Ready to Sell Your Commercial Real Estate? Here’s What’s Next.
If you own commercial real estate, there are plenty of smart reasons to hold onto your investment. Perhaps it houses your business, or you count on the income it provides. Perhaps it’s going up in value, and there’s no reason to think that will change anytime soon.
But, as my colleague, Scott Martin, shared last month, perceptive investors are always on the lookout for the best moment to sell. Getting out can be just as important as getting in. When that happens, you have the opportunity to trade up into a new investment. However, with so many options, how do you pick what’s best for you?
At Hilliker Corporation, we’re always meeting entrepreneurs and investors who are ready for the next adventure. When we do, we ask three questions:
Question 1: What are your goals?
We’ll start by digging into the “why” of your next investment. We’ll start a discussion around questions like:
- Are you looking for a building to house your business, or are you making a pure investment?
- Do you want to be hands-on or hands-off?
- Are you hoping for a specific income?
- What are your plans over the next ten years and beyond?
Question 2: What can you afford?
To answer this question, you’ll need a good idea of how much money you’ll have to play with after selling your current property. That’s where experienced commercial real estate brokers (like those at Hilliker Corporation) shine. They have the expertise to help you develop an accurate “comp,” or price based on “comparable” properties.
It sounds simple, but there are more subtleties involved than just checking to see what nearby properties have sold for. Commercial properties are rarely cookie-cutter and aren’t listed for sale as often.
Therefore, to create a trustworthy comp, brokers combine information from:
- Industry-specific databases.
- Their knowledge of the market.
- Personal experience.
- Information from their network of other real estate professionals.
You’ll also need to counsel with your accountant and lender. If you need a recommendation, ask your broker. We cultivate a wide range of contacts and can often pair you with someone who has the necessary background to help you reach your goals.
Question 3: What is your risk tolerance?
Several factors play into determining your risk tolerance. Discuss these factors with your advisors (real estate broker, accountant, banker, and lawyers):
- How long do you plan to hold the investment (or time horizon)?
- What is your net worth?
- How quickly does the property need to start earning income?
- How much risk capital have you set aside (money earmarked for more speculative investments)?
As we answer these questions and more, we’ll be able to present options that will make sense for your unique situation.
Opportunity # 1 (Business Owners): Leverage Your Equity to Grow
There may come a time, as a business owner, that a significant financial investment in your business will be worth more to you than your real estate. You may need capital to:
- Open another location.
- Scale-up your current operation.
- Upgrade your equipment.
- Another mission-critical improvement.
Instead of borrowing money, you might consider a sale/leaseback agreement: selling the building your business is housed in, then signing a long-term lease with the buyer. (See how we helped a company do just that in this case study.)
For this to work, the buyer will need to be attracted to you as a tenant:
- Your company will need to be financially healthy.
- You need to be willing to commit to a lease agreement of 5, 10, or 15 years (the longer the term, the more the investor will be willing to pay).
You should not consider a sale/leaseback agreement if:
- Your company is not financially stable. (You need to appear credit worthy.)
- You’re planning on selling the company. (Your company’s prospective buyers may not want to be saddled with a long-term lease.)
- You’re uncomfortable in your building, and a long-term lease will stunt your company’s growth.
Opportunity # 2 (Business Owners): Move Before You Sell
Any property you’ve held for a business or investment purpose will be eligible for a 1031 Exchange when you sell it.
In brief, a 1031 Exchange allows you to hold the profit from the sale with a “qualified intermediary” for a short time. Then, you can use that profit to purchase a “like-kind” property — another investment or business property.
It’s a detailed process requiring expert counsel. However, it allows investors to defer taxes on their profits and use it all to purchase something better.
But if you don’t want to be without space, it often makes more sense to buy a new building before selling your current property. With a Reverse 1031 Exchange, you’ll be able to sell your current property after purchasing a new one.
Again, this is not something to attempt without expert counsel. Your commercial real estate broker will help you plan and direct you to the resources you’ll need.
Opportunity #3: Diversify through Multiple Tenant Commercial Buildings
There are many types of properties worth investing in, and each comes with its own set of opportunities and challenges.
Though there are many types of investments that may make sense for you—rehab and development, raw land, multi-tenant apartment buildings, etc.— we’ll discuss the two most common investment options here.
First, multi-tenant buildings are many investors’ first foray in commercial real estate. If you have more than one tenant in your building, you diversify your risk and can plan for the occasional vacancy.
If you have previous experience owning residential rental properties, you’ve likely been responsible for anything that breaks inside or outside the building. When the faucet leaks or the ceiling fan doesn’t turn on, you’re obligated to fix it.
However, multi-tenant commercial leases are usually structured so the tenant is responsible for what happens inside the building: like drywall repair, plumbing, or electrical issues. The landlord is primarily responsible for the outside of the building: parking lots, HVAC, roof, lawn care and snow removal, etc.
Retail multi-tenant buildings often contain a mixture of national chains and mom-and-pop shops—great tenant diversity. However, retail locations need to be beautiful, so landlords need to keep their properties in tip-top shape.
Office and warehouse multi-tenant buildings are often lower maintenance. With less customer traffic, you’ll have more leeway when it comes to the property’s appearance.
In both cases, engaging a property management company like Hilliker Corporation will help ensure your buildings are leased-up with qualified tenants.
