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

For an international real estate investment manager that has a three-decade track record in the business and more than $5 billion under management, you'd think that a $445 million deal would be routine -- especially in today's capital-infused environment.

But it's the largest single transaction ever for investment manager W.P. Carey(WPC Quote), a pioneer of the sale-leaseback format in the U.S. The nearly half-billion-dollar deal -- which Carey International President Edward LaPuma says has a capitalization rate of around 7.5% -- is a major vindication of Carey's concerted 10-year push into markets in Europe and Asia, regions that have yet to really embrace sale-leaseback as a strategy.

In early May, Carey announced it had acquired an interest in one of Germany's leading do-it-yourself (DIY) retailers, Hellweg Die Profi-Baumarkte GmbH & Co., through a partial buyout of Hellweg's real estate subsidiary. At the same time, Carey provided Hellweg with financing backed by 37 of the company's 72 stores. All of the locations in this transaction are in Germany; Hellweg also has stores in Austria.

The Sale-Leaseback Trend

Although not particularly large deal in a time of proliferating multibillion-dollar asset sales, the scope of this deal is meaningful not just for W.P. Carey and Hellweg, but also in the framework of a growing awareness of triple-net leases as a means of leveraging cash and moving assets off balance sheets overseas....