W.P. Carey Builds Do-It-Yourself Approach

"It's the cultural significance of owning property," explains LaPuma. "In the U.S., owner-occupied real estate is in the 20%-to-50% range," he notes. In Europe, by contrast, "about 70% to 75% of commercial real estate is owner occupied." In other words, the market there has a mind-set that reflects centuries of in-place fee ownership, where land titles just don't trade. "Intellectually, practically, it's a more difficult market" for sale-leasebacks than the U.S., he says.

This, however, is the second multiple-asset transaction that the two entities have closed; the first was a $154 million, 15-property deal completed in 2005. The current transaction gives W.P. Carey a roughly 25% interest in Hellweg's real estate subsidiary.

Simultaneously with that purchase, Carey created a lease between that entity and the operating company "that is our typical type of lease," says LaPuma. But that wasn't the end of the deal. W.P. Carey then "made a loan collateralized by those 37 properties" to Reinhold Semer, the principal owner of the 102-year-old retail chain, who, says LaPuma, returned the proceeds of the deal to the operating company. "It looks like a sale-leaseback, but it is two distinct transactions."

Why the Rube Goldberg variations on the typical sale-leaseback? LaPuma says the deal reflects Hellweg's desire to move slowly into the new ownership structure in a way that "made them comfortable." Indeed, although at some point, as the comfort level rises, W.P. Carey could end up owning all Hellweg's real estate assets outright, Semer retains the right to buy back the properties.