Prior to the Northmarq acquisition of Stan Johnson Company, investment sales brokers Zach Harris and Jeff Hughes completed the sale of a nine-location portfolio occupied by Empire Roofing Group, a wholly owned subsidiary of Tecta America Corporation. The facilities are located across five states, Texas, Georgia, Florida, Tennessee and Oklahoma, and total 348,824 square feet. Harris and Hughes with Stan Johnson Company (now Northmarq) partnered with Seth Koschak and Jeff Rein of Stream Realty Partners to represent the seller, Empire Holdings - a Fort Worth, Texas-based national real estate services, development and investment company. The Arden Group, a leading U.S. middle-market real estate fund manager based in Philadelphia, Pennsylvania, acquired the portfolio.  “This portfolio transaction presented an attractive opportunity to acquire well-located low coverage industrial properties across some of the top markets in Texas and the Southeastern U.S., all leased to the same reputable company,” said Harris. “Empire Roofing is one of the top commercial roofing contractors in the country and, now owned by Tecta America Corp, they are primed for continued growth and success. Through our direct competitive marketing process, we selected Arden Group and were excited to work with them on this significant acquisition for their new and growing Industrial Service Facilities (ISF) portfolio.”  The portfolio includes nine freestanding industrial buildings ranging from 16,000 square feet to 150,000 square feet, including a newly built Houston industrial building. Approximately two-thirds of the portfolio’s buildings were built between 1999 and now. The properties are strategically located in major industrial markets with low building coverage as well as outside storage or excess land with opportunities for expansion.  “After an extensive evaluation of the nation’s top brokerage teams to assist with this sales process, we selected Stream Realty and Stan Johnson Company (now Northmarq) as our trusted partners,” said Bowie Holland, president of Empire Holdings. “We were particularly impressed with their substantial due diligence on our portfolio and the innovative marketing strategies they brought to the table. We look forward to many more collaborations in the future.”  “This portfolio acquisition is part of our investment focus on ISF, including industrial outdoor storage sites, truck terminals, trailer parking and last-mile port facilities in core U.S. markets,” said Christian Vergilio, Director of Acquisitions for Arden Logistics Parks.  Arden recently formed a $1 billion Joint Venture specifically focused on acquiring ISFs, or low site coverage industrial assets, situated in dense, infill locations. “The Empire Portfolio is emblematic of the types of partnerships we are looking to form with users in the ISF space and we look forward to continuing the relationship with the team,” Vergilio noted.  About Empire Holdings Empire Holdings is a commercial real estate developer that specializes in single-tenant, build-to-suit industrial properties with design, technology, and innovation at the forefront. Backed by a powerhouse team led by 40-year commercial real estate industry vet Sandra McGlothin, Empire Holdings is changing the way commercial industrial spaces are built. Together, the team has already led Empire Holdings to acquire and develop more than 100 properties spanning 1.1 million square feet across five states, with a primary focus on Texas. To learn more about Empire Holdings, please visit: www.empireholdingstx.com

Northmarq’s Ohio-based Rob Gemerchak (formerly of Stan Johnson Company), has completed the sale leaseback of three freestanding industrial buildings in Ashley, Indiana and Flat Rock, Michigan. Together, they total 35,000 sq. ft. Gemerchak represented the seller, Royal Arc Welding, a leading industrial and manufacturing company that executed a new, long-term triple net lease at the time of sale. The portfolio was acquired for $4.2 million by a California-based developer.  “This long-term sale leaseback opportunity was an excellent fit for private equity, family offices and 1031 investors who were attracted to the company’s story, market position and the well-maintained properties strategically located in the active and healthy Midwest region,” said Gemerchak. “It was truly a win-win transaction, as the seller achieved a competitive sale price for their real estate which they plan to reinvest in their growing business. Additionally, the buyer received a long-term passive investment with a great tenant and sound real estate fundamentals.”  Founded in 1983, Royal Arc Welding provides a diverse range of industrial services including the design, installation, inspection and repair of overhead crane systems. Each of the properties include office space, craned warehouse and assembly operations and serve major long-term clients within the Detroit, Michigan and Fort Wayne, Indiana market areas. 

