Build-to-Suit
Forging Long-term Partnerships Through Tenant-centered Real Estate Solutions
At W. P. Carey, we view real estate as a long‑term partnership — not a one‑time transaction. We stay closely connected with our tenants, aligning our capital and real estate expertise with the evolving needs of their businesses. That philosophy is embedded in Carey Tenant Solutions, our platform designed to support tenant growth beyond the initial acquisition. Through follow‑on investments, we help tenants modernize, expand, redevelop, relocate and improve the energy efficiency of their facilities — allowing them to focus capital on what matters most: running and scaling their core business. Below is an overview of the core capabilities within Carey Tenant Solutions and how each can benefit existing and prospective tenants. Build-to-suits In a build‑to‑suit, W. P. Carey funds and manages the construction of a new facility — or the expansion of an existing one — tailored to the precise specifications of a prospective or existing tenant. Upon completion, the tenant enters into a long‑term net lease while retaining full operational control of the new or expanded facility. We offer two flexible approaches to build‑to‑suits: Build-to-suit financing: We provide construction capital while the tenant’s developer executes the project, either through traditional construction financing funded over time or via take‑out financing upon completion. Turnkey build-to-suit: We finance and manage the entire construction process, from site selection to final delivery. For tenants, the primary advantage of a build‑to‑suit is capital efficiency. Rather than tying up their capital in real estate, tenants can redeploy resources toward growth initiatives, innovation or strengthening operations — while still gaining a facility designed specifically for their needs. Learn how this approach helped support our tenant Cuisine Solutions’ growth. Redevelopments W. P. Carey offers comprehensive redevelopment capabilities, managing projects from initial design through delivery. Combining our internal development expertise and long‑standing relationships with leading architects, consultants and contractors, we assemble experienced teams capable of executing even the most complex redevelopment projects. Our redevelopment capabilities span: Repositionings, where we upgrade, modernize or expand an existing building while maintaining its core use. Redevelopments, which involve unlocking value of infill locations through adaptive reuse and ground up construction of state-of-the-art, primarily industrial, properties that meet the demands of modern occupiers. W. P. Carey’s turnkey redevelopment process is comprehensive and includes: Pre-construction planning and optimization Development feasibility and due diligence Zoning and entitlement approvals Design and permitting Budgeting and scheduling Construction management Creative lease structures Sustainable development Overall efficiency Our proactive approach allows us to work directly with incoming tenants to shape a property around their exact operational requirements, while enhancing the quality of our portfolio by retaining the best positioned assets in the highest barrier-to-entry locations. Learn more about our carbon-neutral redevelopment of a Class-A warehouse for a global IT services company. Energy Solutions Through Carey Tenant Solutions, we also help tenants reduce operating costs and advance their sustainability goals by designing, funding and implementing renewable power and energy efficiency projects directly at their facilities. We believe that improving the quality and sustainability of our assets delivers tangible benefits across our portfolio — increasing renewal probabilities, strengthening tenant relationships and enhancing long‑term asset value – all while helping our tenants reduce their carbon footprint. Our energy solutions include: On‑site renewables, including CareySolar® Efficiency retrofits, such as LED lighting upgrades Smart building technologies, including IoT‑enabled metering Green infrastructure, such as EV charging stations and battery storage Carbon‑neutral construction By integrating these solutions into our long‑term ownership strategy, we help tenants operate more efficiently today while building assets that are better positioned for the future. Read how we collaborated with our tenant, a healthcare products distributor, to fund a rooftop solar installation. A Platform Built on Partnership Collaboration with our tenants — and support beyond the initial transaction — has always been core to how we operate at W. P. Carey. With Carey Tenant Solutions, we have formalized and unified those capabilities, bringing decades of experience together under a single platform to deliver one of the most comprehensive tenant service offerings in the net lease industry. Interested in exploring Carey Tenant Solutions? Get in touch today.
