Showing 82 - 90 out of 110
Five Milestone Moments to Commemorate Five Decades of Investing for the Long Run®
This year marks W. P. Carey’s 50th anniversary, the company’s most exciting milestone yet. Throughout its history, the company has gone through different stages on its journey from a small, privately held investment management firm to a $24 billion publicly traded REIT – but through all the twists and turns, at its core has remained dedicated to Founder Wm. Polk Carey’s commitment to Investing for the Long Run. To commemorate five decades, W. P. Carey reflects on five defining moments in its history and celebrates how far it has come since its humble beginnings. Raise a glass and cheers to #50yearsofWPC! 1. W. P. Carey & Co is founded by Bill Carey W. P. Carey Founder Bill Carey was a born entrepreneur. As a child he sold soda and writing ink he made in his basement to his neighbors. When he arrived at college to begin his freshman year, he soon discovered he owned something many of his schoolmates did not – a small dorm room refrigerator. Seeing an opportunity, he purchased as many refrigerators as he could afford and leased them to his schoolmates for a small fee. By the end of his sophomore year, he had made over $10,000. This simple idea laid the groundwork for the founding of W. P. Carey (then W. P. Carey & Co) on April 3, 1973. Through W. P. Carey, his goal was twofold; to support growing companies with an immediate cash infusion through the purchase of their real estate and to provide individual investors with the opportunity to easily invest in income-producing real estate without the significant financial burden of purchasing an investment property. 2. W. P. Carey Begins trading on NYSE On January 21, 1998, Carey Diversified LLC – the consolidation of Corporate Property Associates 1-9 which would later merge with W. P. Carey & Co to become W. P. Carey – began trading on the New York Stock Exchange under the ticker symbol “CDC” (now “WPC”). When the company started trading, it had a portfolio of 198 properties in 37 states. This milestone made W. P. Carey accessible to all investors and broadened the company’s opportunities for future capital. It was also the year W. P. Carey issued its first dividend, laying the foundation for its reputation today as a reliable income-producing stock. This year, W. P. Carey celebrated 25 years of trading on the NYSE! 3. W. P. Carey expands to Europe with opening of its London office In 1999, W. P. Carey expanded into Europe with the opening of its London office. This launched a whole new avenue of investment opportunities and reinforced the company’s commitment to diversification – now across geography, in addition to property type and tenant industry. W. P. Carey was among the pioneers of the sale-leaseback model in Europe, helping to introduce the financing tool and its benefits for corporate owner-occupiers seeking capital. In 2008, W. P. Carey further grew its European foothold with the launch of its Amsterdam office. To date, W. P. Carey has invested over €8 billion in Europe, building a portfolio of more than 600 European assets across 20+ countries. 4. W. P. Carey converts to a REIT On September 28, 2012, W. P. Carey converted to a Real Estate Investment Trust. Somewhat limited by its existing structure, the REIT conversion helped increase the company’s visibility and expanded its access to institutional capital. As a result, W. P. Carey was able to significantly increase the size of its portfolio, grow dividends and diversify its shareholder base with both active and passive REIT investors. In 2014, the company completed its inaugural public equity and US bond offerings and received investment-grade ratings from Moody’s and S&P. 5. W. P. Carey concludes its exit from the non-traded REIT business On August 1, 2022, W. P. Carey announced the completion of its merger with its final Corporate Property Associates program, CPA®:18 – Global. This marked the exit of the company from the non-traded REIT business, effectively completing its transition to a pure-play net lease REIT. This transition enabled W. P. Carey to not only simplify the business, but become a more valuable company with improved earnings quality, enhanced size and scale, improved cost of capital and a strong, more flexible balance sheet. Today, this enables W. P. Carey to focus on generating long-term earnings growth and delivering long-term value to its shareholders. Closing Thoughts While reflecting on all that’s been accomplished over the past 50 years, it’s important to also note that W. P. Carey’s future has never looked brighter! With a team of talented and dedicated employees and a simpler, stronger company, W. P. Carey is poised to continue delivering on Bill Carey’s mission of Investing for the Long Run for many years to come.
What’s Next for Net Lease?