Northmarq, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a multi-tenant property portfolio leased to Child Development Schools, Inc., the seventh largest early education and childcare provider in the country. The five properties are located in the cities of Wilson, Kenly, Benson, Garner and Selma, North Carolina and total 31,421 square feet. Milo Spector represented the seller, a private investor based in Wilson, North Carolina. The Raleigh-based buyer acquired the properties for approximately $5.7 million.  “This is a unique transaction due to the size of the portfolio and the low price point comparatively to other early education portfolios of its size,” said Spector, Director in Northmarq’s Walnut Creek, California office. “This transaction demonstrated the value of diversification that is desired by investors who don’t necessarily have $10+ million to spend. The small portfolio space is a very unique space that allows smaller investors to still accomplish these diversification goals.”  The established tenant, Child Development Schools, Inc., was founded in 1988 with over 200 locations. All five properties are located within 45 miles of downtown Raleigh, one of the fastest growing cities in the country. Each asset operates on a triple net lease.  “There was a lot of demand for this portfolio, and we were able to source multiple offers, but ended up securing a local buyer, demonstrating our company’s ability to reach both national and regional buyers,” added Spector.  

Northmarq, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale leaseback of a five-location portfolio occupied by Little Caesars. The single-tenant retail properties are located across Nebraska and North Carolina. Matt Lipson and Chris Lomuto of Northmarq represented the seller, a California-based franchisee. The assets traded for approximately $5.7 million to a REIT based in Florida.  “This transaction was a perfect example of how a franchisee can leverage real estate to complete an acquisition. The incoming franchisee was acquiring these fee properties, along with a portfolio of leased properties from an existing Little Caesars franchisee,” said Lipson, Associate Director in Northmarq’s Portland, Oregon office. “We were able to structure a sale leaseback on the five fee properties at attractive terms to both real estate buyer and franchisee, that closed concurrently with their business acquisition. Post-transaction, the franchisee now has a sizable entity, with attractive leases throughout, and no pesky loan contingencies.”  Little Caesars is the third largest pizza chain in the world with more than 4,000 locations in the United States. The combined properties total more than 15,000 square feet and are located in smaller, tertiary markets.  “This is an exciting time at Little Caesars. Unit count is growing, the network is growing, strategic advantages are being realized, and it seems like this is really just the beginning for them,” said Lomuto, Associate Director in Northmarq’s Walnut Creek, California office. “We’re excited to be part of that effort and couldn’t be happier to help our franchisee client continue to grow their business with the acquisition of these locations.”   

