The $5.5-billion deal for outdoor sporting goods chain Cabela's will include a sale-leaseback component when the transaction closes.

This is the web version of a feature that originally appeared in Real Estate Forum magazine. To see the story in its original format, click here.

Private equity's use of sale-leasebacks dates back at least to the dawn of the leveraged buyout boom of the 1980s. That's when a team of investors led by former Treasury secretary William E. Simon acquired Gibson Greeting Cards and, to help finance the acquisition, sold three Gibson manufacturing and warehouse properties to W. P. Carey Inc. Now a publicly traded REIT, WPC has executed a great many SLBs since that pioneering deal, including about $3.4 billion worth since 2003 with PE firms and their portfolio companies.

The basic level of risk in a circa-2017 SLB isn't much different than it was in former years, says Gino Sabatini, head of investments and managing director at New York City-based WPC. “We're dealing with less-than-investment-grade companies, typically with a significant amount of leverage,” he tells Real Estate Forum. “We have to spend a lot of time believing the private equity story, believing in the business of whatever the tenant does and believing they're going to pay us rent for the full period of our lease term—which is usually longer than the PE owner is expected to be involved with the company. All of those things have been true for the past 30 or 40 years.”