunities,” Eglin tells GlobeSt.com. “When the economy is strong we find more opportunities in the build-to-suit area. Volume in each of those categories seems to fluctuate with the economy. In the last couple of years we’ve been involved in more build-to-suits. Over the next 12 to 18 months we expect to see more sale-leasebacks.”

According to W.P. Carey executive director Gordon J. Whiting sale-leaseback deals are “definitely growing every day. It’s a great way for companies to raise money,” he tells GlobeSt.com. “They can take a depreciating asset that’s on their balance sheet, sell it and monetize it to full fair market value.”

Whiting says the explanation for what was once a $30-million-per-year market at W.P. Carey exploding into what is currently a $400-million-per-year phenomenon at the firm is twofold. “For one thing it’s been an education of CFOs, CEOs chairmen and presidents of companies,” Whiting says. “The other thing is that now we’re in a credit crunch where lenders are not as willing to lend.” Sale-leaseback deals, he says, give a company more bang for the buck and look better on paper than traditional mortgages. Best of all, sale-leasebacks allows business owners to invest in their businesses. “They’re better off taking the money that’s in bricks and mortar and putting it back into the business.”

The latest W.P. Carey deal is its third similar transaction in three years with window-manufacturer Atrium on behalf of CPA 14. In November 1999, Carey arranged CPA 14′s acquisition of three Texas facilities. The following August, Carey assisted CPA 14 in providing construction financing for a build-to-suit acquisition of an Atrium industrial facility, also in Texas. The new acquisitions will be included in the 20-year bond-type net lease of the build-to-suit property, which was completed in March.