Opportunities still exist in those industries, he adds. Last year, UTF executed a $10 million sale-leaseback with Toronto auto parts distributor Uni-Select Corp. UTF bought two assets totaling roughly 200,000 sq. ft. in Memphis, Tenn. and Mason City, Iowa.

“You have to take a hard look before you would do deals with companies in industries that are negatively viewed,” he says. Most recently, UTF acquired a 100,000 sq. ft. office building in Ft. Lauderdale from Coventry Health Care for about $26 million.

Hunting for deals

Active investors are hardly shying away from non-investment grade companies. Buyers generally pay cash for assets and then finance 55% or 60% of the property value in the following weeks or months.

“The question is, does it make sense to take somebody within an industry that's struggling?” asks David Steinwedell, a managing partner with Austin, Texas-based AIC Ventures. Since 1990, the investment manager has completed $770 million in sale-leaseback deals with middle-market companies — typically medium-sized private companies that are often struggling to grow. “We're building a portfolio across a number of industries, and there will be players in those industries that will survive and thrive even in bad times,” explains Steinwedell.

Meanwhile, AG Net Lease, a division of New York-based Angelo Gordon & Co., taps relationships with a broad array of private equity funds to source sale-leaseback deals with over-leveraged companies, says Gordon Whiting, founder and chief portfolio manager of AG Net Lease. Angelo Gordon, which manages assets of some $20 billion, pursues a handful of other alternative investment strategies beyond real estate.

In early August, AG Net Lease paid $30.4 million for six manufacturing and distribution facilities in the U.S. and Canada from KIK Custom Products, a third-party maker of national and retailer brand consumer products. KIK, a portfolio company of private equity investor CI Capital Partners in New York, is using the cash to reduce debt and fund growth.

“More companies are looking to do sale-leasebacks because they unlock hidden dollars on the balance sheet,” Whiting says. “And access to other forms of debt capital has been greatly reduced.”

Inland's Cosenza and other sale-leaseback investors see more deals in the near term. Over the last five years, Cosenza says his company has poured $3.8 billion into sale-leaseback deals. “I was shocked,” he says. “But I still want more.”

Joe Gose is a Kansas City-based writer.