Originally published by Wealth Management The corporate sale-leaseback market is coming off a record-high first quarter for deal-making. Despite repricing occurring in the wake of rising debt costs, industry insiders remain optimistic of continued strong momentum ahead in the remainder of the year.  The $8.4 billion in sales logged in first quarter is on par with fourth quarter 2021 activity and nearly triple the $2.9 billion in transactions recorded in the first quarter of 2021, according to a market analysis by SLB Capital Advisors. “That is the biggest first quarter that we’ve seen. The dollar volume was driven largely by two casino deals, but the 186 is the highest count that we’ve seen over the last few years by a good 20 to 30,” says Scott Merkle, managing director of SLB Capital Advisors.  The casino transactions included VICI’s acquisition of the Venetian Resort, Expo and Convention Center for $4 billion and GLPI’s acquisition of two Cordish Companies’ Live! properties for $674 million. Merkle also attributes activity to the huge volume of M&A activity that occurred in 2021.  Traditionally, companies use sale-leasebacks as a financing tool to monetize or “unlock” 100 percent of the equity tied up in real estate. That capital is often used to reinvest back into the business, improve balance sheets or finance expansion. Another catalyst for sale-leasebacks is M&A activity, with the acquiring entity using a sale-leaseback on the real estate of the business they are buying to help finance the acquisition. According to BMO Capital Markets, the U.S. saw 478 M&A transactions last year that were valued at nearly $1.9 trillion.  “A lot of times what we see on the M&A side is groups that will utilize that sale-leaseback as part of the capital stack, and there was an incredible amount of M&A activity last year,” says Jeff Tracy, a senior vice president at Northmarq in Tulsa, Okla. A sale-leaseback of the real estate can bring in 20 to 30 percent of the overall capital stack needed, which helps to reduce the amount of equity and/or debt a buyer needs to bring to the table, he adds.  Some industry experts estimate that industrial assets represent nearly half of all corporate sale-leaseback transactions, and expansion of the industrial sector over the past few years has provided fresh inventory for eager buyers. “Our business has never been more brisk. We are seeing a lot of activity as corporate users continue to look to monetize their industrial real estate and corporate-owned facilities, because they realize it’s a better use of funds to be able to put that capital to work within their business,” says Erik Foster, a principal and head of industrial capital markets, Capital Markets at Avison Young in Chicago.  Market adjusts to higher rates  The broader market is adjusting to higher costs of debt financing for real estate, which has climbed 150 to 250+ basis points since January 1. Although sources agree that rising interest rates haven’t changed the volume of sale-leaseback deals that are getting done, it is resulting in price adjustments and fewer bidders. “As debt has gotten more expensive, buildings can’t sell as aggressively as they did a couple of months ago,” notes Foster.  On average, cap rates have increased between 25 and 75 basis points, depending on the building, location, tenant and term. “The better locations and better credits are going to be less impacted, because there is a significant amount of capital still out there that is chasing deals,” says Tracy. The smaller or more challenging credits and tertiary locations are seeing bigger moves in cap rates, he adds.  Although there is still significant capital targeting sale-leasebacks, the bidder pool has thinned with some investors that have pushed pause amid the repricing that is occurring. Instead of getting 10 offers, a sale-leaseback listing might get six or seven now, because buyers are being more cautious, notes Merkle. SLB Capital Advisors is currently working on a sale-leaseback of an industrial portfolio valued between $75 million and $100 million. First round offers came in during the first week of April with nine groups that advanced. Typically, buyers increase their offers when moving to the second round. However, due to the rise in interest rates, many moved in the opposite direction, lowering their price. The deal is under LOI and moving forward, but the pullback on bidding speaks to how buyers are moving more cautiously, notes Merkle.  Stan Johnson Co. is working on the sale-leaseback of a portfolio of properties for a recreational vehicle business. One of the bids received was structured with a floating cap rate. The bidder included a cap rate range that allowed the seller to choose the rent level they wanted to set, as well as a fixed basis point spread over treasury to account for rate fluctuations.  So, depending on how rates moved prior to the deal closing, the cap rate also could move. “That is something I haven’t seen before, and I think it points to the fact that groups still have a desire to get deals done and they need to deploy capital. But they’re trying to be creative as possible in not only making sure they are competitive, but also protecting themselves from a downside scenario of a big interest rate move,” says Tracy.   Avid buyer interest  Rising interest rates could cool what has been a white-hot seller’s market for sale-leasebacks over the past year. However, industry participants are still optimistic about the near-term outlook. “While cap rates have risen, real estate is still at incredibly attractive levels for owner-operators to monetize their real estate in a sale-leaseback,” says Merkle. When one looks at sale-leaseback from a multiple perspective, multiples on real estate that might have been 15x are now 14x. Those numbers are really compelling for a business to execute a sale-leaseback when their business is worth multiples of say 8-10x, he adds.  SLB Capital Advisors has seen an uptick in pitch activity, inquiries from companies considering a sale-leaseback on assets, in recent weeks. “So, in spite of the pricing environment shifting rapidly over the past 45 days, we’re still in an environment where there is a ton of activity, and I expect to see a lot of continued sale-leaseback activity through the balance of the year,” says Merkle.  Another reason for that optimism is that there is still a significant amount of investor capital aimed at sale-leasebacks. “The buyer pools are more diverse and deeper than I have ever seen in my career, and that continues to put pressure on pricing and provides owners with great liquidity options,” notes Foster.  W.P. Carey Inc. alone recently announced that it had entered into $400 million in new investment agreements since the end of first quarter. The net lease REIT specializes in corporate sale-leasebacks, build-to-suits and the acquisition of single-tenant net lease properties.  In addition, more investors have entered the sale-leaseback market looking to acquire assets. “There has been a huge wall of capital looking to be deployed into sale-leasebacks. We’ve seen even more buyers step up to the plate over the last 12 months or so,” says Merkle. Some buyers are moving more cautiously, but there is still a lot of capital available for sale-leasebacks, he adds.   

Northmarq, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of six freestanding retail buildings across several states in the southwest and Georgia. The properties are leased to Family Dollar and Dollar General. In four separate transactions, Evan Altemus of Northmarq represented the seller, a Texas-based individual investor. The assets were acquired by three separate investor groups all based in Texas, including two private buyers and an institutional investor. The properties traded for a combined $6.3 million.  “These transactions were part of a larger investment strategy for the seller,” said Altemus, Associate Director in Northmarq’s Dallas, Texas office. “Their comfort lies in the single-tenant industrial sector and given our breadth and expertise across all asset types, the seller asked us to help them execute their strategy of exiting the retail market and transitioning to more industrial-focused properties. We were able to bring qualified buyers to the table, providing them with critical boots-on-the-ground information in order to enhance their understanding of each out-of-state market.”  Each dollar store was built or remodeled between 2005 and 2018, and the tenants operate on double net leases at all locations.  “Cap rates on these properties were comparatively high due to the short-term, double net leases, and because of the corporate credit and the ability to increase the value over time, these deals brought interest from yield-chasing investors historically focused on the multi-tenant retail sector,” added Altemus. 

