NEW YORK CITY-“It’s a question of supply and demand and how badly you want to put the deal together,” said Sidney Domb, president of United Trust Fund. Domb was speaking as a panelist during the “Domestic and International Opportunities in the Sale Leaseback Market” panel that RealShare Net Lease 2011 Wednesday afternoon, during which the credit-worthiness of the tenant was the focus of much discussion.

Sale leasebacks provide financing for companies looking for an infusion of cash. The current economic climate has seen an abundance of corporate property owners looking to do the deals, but their credit ratings have become central to ensuring that rents are paid on time.

“Our basic thing is the credit end of the business,” Domb continued. “Recently when interest rates got so low, large companies went out and floated bonds, and those that couldn’t are the ones looking to do sale leasebacks.”

Howard Sands, a managing director and founding principal at Corporate Partners Capital Group, pointed out that he sees the demand for the transactions as low in the retail sector, with some stores “still in contraction mode.” Cap rates in the non-investment grade arena “are not where they were three years ago,” Sands said, adding that in the current climate, "due to lack of supply, it’s hard to buy single tenant deals with investment-grade tenants, and with increasing demand capital is being pushed downstream toward solid non-investment grade single tenant deals.  Ours are performing well and we have been selling them at a clip of about three per month."

The biggest buyers in the game and the second biggest sellers are REITS, while private investors top the list of sellers, Jones Lang LasSalle managing director Bruce Westwood-Booth pointed out. “In 2010 and 2011, the biggest sellers were the private investors—they were getting rid of a lot of product.” Third on his list of sellers were corporates, he said.

Helping to push corporates further down the list of sellers, panelists said, in addition to their reliance on bonds for cash flow, has been their preference for build-to-suits, to reflect their unique corporate personality. “Most of the sale leasebacks that we see today are from companies that are desperate for cash,” said Dick Rouse, vice chairman and CIO at Lexington Realty Trust. “And we really don’t want to do deals with that type of credit.”