Project Management Teams Deliver Big Value for Tenants
There’s no question that the current real estate development market is challenging. Labor shortages and rising material costs are creating hurdles in the construction industry, which is being compounded by limited inventory of vacant real estate for certain property types, leaving companies with very few options for additional square footage or property upgrades. The good news is that companies that lease their building may be in luck thanks to a high-value service some landlords are offering: a dedicated project management team. Project management teams come in all shapes and sizes, but they have the potential to handle all types of development projects (e.g., expansions, renovations and build-to-suits) as well as deliver turnkey solutions. REITs and other longer-term investors will often invest in these teams, priding themselves on being a partner to their tenants for the duration of the lease and beyond. Project management teams manage everything from conceptual planning to design to construction management, assembling a team of architects, consultants and contractors. This holistic service is particularly valuable since most tenants don’t have the resources—be it the capital, relationships or expertise—to execute these projects themselves. And leveraging their landlord’s project management team is often more efficient and cost-effective than hiring a third-party developer, and enables them to focus on their core business, which is most likely not real estate development. In today’s market, having access to a dedicated project management team with a shared interest in their tenant’s business and the expertise to effectively navigate current challenges is more valuable than ever. Here’s why: Renovate, modernize or convert an existing building Project management teams can adapt an existing building to reflect the tenant’s evolving real estate needs. This could encompass a full renovation and modernization of an outdated building or converting one property type to another (e.g., office to R&D) to reflect a changing business model. Moreover, with prices continuing to increase having a project management partner that can finance the upfront costs associated with these projects is critical. In addition, working with a project management team that understands the ins and outs of a tenant’s business along with being able to offer a tailored approach means the final product will be ideally suited to the tenant’s long-term needs, in comparison to if the tenant worked with a third-party developer. Expand an asset to accommodate a need for more space In order to continue growing, many tenants need to expand their real estate footprint to make room for more equipment, inventory and more. However, record-low availability of real estate means that many tenants can’t find the additional space they need. An in-house project management team can help by working with tenants to expand their existing space to accommodate growing business needs. A huge benefit of this approach is that tenants can typically continue operating in their existing facilities during an expansion, offering minimal disruption to day-to-day operations. Retrofit an existing space to make it more sustainable With energy costs continuing to soar, there’s never been a better time for tenants to update their properties to make them more sustainable. In-house project management teams can work on a variety of sustainability projects including renewable energy opportunities – such as solar panel installations – energy efficiency retrofits and green building certifications. These sustainable projects can reduce tenants operating costs and help reduce scope 1 and 2 emissions to align with their sustainability goals. Conclusion For landlords, investing in a project management team is a win-win. Turnkey project management solutions add value for tenants by adapting their property to meet their long-term needs, helping increase lease renewals while also improving the overall quality of the portfolio. From an investment perspective, having a project management team also provides a steady pipeline of attractive internal investment opportunities, while enabling the landlord to have project oversight on deals where they are also serving as the capital provider.
The Ins and Outs of Sale-leasebacks
What Is a Sale-Leaseback? In a sale-leaseback (or sale and leaseback), a company sells its commercial real estate to an investor for cash and simultaneously enters into a long-term lease with the new property owner. In doing so, the company extracts 100% of the property's value and converts an otherwise illiquid asset into working capital, while maintaining full operational control of the facility. This is a great capital tool for companies not in the business of owning real estate, as their real estate assets represent a significant cash value that could be redeployed into higher-earning segments of their business to support growth. What Are the Benefits? Sale-leasebacks are an attractive capital raising tool for many companies and offer an alternative to traditional bank financing. Whether a company is looking to invest in R&D, expand into a new market, fund an M&A transaction, or simply de-lever, sale-leasebacks serve as a strategic capital allocation tool to fund both internal and external growth in all market conditions. Key Benefits Include: Immediate access to capital to reinvest in core business operations and growth initiatives with higher equity returns. 