The effect of rising interest rates registers in many ways around the real estate world, but perhaps the starkest impact can be seen in the investment volume differential in one of CRE’s most popular sectors. Net lease investment volume decreased roughly 35% year over year in the third quarter, according to Jason Patterson of W. P. Carey. The VP of investments at one of the largest diversified net lease REITs notes the Fed’s impact on market players has been far-reaching. “Net lease volume prior to the Fed moves had been near or at record levels so the run-up in rates certainly impacted people getting on the same page with the value of real estate or what they were willing to commit to on a cap rate basis,” Patterson said. “A high level of volatility in a space where people are making long-term investments is not the ideal environment.” A Debt Market in Disarray Call it a pause, a disconnect, or total debt market disarray, 2022 has brought major headwinds to a CRE industry and net lease sector that have gotten accustomed to cheap capital. Yet, Patterson reports still seeing a lot of attractive opportunities in the market. “Private equity-backed sellers or tenants continue to use sale-leasebacks as an attractive form of unlocking tied-up capital in their acquisitions, a counter-inflationary move that in some cases has been beneficial to us,” he said. “They’re viewing it more and more as a regular, very attractive component of the capital stack, which I think is good from a broad industry perspective.” Unencumbered by rising capital costs, equity investors have certainly found more room to work within the net lease market “The current environment favors people in a high certainty or all-cash type of capital structure like W. P. Carey,” Patterson said. “We’ve seen increased focus on certainty of close as levered buyers signed up for deals maybe in the early part of the summer and then with rising debt costs their assumptions didn’t pan out. You see deals come back to market as more investors have to reevaluate pricing in this period of volatility.” 2023 Outlook Citing the first half 2022 industrial deal volume exceeding more than 50% of the STNL market, Patterson forecasts that industrial product will continue to be a very attractive investment target. He added though that not all industrial product types are created or viewed equally. “Rather than just lump everything into broad industrial, we’re looking for real estate that is extremely critical to operations for our tenants,” he said. “Maybe we’re willing to give up a little bit in terms of fungibility for increased certainty that tenants are going to renew and keep paying rent for the long term. Asset classes such as cold storage and food production are extremely important to users and they don’t have a ton of alternative options available.” A $75 million sale-leaseback W. P. Carey completed in the second quarter embodies the above trends. The 25-year net lease for six mission-critical specialty manufacturing facilities totaling approximately 1.1 million square feet in three countries is backed by private equity. “There continue to be more and more deals getting done with private equity sponsorship, and we’d expect that to largely continue in 2023,” Patterson said. “The trend, a positive one for the industry, really is private equity ownership looking toward sale-leasebacks.”
Sail Through Inflationary Headwinds with Net Lease REITs
Experts are sounding the alarm bells regarding an impending recession due to sustained inflation, rising interest rates and conflict in Europe. As a result, some investors are questioning whether their portfolios are resilient enough to weather an economic downturn. For investors seeking a reliable dividend stock to add to their portfolio, one worth considering is a net lease real estate investment trust (REIT). REITs are companies that own or finance different types of properties and net lease specifically refers to the triple-net lease structure, whereby tenants are responsible for paying expenses related to property taxes, insurance and maintenance. Net lease REITs generally own single-tenant properties leased to creditworthy tenants and operate like corporate bonds due to their long-term leases. However, unlike bonds, net lease REITs can grow substantially through a combination of rent increases and external acquisitions, offering both stability and the potential for long-term growth. In today’s volatile market, here are three reasons why investors should consider adding net lease REITs to their portfolio. Stable dividend yields provide long-term income REITs have high and reliable dividend payouts compared to other stocks due to the REIT structure which requires at least 90 percent of taxable income to be distributed to shareholders as dividends. Several REITs have also increased their dividend over time, which has historically outpaced the rate of inflation and provided investors with steadily growing income. Furthermore, REITs can offer long-term capital appreciation through stock price increases, providing investors with total returns comparable, and often higher, than those of other stocks and fixed income investments. This demonstrates that REITs can be an attractive investment option for both income- and growth- focused investors. Contractual rent increases offer hedge against inflation Some net lease REITs provide natural protection against inflation due to contractual rent increases imbedded in their leases. These can be fixed or linked to an inflationary index such as the consumer price index (CPI). CPI-linked rental increases enable REITs, in particular net lease REITs that are not responsible for property management expenses, to directly offset inflation and pass on rising costs to the tenant. Inflation also tends to increase property prices which increases the overall value of a REIT’s portfolio; however, this growth is tempered by a REIT’s increased cost of debt due to rising interest rates. Regardless, these characteristics help protect investor returns against inflationary pressures, adding resiliency to a portfolio. Diversification protects against certain market risks Some net lease REITs offer diversified portfolios of real estate, meaning they invest across a range of property types, geographies and tenant industries. This ensures that no individual tenant, asset type or industry will have an outsized impact on overall performance, insulating investors from individual market risks and offering stability in economic downturns. Net lease REITs also offer diversification compared to other stocks and bonds an investor may own in their portfolio, as real estate is a distinct asset class that has demonstrated low correlation with other sectors of the stock market. In other words, net lease REITs tend to outperform when other assets in a portfolio are struggling, offsetting market volatility. Conclusion When investors are choosing a net lease REIT for their portfolio, it’s important to consider that not all are created equal. Selecting a REIT with an established history and experience performing in all market cycles will ensure investors are protected from adverse impacts, while reaping the benefits of stability and growth over the long term.