Northmarq, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of two Fresh Thyme Market grocery stores in suburban Indianapolis, Indiana. Located at 11481 East 116th Street in Fishers, Indiana and 3400 East 146th Street in Carmel, Indiana, the freestanding properties are approximately 28,600 square feet each. The seller was a Chicago, Illinois-based private equity fund, and the buyer was a private equity fund with headquarters in Mexico City. Together, the assets traded for approximately $18.7 million. Mark Lovering of Northmarq represented both parties in the transaction. “Due to the extensive reach of our net lease marketing platform, we were able to sell these assets to a repeat international buyer before ever having to market broadly,” said Lovering, Associate Director in Northmarq’s Chicago, Illinois office. “Investment demand for grocery assets remains at an all-time high, and inflationary pressures are likely to further insulate the underlying values over the investment horizon.” Fresh Thyme Market is a specialty grocer with more than 70 locations across the Midwest. The tenants operate on long-term net leases at both locations, and both stores draw consumers from outstanding demographics and growing populations across the north and northeast suburbs of Indianapolis. “Both locations were encumbered by separate CMBS loans, which added several layers of challenges to get these deals completed,” added Lovering. “A lot of credit goes to the buyer and seller. They were both highly organized and remained steadfast throughout a lengthy negotiation process with the special servicers and CCRs.”

Northmarq, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale leaseback of a two-location portfolio occupied by Oryx Oilfield Services. The facilities are located at 900 East Highway 11 in Kermit, Texas and 922 Farm to Market 81 in Goliad, Texas. Together, the transaction included 13 buildings totaling more than 118,000 square feet. Northmarq’s John Rotunno represented the tenant, who executed a long-term lease at the time of sale. The portfolio was acquired for an undisclosed price by Real Capital Solutions, a private equity group based in Colorado. “The impact of COVID-19 on sectors outside of non-essential retail was substantial in some cases, and Oryx’s oil field service business faced challenges including a decline in revenue,” said Rotunno, Associate Director in Northmarq’s New York office. “By executing a sale leaseback of their real estate, Oryx can now consolidate debt and focus company resources on the business’s future growth, providing critical working capital.” With roots in the oil and gas industry, Oryx has a solid history of service to key customers, providing facility maintenance and construction, pipeline construction and fabrication facilities for facility components. The portfolio properties serve as mission critical locations for Oryx’s service operations, and the properties feature office and warehouse space, manufacturing and fabrication facilities, as well as an abundance of fenced acreage totaling approximately 95 acres.

Northmarq, one of commercial real estate’s leading investment sales brokerage firms, has completed the sale of a single-tenant property portfolio triple net leased to The Learning Experience (TLE). Brandon Duff and Matt Spangenberg of Northmarq exclusively marketed the portfolio on behalf of the Chicago, Illinois and Atlanta, Georgia-based seller. Milo Spector of Northmarq represented the purchaser, a San Francisco, California-based 1031 exchange buyer, who paid approximately $9.83 million. This transaction represents the sixth and seventh unique TLE properties sold by the firm in the past 10 months. “We have been aggressively focused on the early childhood education space for some time and been particularly successful driving transactional velocity with a growing concept like TLE,” said Brandon Duff, Managing Director and Partner in Northmarq’s Chicago, Illinois office. “The buyer pool continues to grow significantly for this niche property type, evidenced by multiple offers we have received from various buyer profiles on each early childhood education property offering that we have completed.” “The limited corporate guaranty structure that TLE employs in its leases has historically been a challenge to overcome,” added Matt Spangenberg, Associate Director, also in Northmarq’s Chicago office. “However, we have been successful in explaining to investors the unique dynamic between TLE corporate and its franchisees, which incentivizes TLE to keep locations open regardless of its limited financial exposure. This, combined with educating investors on the value drivers of each specific property and bringing them up to speed on the early childhood education industry, has helped us drive significant value in the sale of these properties.” Situated in the affluent Milwaukee, Wisconsin suburbs of New Berlin and Menomonee Falls, the locations were built in 2020 and represent two of the first three TLEs built in the state. Both locations are operated by one of the most successful franchisees in the TLE system and represent TLE’s aggressive push into Wisconsin as part of its ongoing expansion to more than 450 locations across the U.S. “The buyer was an all-cash, 1031 exchange investor and repeat client of ours. We performed a national search for their replacement property, and they were attracted to these TLE properties due to the long-term leases, triple net structure, new construction and insight on the franchisee operating each of these TLE locations,” said Milo Spector, Director in Northmarq’s Walnut Creek, California office, who has a deep track record in the early education sector. “This is another excellent example of the internal network we have at Northmarq and the collaborative platform adding value to both a seller and buyer in a transaction. This is particularly the case with our already established presence in the early childhood education space, as we have existing relationships with the most active investors for this property type, combined with our real-time tracking of new active participants as well as private 1031 exchange buyers looking for these acquisitions nationwide.”