Real estate who needs it?

That's what W.P. Carey Group, a New York real estate finance company, hopes corporate America is thinking. The firm specializes in sale/leaseback transactions, in which it buys commercial properties from companies and simultaneously leases the buildings back to them.

"Companies are not in the business of owning real estate," said Edward V. LaPuma, first vice president at W.P. Carey.The sale/leaseback has several benefits for the company as tenant, he said. It can report the proceeds from the property sale as income. Because the transaction is structured around a lease rather than a mortgage loan, the tenant does not have to count its payment obligations as debt. And the tenant can take 100% of the property's value by selling and leasing back a building, whereas even the more aggressive mortgage lenders would finance a considerably smaller portion.

Carey put a twist on the sale/leaseback concept in a recent $42 million deal with Checkfree Holdings Corp., the electronic bill payment and presentment giant.

It purchased Checkfree's 80-acre Norcross, Ga., campus for about $30.8 million, and simultaneously agreed to provide $4 million in equity financing to build an additional 100 thousand-square-foot office building on the campus. Bank Austria Creditanstalt provided a $15.8 million mortgage on the corporate campus and a $7.5 million construction loan for the new building.

The Austrian bank, whose U.S. real estate operations are based in Atlanta, will replace the construction loan with permanent financing once construction is finished.

Although Carey is the borrower on the two loans, Bank Austria is ultimately looking to Checkfree's ability to pay its rent, said Stephen Hipp, senior associate at the bank. "We underwrite the mortgage as if the tenant is our borrower," Mr. Hipp said. "It's their ability to pay Carey's rent that will service our debt."

The deal closed in early June. Later that month, three major banks announced an electronic bill payment and presentment venture. Checkfree's stock plunged 25% on fears of competition from the new venture. The stock has since recovered much of that shortfall.

Checkfree's new landlords say they are not worried. Mr. LaPuma cites high barriers to entry in the electronic bill payment and presentment business. "This is not a business that somebody can just walk into," he said.

Mr. Hipp added that only a small fraction of households use electronic bill payment, but that is likely to increase significantly in the years ahead. Even if Checkfree's dominant market share slips, the total pie is apt to grow. He and Mr. LaPuma also said the corporate campus is the largest single property on the scenic Chattahoochee River making it a desirable piece of real estate.

He said the sale/leaseback transaction has gained favor in recent years, as part of a corporate trend toward outsourcing. Others disagree. "If anything, it's waning," said Jeffrey Lenobel, head of the real estate department at Shulte, Roth & Zabel LLP, a Manhattan law firm. The chief impetus behind the deals in their heyday, he said, was a tax benefit, in that tenants can depreciate rent.

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