100% market value realization of otherwise illiquid assets compared to debt alternatives. Alternative capital source when conventional financing is unavailable or limited. Ability to retain operational control of real estate with no disruption to day-to-day operations. Potential to gain a long-term partner with the capital to fund future expansions, building renovations, energy retrofits and more. Who Qualifies for a Sale-Leaseback? There are several factors that determine whether a sale-leaseback is the right fit for a company. To be eligible, companies must meet the following criteria: Own Their Real Estate The first and most obvious criterion for qualification is that the company owns its real estate or have an option to purchase any existing leased space. Manufacturing facilities, corporate headquarters, retail locations, and other forms of real estate can be potential candidates for a sale-leaseback. Unlocking the value of these locations and redeploying that capital into higher yielding parts of the business is a key driver for companies pursuing sale-leasebacks. Be Willing to Commit to Operating in the Space While the term of the lease in a sale-leaseback can vary, most investors will want a commitment from a future tenant to occupy the space for a 10+ year term. Assets critical to a company’s operations are often good candidates for a sale-leaseback because a company is willing to sign a long-term lease for those locations. This makes it a more attractive investment for sale-leaseback investors as they have more security that the tenant will stay in the facility for the long term. Have a Strong Credit Profile Companies do not need to be investment-grade quality to pursue a sale-leaseback. However, some credit history is typically required so the sale-leaseback investor knows that the business can make rental payments over the course of the lease. Sub-investment-grade businesses are still eligible as long as they have a strong track record of revenue and cashflow from which to judge their creditworthiness; however, they may need to find an investor who has the underwriting capabilities to assess their business. Minimum revenue and profitability requirements will vary based firm to firm, so it’s best to ask about this upfront before engaging with any particular sale-leaseback partner. Qualities to Look for in a Sale-leaseback Investor When considering a sale-leaseback, finding the right buyer is critical in order to ensure a company is maximizing the value of their real estate. Here are some of the key qualities to look for in a sale-leaseback investor. Experience A knowledgeable investor can offer more flexibility and guide sellers through the process, creating customized deal structures to meet all of a company’s unique objectives and avoid potential pitfalls. Additionally, experienced investors can typically navigate all market cycles and offer certainty of close (some in as little as 30 days), ensuring the deal closes in a timeframe that works for the company and their fiscal requirements. An All-Equity Buyer When looking for a sale-leaseback partner, finding an all-equity buyer is important, particularly when dealing with timing constraints. All-equity buyers don't have to worry about third-party debt or financing contingencies, meaning there’s less likelihood of a re-trade in the late stages of negotiation. All-equity buyers can also typically close faster as they do not need to wait on approval from banks or lenders, providing a smoother process overall. A Long-Term Real Estate Holder Finding a long-term investor is vital. Sellers don’t want someone who is simply looking to flip a property for a quick profit. Instead, look for an investor who will remain a committed partner to you over the long run and one that can provide capital for future projects such as expansions, renovations, or energy retrofits. Diverse Knowledge and Experience Different industries, property types and locations require unique expertise to efficiently and effectively partner with sellers to structure a deal that address the needs of all parties. Working with an investor with experience in the company’s specific industry, property type and/or country ensures that all potential risks and opportunities are considered before entering into a sale-leaseback agreement. For example, if you are considering a cross-border, multi-country transaction it’s critical you look for an investor with local teams in those countries who speak the language and understand the local rules. What is a Build-to-Suit? When looking into a sale-leaseback, another term companies may encounter is a build-to-suit. In a build-to-suit, a company funds and manages the construction of a new facility or expansion of an existing one to meet the specifications of a prospective or existing tenant. Upon completion, the company enters into a long-term lease, similar to a sale-leaseback. For companies looking for a brand-new property, this is a great solution that requires no upfront capital. The Main Benefits of Build-to-Suits Include: Development of a custom-built facility in a location of the company’s choice. No upfront capital required, enabling the company to preserve capital for its business. Ability to retain operational control of the facility post construction. Potential to gain a long-term partner with the capital to fund future expansions, building renovations, energy retrofits and more. Conclusion While sale-leasebacks may seem intimidating for companies who have never pursued one, working with an experienced and well-capitalized investor can make the process easy. When working with an investor like W. P. Carey, sellers can ensure they are working with a partner that can understand the unique requirements of their business while having the added option of closing in as little as 30 days and the added advantage of gaining a long-term partner who can support its tenants through flexibility and additional capital should they wish to pursue follow-on projects such as expansions or energy retrofits as their business and real estate needs evolve. In all market conditions, sale-leasebacks are a great financing tool to unlock otherwise illiquid capital that can be reinvested into a company’s business to support future growth. Think a sale-leaseback is right for your company? Contact our team today!
