Daily Archives: August 20, 2019

Divest for Success — Here’s When to Sell Your Commercial Real Estate Investment

Scott E. MartinOver my thirty-three years in the commercial real estate business, I’ve helped hundreds make smart property investments. The market is complicated, but with an average rate of return of 10.6%, real estate consistently outperforms the S&P 500 Index (roughly 8%).

That’s good news!

Additionally, investors who partner with savvy advisors tend to make more money. Here at Hilliker, we’ve collected thousands of stories from clients who’ve made their lives—and the lives of others—better through a well-timed real estate deal.

But no property investment makes sense forever. No one wants to hold on too long, missing an opportunity to turn a profit. How do you know if the moment is right to move on?

If you keep your eyes open for these crucial decision points, you’ll be better positioned to make the most out of your investment.

Opportunity # 1 (Owner/Occupiers): You’re Ready to Sell Your Business.

In most cases, we recommend business owners prepare their building for sale at the same time they’re preparing their business for sale. In a business-plus-property package deal, the business owner often loses money on the property. Without competition, they’re unable to negotiate a price at full market value.

Additionally, renting to the property the people who now own your old business is usually not a good idea. Here’s why:

  • Perhaps the new owners will feel unhappy with an aspect of the company you sold them. Because of their unhappiness with the business deal, they could find ways to make your life difficult as their landlord.
  • If the new business owners don’t operate the business you used to own wisely, you may give them too much leeway as their landlord. You may hope to see them turn things around when another landlord would simply terminate their lease.
  • If you structure the lease as part of the sale of the business, you likely won’t get the market rate. Just like the sale of the property, the two should be separate transactions.
  • Because they are unsure if they’ll grow, they rarely sign a longer-term lease. This makes your property less attractive to a potential buyer.

Stay out of this sticky territory! Here’s what we suggest instead.

  1. Make sure a lawyer structures your holdings by filing your business and real estate under separate corporate entities.
  2. Have a qualified real estate broker (like Hilliker) properly value your property and qualify the new owner’s credit-worthiness.
  3. Have your broker negotiate a market-rate long-term lease with the new owners of your business. They’ll be sure to maintain the sort of capitalization rate (cap rate) that will appeal to an outside investor.

Following these steps will put you in a more advantageous position — and keep you out of muddy waters.

Opportunity #2 (Owner/Occupiers) – Your Building No Longer Reflects Your Business

Though it may have been perfect when you first moved in, there are some indicators that you’re in the wrong space for your business.

  1. You’ve outgrown it, but instead of trading up, you’ve decided to lease one or more auxiliary spaces. Though it may make sense in the short-term, it could also add unnecessary complexity as your business continues to grow.
  2. You’ve scaled down operations or staff, and part of your building now sits vacant. Unless bringing in a tenant makes sense, consider selling and purchasing something that better meets your needs.
  3. Your business model doesn’t require heavy foot traffic or visibility, but your neighborhood suddenly turns into a hot retail district. You may be able to make a profit by selling and moving to an area more suited to your business.

 Opportunity #3 (Investors) – You’re at 100% Occupancy

Your broker should make it his or her job to pursue high-quality, credit-worthy tenants for your space. If that person is competent, your tenants will sign win-win leases that make you money and make them want to stay.

Once your building is leased-up, you could sit back and enjoy the moment. But it’s also the moment your property is most attractive to investors and a great time to make money and roll it into an even more lucrative—or “value-add”—investment.

Opportunity #4 – Your Neighborhood’s Economy Is Changing

Economic upturns and downturns signal opportunities to sell, but investors want to find the perfect moment to maximize their profit. Though there is no real-estate crystal ball, there are a few indicators to help you decide.

  • How are traffic patterns? If the road system has changed or there are fewer cars in your neighborhood, your property value may be changing as well. 
  • Is the center of town moving? If there is a new development a few blocks away, threatening to pull traffic from your location, you may want to sell. Property owners with retail tenants should take notice. 
  • Is a significant portion of your building vacant? Though not ideal, this could work in your favor. Businesses in a position to buy may want to move into the empty space and have the added benefit of income from tenants. 
  • Are there substantial investments near you? If you see new developments or rehab projects in your neighborhood, it’s a good sign. If you don’t want to put money into “keeping up,” now may be a good time to sell.

