WP Carey Scores 386,000-SF JPMorgan Chase Office Building in Sale-Leaseback “Flip”

March 1, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user david.nahas

W. P. Carey & Co. L.L.C. has gotten its hands on a piece of the 2.9 million-square-foot office portfolio that Brookfield Real Estate Opportunity Group recently acquired from JPMorgan Chase. In a transaction orchestrated simultaneously with Brookfield’s purchase of the group of 16 JPMorgan-owned properties, W. P. Carey acquired the 386,000-square-foot JPMorgan Chase Operations Center in Fort Worth, Tex., from Brookfield under a sale-leaseback deal that allows the bank to continue to occupy the entire building.

The Operations Center sits within the 1,200-acre CentrePort Business Park, which boasts a location midway between the Dallas Central Business District and downtown Fort Worth, and easy access to the Dallas/Fort Worth International Airport. Financial details of W. P. Carey’s swift purchase of the property from Brookfield have not been disclosed, and the length of the lease is being described only as long-term.

Before the credit crunch took hold, sale-leaseback transactions, a reliable means for a company occupying its own real estate to expeditiously secure cash while maintaining its location, were somewhat prevalent.

But in 2009, the deals began to dwindle. “When commercial real estate debt was readily available and cheap, sale-leasebacks were popular,” according to a report released by commercial real estate research firm Real Capital Analytics in September of 2009. “On average, the spread between single-tenant property yields and corporate bonds has doubled to nearly 200 basis points. Sale-leasebacks are no longer a cheap form of capital for corporate owners, but for a few, it may still be their best option.”

JPMorgan leased back 60 percent of the 16-property portfolio it sold to Brookfield; however, its decision to sell 23 properties totaling 7.1 million square feet last summer was not spurred by a need to unload debt attached to distressed properties, as has been the case with many corporate property owners since the credit markets went into a deep freeze. Despite the fact that property values have plummeted over the last two years, a sale-leaseback transaction is still a good way of pocketing quick cash, too.