Top 3 Financial Strategies for CFOs to Fund Business
Inflation is currently at 8.2% year to year, way above its 2% benchmark. The Fed has increased interest rates three times in a row to try and keep inflation under control, with promises of further interest rate increases to achieve a terminal target of 4.6% in 2023. Higher interest rates have a direct impact on your funding efforts. Increasing rates reduces spending power, causing stock prices to fall almost immediately while increasing the cost of debt. In an ideal world, you would be able to make all the money you need by simply selling goods and services. But the general business strategy is that you need money to make money, which means getting external funding. Finding affordable funding can be a difficult strategic decision for any chief financial officer, especially in the current economy. While equity and debt are major sources of business funding, a sale-leaseback is a good option to consider when you are looking for more affordable financing. Here's a closer look at the pros and cons of debt, equity and sale-leasebacks and why a sale-leaseback may be the best financial strategy for your company in the prevailing economy. Public markets capital raise (equity and debt) One of the ways to raise funds is through debt or equity financing. With debt financing, you issue corporate bonds to the public and pay back the full loan amount plus interest upon maturity of the bond. Corporate bonds attract a higher rate of interest than government bonds because of the perceived higher risk, meaning more costs for you. Equity financing involves selling company shares in the stock market and paying the equity holders a dividend or return should the stock value appreciate. Your obligation to pay earnings to equity holders will depend on the types of shares held. Preferential shareholders receive payments first, while common shareholders get paid after creditors and preferred shareholders. Pros You can raise large sums of money from the public. Interest rates paid are typically lower than bank interest rates. Stock issuance does not require you to pay investors. Payments are based on business performance. Interest on debt financing is tax deductible but there are limitations. Cons The current rising interest rates have caused a general fall in share prices, making equity funding a less ideal way to raise funds. Equity raises dilute stocks since each shareholder owns a small piece of the company. The current economic slowdown makes it harder for businesses to get debt financing. Even when you do, the cost of debt is high and you have to pay lenders regardless of the performance of your business. While you do not have to repay equity, shareholders are entitled to a share of a company's earnings. Dividends paid to investors are not tax-deductible like in debt financing. Investors are a huge part of your company's decision-making. Outside funding can cause tension between your company and investors. Loans A loan can be handy when you need working capital or funds for short-term needs, especially when you are running a high-growth business. In this case, you can borrow money privately, for instance, from a bank. Pros The market has a variety of lenders you can chose from. Interest on debt financing is tax-deductible but there are limitations. Private borrowing can help boost your credit score. Cons Interest rates are rising, making it difficult to find a good rate for your loan. Banks are increasing their lending restrictions. Refinancing a loan can be more expensive as interest rates keep rising. You have to repay lenders even when your company isn't doing well, which can result in bankruptcy or litigation. Debt and equity finance can be risky. Failure to repay public debt or a loan can result in default or bankruptcy which affects corporate credit scores. Equity financing also has its downsides since you miss out on tax benefits and also risk ownership dissolution since new and old investors expect a share of corporate profits. These cons are a great reason why sale-leasebacks are the more attractive option. Sale-leaseback What is a sale-leaseback? A sale-leaseback, also called a sale-and-leaseback, is an agreement between you and an investor where you sell your real estate for 100% of the value of your property and simultaneously enter into a long-term lease for the same property. A sale-leaseback is not classified as debt or equity but as a hybrid debt product. You can access much-needed capital when you sell your real estate within a sale-leaseback agreement without increasing your debt. A sale-leaseback is the best financing option when you have cash invested in your property or land that you could use to better your cash flow or invest in profitable business projects while maintaining operational control of your asset. A sale-leaseback is one of the best financial strategies for CFOs to fund business as it can improve your financial statements. By enabling you to pay down debt and improve cash flows, sale-leasebacks can improve your company’s balance sheet health. Pros Rental payments from a sale-leaseback qualify for tax deductions. You transfer the volatility risks of owning your real estate to the new owner. The agreement involves a long-term lease at your agreed-upon rental rate, providing stability for the future. Sale-leasebacks generally fetch a lower rate in the current environment when compared to debt financing. You get a long-term capital partner who can fund future expansions, renovations and build-to-suits to help grow your business. If you're not in the business of owning real estate, you can unlock 100% of cash in illiquid real estate at market