Opportunity #5 (Manager/Owners) – You’re Ready for Retirement

Those who actively manage the buildings they own — apartment buildings and retail strip centers in particular — have more than a full-time job. Between dealing with contractors, collecting rent, making repairs, and keeping space leased, you may be ready for something more manageable.

In that case, you can pass the management to a third-party, or it might be a great time to sell to another investor. Your next investment can be higher-yield and lower maintenance (keep reading for more!).

 Opportunity #6 – Roll Your Profits into a Triple-Net Investment!

When you sell your building, we can help you reinvest in a low-stress triple-net (NNN) investment property. Through our partners at Westwood Net Lease Advisors, you’ll be able to set up a 1031 Exchange, a tax shelter that allows you to defer paying capital gains taxes on your sale.

Then, we can help you find NNN property. NNNs are the easy-button of real estate investments for a couple of reasons.

First, you own the property, but the tenants are 100% responsible for its upkeep.

Second, NNN tenants are often locations of extremely credit-worthy companies. Our clients own NNN properties that house Dollar General, Walgreens, and Buffalo Wild Wings, to name a few.

Is it time to sell your commercial real estate investment?

Though there is no “perfect time,” we at Hilliker Corporation want to be part of your success story. We’re advisors who can help you weigh your options, giving you the tools and information to make quality decisions for you and your future.

We’re poised to help investors and entrepreneurs like you. Give us a call today.

How Hilliker Thrives in the Cutthroat Commercial Real Estate World

The independent, Brentwood-based firm credits a hyperlocal approach with national connections for its success in face of its heavy-hitter competitors.

Ben M. HillikerWhen Ben Hilliker started his real estate firm more than 30 years ago, he could count his competitors on one hand.

Today, Hilliker Corp. is among more than two dozen commercial real estate firms, including corporate heavyweights such as CBRE, Cushman & Wakefield and JLL, in the St. Louis metropolitan area vying for listings.

“We haven’t tried to stand out. We’ve simply done what we feel is best for our clients, and in turn, for us,” Hilliker said.

Hilliker, founder and CEO, leads the firm along with President H. Meade Summers III, Senior Vice President and Principal Hal Ball, Vice President and Principal Scott Martin and Vice President and Principal Will Aschinger.

Brentwood-based Hilliker Corp. is not known for multimillion-dollar, blockbuster deals. Though it sells up to 20 properties a month, its deals often stay below the $10 million mark.

But that’s where Hilliker has found a niche that’s kept it successful despite corporate-owned competitors.

Key to its strategy, Hilliker said, is putting the agents’ success before the company, staying out of investment and development to avoid any conflict with clients, and guiding clients through every step, including tasks like rezoning. Hilliker’s agents average more than 15 years of experience in real estate.

In addition, market expansion has been an area of focus. The company has broadened its footprint from doing deals mostly in the city to now reaching into the corners of Jefferson and Franklin counties.

In the past five years, the firm has added five brokers and moved to a bigger office at the Magna Place building on Brentwood Boulevard in 2013.

And in 2011, it hit a milestone with its acquisition of Westwood Net Lease Advisors, which specializes in 1031 tax-exchanges and caters to buyers seeking triple net leases, where tenants are responsible for the property’s expenses.

The deal helped diversify Hilliker. Most of Westwood’s clients are local individual investors, typically in their 60s. Westwood connects its buyer-clients to properties with “recession-proof” tenants such as dialysis centers, dollar stores, fast food and fast-casual restaurants, daycares and even car washes, said Westwood President Chris Schellin.

In 2017, vice presidents Vince Vatterott and Jason Simon closed on a $92.6 million deal for its client to acquire the Dow Chemical headquarters building in Midland, Michigan, marking Westwood’s largest deal ever.

Hilliker often will sell a property for a client who will then use Westwood to reinvest those proceeds into another property.

“We’re giving sellers an avenue to the national marketplace, (and) we’re bringing national players to the St. Louis market,” Schellin said. “It’s a win-win for everybody.”