Tips for Ensuring a Successful Sale-Leaseback
A “great tool in really uncertain times,” the sale-leaseback can give immediate access to capital and minimize debt market exposure during uneasy economic periods. But for many looking to utilize it, the uncertainty of whether or not a deal will be successful can be a barrier to fully exploring it. Jason Patterson, SVP, investments at W. P. Carey, starts by recommending thorough planning and transparency and careful selection of the buyer and future landlord. “Especially with interest rates being volatile, knowing that your counter-party—the buyer—is experienced and well-capitalized is increasingly important, and will ensure that they show up at the closing table to complete the deal that you bargained for,” he says. Pre-Deal Prep Work Preparation and due diligence are always key in real estate investing, and it’s no different with sale-leasebacks. The seller/future tenant must figure out in advance its economic needs and preferences, including the term, rent level and rent escalators that make sense for the business. “Doing the pre-vetting process upfront on the big economic terms is key,” Patterson says. “Knowing the tenant has thought about and committed to the term and all the key economic points in a lease upfront makes a big difference and prevents the derailing of the process later on when a group might realize they can only do a 15-year lease versus a 20-year one.” Being timely and transparent about potential property issues is also critical to keeping the sale-leaseback deal on track. Whether environmental concerns, title complications or a problem with an old survey, issues will come out during the due diligence process so address them early on. Partnership Essentials: Real Estate to Relationship To enjoy the immediate access to capital, full market-value realization, preservation of operational control and other sale-leaseback benefits, corporate real estate sellers and private equity sponsors must do the deal. That means they must find the right buyer. “The biggest criteria in determining the best sale-leaseback partner is really access to capital and high certainty to close,” Patterson says. “That means finding a buyer who isn’t relying on a third-party financing source and doesn’t employ buying contingencies.” And the finish line isn’t the closing table. A buyer that is experienced in the market and a responsive, reliable landlord over the ensuing long-term lease is invaluable. “Make sure you’re choosing the right party for a long-term relationship,” says Patterson. “It’s great peace of mind knowing you have a landlord you can turn to in situations for flexibility or additional capital.” A strong partnership born of a sale-leaseback emphasizes the relationship versus a mere transaction. One of the resulting benefits for tenants is the ability to do more “bespoke-type” agreements, according to Patterson. Perhaps there’s an existing vendor the business wants to maintain ties with or the tenant has a big project underway on site; the long-term landlord can provide a flexible structure to accommodate. W. P. Carey’s sale-leaseback business has the capital to fund future tenant expansions, build-to-suits, building renovations, energy retrofits and more after the initial deal has been completed.
The Ins and Outs of Build-to-Suits
What is a build-to-suit? A build-to-suit is a real estate solution where a company secures a custom-built facility without the upfront capital investment. In a build-to-suit, a developer or investor funds and manages the construction of a new facility or expansion of an existing one to meet the specifications of a prospective or existing tenant. Upon completion, the company enters into a long-term lease, similar to a sale-leaseback. For companies in need of a new, purpose-built facility, a build-to-suit is an efficient and capital-saving alternative to buying or retrofitting an existing building. What are the key benefits of a build-to-suit? Custom-built facility in the company’s preferred location No upfront capital required, enabling the company to preserve capital for business growth Operational control of the facility post construction Potential for future expansions, renovations or energy retrofits through an investor partnership Who should consider a build-to-suit? Build-to-suits are best suited for companies that: Have specialized layouts, equipment or other design requirements Prefer a new property instead of retrofitting an older building Want to preserve capital rather than tie up funds in real estate development Can commit to a long-term lease (typically 10-30 years) How does the build-to-suit process work? Companies can pursue a build-to-suit through three main approaches: Developer-led build-to-suit: Based on the building specifications, a tenant will hire a commercial developer. The developer will take on the responsibilities (and risk) of land acquisition and building construction. Often, they will work with an investor, like W. P. Carey, as a capital partner to either finance the construction or acquire the building upon completion. The tenant will then lease the property, typically on a long-term basis, from the owner. Reverse build-to-suit / sale-leaseback: In this scenario, the tenant takes on the initial responsibilities of land acquisition, financing and hiring a general contractor for construction. Upon completion, an investor like W. P. Carey acquires the building. This allows the tenant to recoup the acquisition cost and reinvest that capital into their business. Investor-led build-to-suit: With this option, a tenant can bypass the developer and work directly with an investor like W. P. Carey that offers in-house project management services. The investor would work hand-in-hand with the tenant on site selection, land acquisition, design and construction, delivering a building that meets the tenant’s unique needs with no upfront capital required. The investor would own the building and lease it to the tenant on a long-term basis upon completion. How long does a build-to-suit take? Build-to-suits can take anywhere from 12-36 months depending on the size, location, permitting and other specifications. Rent payments typically do not begin until the building is substantially complete and operational. The lease term of a build-to-suit property is also usually longer than those of a typical commercial lease, ranging anywhere from 10-30 years. Conclusion: Is a build-to-suit right for your business? While build-to-suits may seem intimidating for companies who have never pursued one, they are a great solution for custom-built real estate with little to no upfront capital involved. W. P. Carey has extensive experience working with tenants and developers to structure customized build-to-suit financing programs that meet their specific needs – whether it be traditional construction funding, financing upon completion or a full scope of in-house project management services. Considering a custom-built property for your company? Reach out to our team today!
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.