W.P. Carey Seeks $3 Billion in Sale-Leaseback Deals in Europe

Bloomberg BusinessWeek - July 16, 2010

W.P. Carey & Co., owner of the New York Times Co.’s headquarters, plans to spend about $3 billion buying European properties and leasing them back to the sellers as more businesses divest real estate to raise money.

The company, which specializes in sale-and-leaseback deals, has about $1.5 billion of cash to invest in the region during the next three to five years, H. Cabot Lodge, head of Europe, said in an interview at the company’s London offices. It plans to borrow a similar amount over that period to help finance acquisitions, he said.

European companies are increasingly turning to sale- leaseback arrangements to raise cash as bank lending remains restricted, according to broker CB Richard Ellis Group Inc. By selling their shops, offices or warehouses, companies can use the proceeds to expand and stay in the buildings as tenants.

“Capital is still tight,” said Lodge, 54. “A lot of chief executives who said they would never sell their real estate are now being pushed into it.”

Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, raised 1.15 billion euros ($1.5 billion) in September by selling 948 of its branches. HSBC Holdings Plc sold its headquarters in London’s Canary Wharf financial district for 1.09 billion pounds ($1.7 billion) in April 2007.

W.P. Carey’s funds already own about $3 billion of properties in Europe and about $7 billion in the U.S. There is far more potential for sale-and-leasebacks in Europe than there is in America, Lodge said. Two-thirds of European businesses own their properties, compared with a third of U.S. companies, according to W.P. Carey.

CB Richard Ellis is advising about three times as many European landlords about raising money from their real estate as it was a year ago, said John Wilson, the broker’s London-based head of corporate strategies.

“They’re effectively short of working capital to restructure themselves for the upturn,” Wilson said in a telephone interview.
The value of European sale-and-leasebacks surged to 46 billion euros in 2007 from 6.9 billion euros in 2004, according to CB Richard Ellis. Such deals have made up about 20 percent of European real estate transactions since 2007, Wilson said.

W.P. Carey purchased two warehouses from Eroski, a Spanish supermarket chain, for $52 million last month, according to its website. The company’s biggest European deal was in 2007, when it bought a real estate unit and some debt from Hellweg, a German home-improvement company, for 335 million euros.

In March 2009, W.P. Carey bought the space occupied by the New York Times in its Manhattan headquarters for $225 million and leased it back to the newspaper group for 15 years. Sphere: Related Content