Several years ago, Hilliker Corp. tapped Westwood to help with long-term client Dave Spence. No longer a majority owner of parent company Alpha Packaging — one of St. Louis’ biggest privately held companies — Spence wanted to sell Alpha Plastics Co.’s facility in Overland.

Together with Vatterott, Hilliker Corp. renegotiated a lease with Alpha to make the property more attractive, and in early 2015 New York City-based Gramercy Property Trust closed on its acquisition of the facility for $10.6 million, according to St. Louis County records.

“We couldn’t have orchestrated that better. And we’ve found more and more situations like that (because of Westwood),” Hilliker Corp.’s Hal Ball said. “We’ve found this in-between zone that’s been exciting for all of us.”

Read the Full Article HereSt. Louis Business Journal

 

Hilliker Corporation has served St. Louis since 1985, having brokered over 10,000 transactions. As the area’s largest locally-focused commercial real estate broker, we know our region intimately. From new construction to historic properties, we help our entrepreneurial clients become part of a great tradition.

If you’re ready to buy, sell, or lease commercial real estate in the St. Louis area, Hilliker Corporation is poised to help you find the property that suits your unique needs, plans, and dreams.

Schedule an appointment today.

Impact Agape Ministries Finds Church Building Home

The Need for a Church Building in St. Louis

Pastor Kenneth “Coach Kenny” Haynes has been in pastoral ministry for over 25 years. Two years ago, he founded Impact Agape Ministries, an independent, ethnically-diverse congregation, motivated by practical Biblical teaching mixed with concrete action.

Haynes teaches people how to have a successful life on earth while reaching out to their neighbors. He says, “As a not-for-profit, we don’t pay taxes. That makes it our job to put resources back into the community.”

And that’s precisely what Impact Agape Ministries has been doing for the past two years of its existence. Haynes and congregants spend time in their neighborhoods asking people what sort of help they need, then finding ways to serve.

In the future, they hope to offer classes on money management, marriage, and parenting. They have plans to provide training for young people after school, as well as creating a place of connection for seniors during the day.

Impact Agape Ministries just needed a home base from which to operate.

Looking for a Community to Serve

As a new church, finding places to meet wasn’t always easy. As the congregation grew, Haynes felt uncomfortable meeting in a variety of buildings. However, as a community-focused ministry, they needed to find a place to put down roots.

Fiscally conservative, Haynes was careful to build up the church’s financial reserves from the beginning. But even with a substantial bank account, all churches under five years old are considered a credit risk by most financial institutions.

About a year ago, when Haynes found a building to lease, he convinced the owners of his credit-worthiness by paying six months’ rent upfront. However, Haynes wanted the church to own a space they could settle into, modify, and perfect for their purposes.

It was time for Haynes to find a permanent home for Impact Agape Ministries and their congregation.

Haynes’s wife, Sandy Haynes, is a real estate broker for Old Orchard Realty. Together, they began looking for a place that would support their vision for the future. They looked at several buildings—some churches, some not. Some were too far from the neighbors they hoped to serve. Some were out of reach financially. Others didn’t have enough space for the planned-for outreach programs.

One day, while browsing online listings, the Haynes’s saw a former Catholic church in The Spanish Lake area. The Archdiocese of St. Louis had listed it with Hal Ball and Peter Newton of Hilliker Corporation along with Linda Jones of Linda M. Walsh Real Estate.

Hal C. BallPeter Newton

The price and location were in line with their concept for the ministry. They called Ball to learn more.

A Corridor of Community Institutions

The congregation of Our Lady of the Holy Rosary Church in Spanish Lake had consolidated to another church in 2017. But even though they were absent for more than a year, the building they had inhabited remained beautifully maintained.

At 10,000 square feet and sitting on 7.5 acres, it’s surrounded by other community institutions: Christ Light of Nation Elementary School, Twillman Elementary, and Trinity Catholic High School.

The building does not have a basement, so there was limited room in the building for their classrooms. However, they thought they could remodel the on-campus rectory for that purpose.

Ball and Newton worked hard to negotiate a mutually appropriate price. Impact Agape just needed to find financing, though doing so for a new ministry is difficult.

Most lenders asked for 25% down simply because Impact Agape wasn’t yet five years old. Though the church had a rock-solid bank account, that down payment was more than they had available.