value and reinvest it in profitable areas of business. You can maintain operational control of your real estate after selling it. A sale-leaseback gives you immediate access to capital to reinvest in your core business operations compared to a loan or equity financing which may take some time. Cons If you've never done a sale-leaseback, you may not even know how to start. W. P. Carey can help. We specialize in acquiring real estate and creating custom sale-leaseback structures to meet your unique needs. You need to own your real estate assets to pursue a sale-leaseback, so this type of financing may not be possible for some businesses. We're here to help with your sale-leaseback needs If you are looking for more cash flow for your business, you could take the traditional route with capital raising or a loan or go for a sale-leaseback. A sale-leaseback may be the more attractive strategy to secure the financial flexibility you need to pursue your strategic business goals. Learn more about sale-leasebacks and how other companies use them as a powerful capital solution to fund business growth. Think a sale-leaseback is right for your company? Contact our team!
Leveraging corporate finance to unlock real estate capital
Economies and markets have grappled with a succession of enormous challenges in the wake of the pandemic. Healthcare and geopolitical crises have cascaded into the fiscal, financial, supply chain and monetary realms, with inflation rearing its head and interest rates rising in its wake. Rising interest rates will, in our view, cause commercial real estate values to correct significantly over a two-year timeframe. Some investors are taking to the side-lines in this period, subduing overall activity. Others are seeking opportunities. Many of these opportunities will emerge among corporates seeking to monetize their property assets in order to release capital. This will be for both defensive purposes (for instance, to service or pay down debt), or to explore new growth opportunities of their own. Written by Colliers Corporate Capital Solutions and featuring contributed content from Christopher Mertlitz, Head of European Investments at W. P. Carey, this 24-page whitepaper seeks to educate the reader on the macro-outlook of the global real estate pricing reset and evaluates a range of lesser-known capital-raising options for corporates to consider as traditional lenders grow more risk averse and bond issuance looks less attractive. Given the current market dynamics, sale-leaseback strategies appear to be emerging as the preferred solution for many corporates, particularly sub investment-grade organizations seeking to strengthen balance sheets. Find out why in this latest report.
Optimism Amidst Uncertainty: Key Takeaways from EXPO Real
Earlier this month, Europe’s largest real estate trade show EXPO Real returned in Munich. Nearly 40,000 attendees gathered to network and discuss trends, innovation and opportunities in the real estate market. Traditionally, EXPO is a place “where deals get done” but given the current challenges in the macroeconomic environment attendees were more focused on understanding where the market is heading into 2023. Here were three of the most prominent topics discussed. Rising interest rates With the European Central Bank announcing its third consecutive rate hike this month, interest rates were the main topic of discussion at EXPO Real. Largely, attendees were focused on how assets should be priced to reflect rising rates, with the consensus that we’ll continue to see cap rates rise and property prices fall into next year. However, a big challenge that attendees are facing is how to bridge the gap between seller expectations and the pricing buyers will need to generate adequate returns. To compound the issue, inflation remains at record highs in Europe which means more interest rate increases are certainly on the horizon. This will create an even more challenging environment for real estate investors that require third-party debt financing to close transactions, making all-equity buyers better positioned to execute on deals. Logistics still dominant Despite the macroeconomic doom and gloom, the current market still has room for certain sectors to thrive. Logistics remains the darling of the real estate world, with Europe seeing record logistics investment volumes in the first half of 2022. 20% of all real estate investment in Europe is in the logistics sector, suggesting there is still a very strong investor appetite for the asset class. The sector continues to benefit from tailwinds amplified by COVID such as the rise of e-commerce, which continues to drive occupier demand for logistics and warehouse space. Record-low inventory and high demand have meant the logistics sector has been slower to see cap rate increases than others; however, many are seeing a re-pricing period take place which is critical for investors looking to close transactions. Sale-leasebacks gaining prominence as bank lending becomes more restrictive Amidst all the uncertainty at EXPO Real, there was still an undercurrent of optimism among attendees. Historically, we’ve seen more sale-leaseback opportunities come to market in challenging economic environments as a result of companies seeking ways to shore up capital to support ongoing business operations and growth. With banks becoming more restrictive with lending, alternative forms of capital such as sale-leasebacks provide an immediate opportunity to plug the financing gap for companies. And with interest rates likely to continue rising into 2023, now is a great time to pursue a sale-leaseback and lock in an attractive rental rate for the long-term.