Eventually, they found a financial partner with the help of Sharon Gladney, owner and operator of Midwestern Development Group, LLC. Gladney, a congregation member, was able to attain pre-approval for the finances needed. The lender was impressed by the church’s consistent membership and financial records.

The UCC was impressed by the church’s consistent membership and financial record. To build up the down payment, the congregation stopped paying rent by moving to The Twillman House Community Center. The congregation continued to give generously to cover the remainder of the down payment.

A Fresh Start for Impact Agape Ministries

Impact Agape Ministries was able to move into the new building on closing day.

The building will require some work to get it perfect for the future. But with a congregation happy to serve their new neighborhood together, everyone is ready to help the church succeed.

St. Louis Institutions—are you looking for a new home?

Hilliker Corporation is in the business of making St. Louis a kind and compassionate place, partnering with:

  • Congregations across all creeds.
  • Schools
  • Residential care facilities.

Whatever your current situation, Hilliker brokers want to work with you. We want to help you cut across red tape. In the end, we hope to negotiate a deal that makes sense for you, those you serve, and the donors who believe in what you’re doing.

If you’re ready to buy or lease a new church building—or an institutional building of any kind—set up an appointment with one of our brokers today.

Wayne Contracting Consolidates Remote Workforce by Purchasing Westport Office and Warehouse

Brad Burns was working for a general contractor in the St. Louis area when he caught the entrepreneurial bug. He believed he could build a multi-faceted business by curating a strong base of project managers, office staff, and contractors.

He began his first venture, Wayne Contracting, in 2014. They serve national retail chains and vendors by:

  • Installing retail fixtures.
  • Building out new branch locations.
  • Remodeling existing branch locations.
  • Setting up industry-specific equipment.
  • Overseeing construction for store closings and relocations.
  • Much more.

Their clients include Walmart, Barnes and Noble, Panera, Ralph Lauren, and Bank of America. They do their work throughout the US and Canada.

As Wayne Contracting has grown, Burns has leveraged his team’s skillset to spin off other businesses:

Attributing the company’s success to a combination of great timing and determination, Burns was able to get all four companies off the ground with more than 100 employees working remotely.

It was the perfect strategy, but he knew it wouldn’t work forever.

Office and Warehouse Space Along the I-270 Corridor

By 2017, Burns began his search for office and warehouse space. He knew it was time to act for several reasons.

First, the team’s collection of tools and materials were spread out across a rented storage facility, various trucks, and employees’ garages. If the business kept expanding at its current rate, they would grow beyond their capacity quickly.

Second, his project managers and office staff could accomplish more if they were in one place. The team was hungry for consistent face-to-face communication.

Finally, Burns and his wife have five children, ages seven and under. His home office situation was becoming untenable, joking, “Little kids don’t respect boundaries when you say, ‘I’ve got to work now.’”

The Wayne Contracting staff estimated they needed 10,000 square feet of combined office and warehouse. Additionally, he wanted to limit his search to the I-270 corridor—an easy commute for all team members. He was looking to buy, not lease, believing it was the right decision for the future stability of the company.

A. William AschingerInitially, two separate brokerages were unsuccessful in helping him find a space. During that time, he learned his aunt and uncle’s restaurant business had found success with Will Aschinger of Hilliker Corporation. Burns had met Aschinger years before and had been impressed by his knowledge, experience, and creativity.

Growing an Entrepreneur’s Portfolio

Burns and Aschinger started searching together. Aschinger only sent opportunities he thought were worth the busy entrepreneur’s time.

Burns said of Aschinger, “He’s a good guy and easy to deal with. Some brokers want to jam stuff down your throat, but not Will. He got in tune with what I was looking for relatively quickly.”

Unfortunately, in this extraordinarily tight market, few properties were available inside the parameters they had set. After searching for a total of two years, however, Burns felt like his business and family were both growing too quickly for him delay any longer. While scrolling through properties on the Hilliker website, something caught his attention.

32 Progress Parkway is a nearly 7,000 square foot warehouse and office building in the Westport area of Maryland Heights.

Patrick McKay of Hilliker Corporation represented the owner.