Three Ways Supply Chain Disruptions are Impacting the Commercial Real Estate Market
The emergence of the coronavirus in early 2020 caused a drastic slowdown in supply chains across the globe. Labor shortages, fluctuating consumer demand, disruptions in shipping lanes, COVID-19 restrictions as well as general economic uncertainty caused major disturbances in the flow of goods. The war in Ukraine further compounded these issues by cutting off the supply of critical raw materials and ratcheting up energy costs. These disruptions have caused several challenges and opportunities for commercial real estate as the industry focuses on restoring the reliability of the global supply chain. Here are three of the most significant impacts: Rising demand for warehouse space During the pandemic, many companies struggled to restock in-demand products driven by a steep increase in online orders amid global lockdowns. Once lockdown restrictions loosened, this led to an “inventory bullwhip effect” as companies over-purchased merchandise to avoid future inventory shortages. Sustained supply-chain bottlenecks led retailers to continue over-purchasing—shifting from “just-in-time” inventory management to a “just-in-case” model in an effort to keep more inventory onsite. As a result, the demand for warehouse space skyrocketed. The impact of this rising demand is significant. On one hand, warehouse sellers can get a significant premium for their property if they pursue a sale-leaseback of their real estate. However, companies looking to acquire or rent warehouse space might have a difficult time as vacancies are at record lows—for U.S. industrial properties it’s just 4.1%. Supply chain disruptions causing delays in construction materials also increase the build time for new warehouses, meaning many companies are left waiting several years for the space they need to accommodate today’s surging retail inventories. From an investor perspective, rising demand often translates to low cap rates for well-located warehouses despite inflationary pressures and rising interest rates. However, the shortage in available space also enhances the criticality of these properties to tenants, making them less likely to vacate at the end of the lease term. Re-shoring supply chains Supply chain disruptions highlighted the risk of off-shore operations for many manufacturers. As a result, many manufacturers are making the decision to re-shore their production facilities to protect against such disruptions in the future. In fact, in 2021, a record 1,800 companies re-shored their production operations in the U.S. Companies looking to re-shore production are choosing locations with a high availability of land for development, a large pool of skilled labor and well-developed transportation infrastructure including railways and ports. This has led to an increase in development in the Midwest and South due to both regions’ access to rail infrastructure and seaports respectively. While re-shoring has contributed to the rising demand for warehouse space, it has also opened up new opportunities for investors as companies look to rent existing warehouses in tertiary markets that may not have historically been attractive, but have access to transportation infrastructure and land available for development. Increased interest in last-mile logistics space With limited warehouse space available, companies are having to get creative with their distribution strategies. One such method is through last-mile warehouses, which facilitate the movement of goods in the supply chain to the final destination. These warehouses are typically located close to the consumer and therefore decrease supply-chain costs while minimizing delivery time. As a result, warehouses situated near major highways and bridges that lead into metropolitan hubs are becoming highly in-demand for companies looking to make their distribution network more nimble. This presents an opportunity for investors who own these types of facilities to capitalize on demand and secure high-quality tenants on long-term leases.
Three Ways CFOs are Leveraging Sale-leasebacks to Prepare for a Recession
The U.S. economy has hit some major roadblocks in recent months. Sustained high inflation, supply chain disruptions and rising interest rates have all signaled to economists that we are either in or on the verge of a possible recession. While there is no universal playbook on how to prepare for a possible recession, for companies that own their real estate, a sale-leaseback is one lesser-known, value-extracting method savvy CFOs should consider. In a sale-leaseback a company sells its real estate to an investor for cash and simultaneously enters into a long-term lease. Proceeds from the sale-leaseback can then be used to bolster a business’ balance sheet and provide the financial flexibility to help navigate a volatile economic environment. Here are three ways CFOs are using sale-leaseback proceeds to grow their businesses and prepare for an uncertain future: Pay down debt and improve credit The last thing businesses want to deal with when a recession hits is mountains of debt to pay down with limited cash flows. By pursuing a sale-leaseback now, companies can unlock capital to reduce leverage and improve their balance sheet health. The reduction in leverage helps improve both a business’ debt / EBITDA ratio in addition to debt / capitalization. As a result, companies will have less debt obligations to worry about and may even improve their credit – leaving them better positioned to weather an economic downturn and secure loans at attractive rates in the future should they need to. Redeploy capital to higher ROI business segments It is almost always the case that businesses can earn more by reinvesting the capital locked up in their real estate (an otherwise illiquid asset) into their core business operations. This makes sale-leasebacks an attractive capital tool for almost any business with owned real estate. Common uses of sale-leaseback capital that can boost a business’ returns include, acquiring new equipment, funding R&D, launching new product lines as well as growing their market share in existing business lines through acquisitions. Improving the efficiency of a business while increasing profits will not only help companies endure a short-term recession, but also position the business for long-term success. Unlock financial flexibility for future growth Sale-leasebacks are a unique financing structure as they give a business the opportunity to convert a non-earning asset into growth capital. Sale-leasebacks also typically have no more restrictive financial covenants than a traditional bank loan – providing CFOs with significant discretion in determining the best use of their company’s cash. In a recessionary environment when companies typically struggle with dwindling cash flows, having the extra capital from a sale-leaseback could offer companies the financial flexibility to take advantage of growth opportunities as they arise, setting them apart from their competitors who may be struggling just to stay afloat. Conclusion For many companies, sale-leasebacks are a cost-effective strategy to unlock capital which can help improve balance sheet health and enable companies to invest in growth, positioning them for longevity and success even amidst an economic downturn. Given the rising rate environment, it’s also advantageous for a company to pursue a sale-leaseback now to lock in an attractive long-term rental rate before interest rates likely rise again in the fall. Ultimately, preparing for a recession comes down to preparation. By making strategic business choices now, CFOs can prepare for an uncertain future.
Inflation Pumps the Case for Sale-Leasebacks
Money isn't worth as much these days, but it's not getting any cheaper for businesses seeking growth. Facing 40-year-high inflation, the Federal Reserve has gone from 25- to 50- to 75-bp rate increases. Loans may no longer make sense for cash-strapped companies. That said, continued inflation could make a sale-leaseback an attractive alternative, according to Tyler Swann, managing director at W. P. Carey. "A sale-leaseback allows you to lock in your cost of capital for a very long term," says Swann. "If you take the view that interest rates are going to continue to rise, locking in that cost of capital today could be very valuable for you." A sale-leaseback is when a business sells its real estate for cash and leases it back on a long-term basis from the seller. Often, the buyer-landlord is a REIT or other institutional investor that is equipped to make the most out of a real-estate asset. The seller-lessee company, meanwhile, benefits by being able to invest the value of the asset into the business. Swann makes the general case for sale-leasebacks more succinctly: If you're not in the business of real estate, why be in the business of real estate? "It is almost always the case that an owner of a business can earn more on reinvesting money in their business than they can on having that money locked up in real estate," says Swann. "It's more capital-efficient to have that building owned by investors who want to take that risk specifically." This two-way street of capital efficiency is heightened in the inflationary context because of how a business's needs differ from those of an investor. "Because of the Fed's aggressive stance on raising rates, short-term rates are probably going to rise pretty meaningfully in the next six to 12 months," says Swann. "But because the investments that we're making are such long-term investments, we're locking in our returns and borrowing costs for a very long period of time. So we're most focused on what long-term interest rates look like." When considering a sale-leaseback, Swann recommends that would-be seller-lessees consider the property's capitalization rate against such factors as the proposed lease term and rental-increase schedule -- as well as against the market as a whole. In an inflationary environment, this latter juxtaposition can be striking. "If you look at the broader debt markets, particularly high-yield debt markets, they're in very bad shape right now. Interest rates for high-yield debt have skyrocketed recently," says Swann. "And that has made sale-leaseback financing, [where cap rates have] not risen nearly as much, a much more attractive option on a relative basis."