Though it was smaller than he initially hoped for, the Westport area was perfect. It’s an easy commute for Burns and his employees and a smart investment for the future.

Burns will continue to lease a remote parking facility for company vehicles, but everything else will fit comfortably inside the new location. They were able to purchase the property in July 2019 for $605,000.

Remodeling the space themselves, they estimate a move-in date mid-August, 2019.

Moving from Remote Employees to Real Estate Investment

Thanks to technological advancements, remote workers allow entrepreneurs to grow without leasing or buying a “central office.”

But “spread-out” can become “spread thin” very quickly. In many cases, face-to-face collaboration and consolidation can be the only efficient way forward.

If your business is ready to make the leap from remote office to central location, Hilliker Corporation’s brokers are experienced, creative, and determined. We look within the current market to find ways to help you grow and thrive well into the future.

If you’re ready to consolidate your efforts into your first commercial office or warehouse space, we’re here to help. Give us a call today.

Ambulance District Buys Raw Land in St. Charles County

The Need for Raw Land in St. Charles, MO

St. Charles County is an exciting place to be. Its growth over the past three decades leads to some compelling numbers.

In 1990, the county’s 592 square miles only supported 213,000 residents. In 2019, the numbers are closer to 400,000. Though this has slowed, St. Charles County has still seen a consistent 1% to 1.5% growth rate every year since 2010.

Of the services that have had to grow along with the county, the St. Charles County Ambulance District (SCCAD) is among the most critical.

Though ambulances serve residents with non-emergency transport (as well as health and safety programs), they respond to life and death situations daily.

The department responded to 41,685 calls in 2018, a number projected to increase to more than 44,000 calls in 2019.

SCCAD maintains 16 permanent base stations across the county for emergency response. But to keep up with the county’s growth, it has had to spread administration, vital IT functions, training, and vehicle maintenance over five locations and three municipalities.

The lack of a central office for all of these non-emergency functions had become a strain on the district’s resources.

They needed to consolidate their efforts. They needed to invest in a purpose-built building on raw land in St. Charles County.

Help for the Helpers

Thanks to the resident-approved general obligation bond called Proposition Ambulance, SCCAD has $70 million to invest in improvements. They planned to use a significant portion of that budget for a new consolidated campus facility.

Hoping to stay near the I-70 corridor, they wanted to find land inside their budget that would allow them to build a facility large enough to grow with the district over many years.

Represented by Bob Cissell and Chris Shea of Cissell Mueller, they found several possible candidates. However, the farmland near Mid Rivers Mall Drive and the newly completed Salt River Road was the most promising.

A Unique Hobby and a Private Airfield

Owned by seven siblings known as the Sunshine Group, the land at Mid Rivers Mall Drive and Salt River Road was initially purchased by Jim Sontheimer, Sr., in 1978.

Sontheimer was a private plane enthusiast. He bought the nearly 100 acres of farmland north of I-70 so he could build a house for his family with a runway in the backyard.

Six of Sontheimer’s seven children later built homes of their own on the land, but he leased the rest out to farmers. After Sontheimer’s death in 1992, the family listed the property with Ben Hilliker, founder of Hilliker Corporation but, recognizing the level of demand, chose not to market it aggressively.

However, the completion of Salt River Road in 2016 meant an increase in traffic and development. The Sunshine Group decided it was time to make a concerted effort to sell the land. Mr. Hilliker enlisted brokers Will Meehan and Chris Taff to find a match for as much of the property as possible.

The Sunshine Group (represented by Meehan and Taff) sold 31.2 acres to the St. Charles County Ambulance District for $2,718,144.

 Sixty-seven acres are still available.

Progress for St. Charles County Residents

SCCAD’s budget for the entire project, including both building and land, is $35 million. The district is partnering with the architects at Arch Images along with project management from Navigate Building Solutions.

They’re hoping to break ground in November of 2019.

Looking for Raw Land in the St. Louis Area?

At Hilliker, we help organizations of all kinds find the right real estate for their needs. We dream with you, create a plan, and set out to match your unique set of parameters with properties for lease or sale throughout the St. Louis area.

Whether you need an existing building or are ready to build your own, count on Hilliker to help set you up for real estate success.

Call us today.