Opportunity # 4: Upgrade to a Hands-Off Investment
As discussed in our previous article, Triple-Net Properties are the “easy button” of real estate investment.
In a Triple-Net Lease agreement, the tenant assumes 100% responsibility of the care and maintenance of the building and lot. As the owner, you’d need to do next to nothing.
Additionally, the tenant is almost always an extremely credit-worthy national chain. Hilliker’s sister corporation, Westwood Net Lease Advisors, matches Triple-Net Leases with tenants like Dollar General, Advanced Auto, Applebees, Sherwin Williams, and Chase Bank.
For companies who sign Triple-Net Leases, there is little need for them to own their property: The business is their primary focus and money-maker. However, because these are often retail locations, the lessees are highly motivated to keep the building beautiful and functional.
Though tenants sometimes move out, triple-net properties continually attract high-level companies, making them a safe, simple, and lucrative investment.
Is Cashing Out Ever a Smart Option?
Of course. Even as “hands-off” as a Triple-Net property may be, an investor may decide they want out of the game altogether. That said, there are compelling reasons to keep rolling your investments forward, deferring taxes indefinitely.
Commercial real estate is a safe and profitable investment. And your heirs can benefit from the passive income generated by your careful, well-informed choices for years to come.
Your Real Estate Lifecycle
Are you just getting started as a real estate investor? You need a partner who can grow with you. Someone to help you make smart decisions as you balance the reality of your current situation with your hopes and dreams.
Are you in the middle of your journey, wondering what’s next? Do you need a pro who can help you weigh your various options, who understands the market, and can help you take the steps necessary to continue to prosper?
Or are you looking to turn your current investments into something that will see you through retirement, then to pass your legacy on to the next generation?
From startup, through growth and maturity, all the way to retirement and beyond, Hilliker is your guide throughout your Real Estate Lifecycle. Wherever you are in your journey, if you’re ready to take the next step, call a Hilliker broker today.
The St. Louis Office for Developmental Disability Resources sells property, leases office space
Serving Those with Developmental Disabilities
Shaelene Plank is a licensed professional counselor and has spent the last 25 years working in various roles for those with mental health issues and developmental disabilities. Her background makes her a perfect fit for the role of Executive Director at the St. Louis Office for Developmental Disability Resources (STLDD), a position she accepted in 2017.
Founded in 1980, the organization is the intermediary for tax dollars earmarked by Missouri Senate Bill 40. STLDD distributes money to those that serve St. Louis City residents living with:
- Autism Spectrum Disorder
- Cerebral Palsy
- Epilepsy
- Intellectual Disability
They also engage in targeted case management, helping match specific individuals with the services they need to live a full and productive life. Similar offices exist throughout the state (one per county) but operate independently from each other.
The agencies who receive program funds help those with developmental disabilities in numerous ways: through supportive living, employment, job training, socialization, and transportation.
A well-functioning STLDD is crucial to the health of our city.
Re-Evaluation and Future Strategy
For many years, STLDD operated out of a single building in the heart of downtown St. Louis. But to handle a steadily growing number of office staff, onsite programs, and file storage, they ended up purchasing two more nearby buildings. Clients had gotten used to the three locations, and each was customized to ADA accessibility guidelines.
However, in 2016 STLDD downsized some of its staff and programs. Owning three buildings didn’t make sense anymore.
There were other limiting factors as well. Separate buildings did not allow the staff to function as a cohesive team, and the aging buildings were becoming a financial strain. Each needed serious renovation, and STLDD was reluctant to divert funds from their primary purpose.
The Board of Directors determined it made more sense to divest themselves of their current three buildings and find a quality long-term lease.
They listed the buildings for sale in early 2017, but after a year on the market, only one had sold. There was little interest in the other two: 2345 Pine Street and 2334 Olive Street.
One of the board members knew Hal Ball of Hilliker Corporation. Plank called Ball, who brought in fellow broker Patrick McKay, and together they worked on a new marketing plan.
Originally, the properties had been listed as a rehab and development opportunity, but Ball and McKay said, “These are office buildings that someone will want as office space. We believe if you market them that way, they’ll sell.”
The strategy worked. Within months, both properties had signed contracts with solid buyers.
All that Plank and STLDD needed now was a new home. McKay and Ball negotiated a leaseback agreement with the buyers so STLDD could continue operating from their original offices until they found the perfect St. Louis City Office Space.
The Search for St. Louis City Office Space
The leaseback agreement gave Plank, Ball, and McKay a short time to find a new property for lease.
As a St. Louis City agency, they had to stay inside city limits, so the boundaries for their search were clear. They toured several different office spaces, but the team was insistent on specific features that were not widely available.
First, though they had enjoyed being in downtown St. Louis, parking was limited. They wanted property with a dedicated lot for staff, clients, and partners to use without searching for a space. As they looked, they discovered many leases would only include parking at an additional cost, asking STLDD to pay a per-space premium.
Second, the building had to be compliant—or easily made compliant—with ADA accessibility guidelines. Finally, Plank wanted the staff to be together comfortably with plenty of room for meetings and programs.
She believed 10,000 square feet would be sufficient. After touring several properties that didn’t check all three boxes, McKay and Ball finally found such a space at 2121 Hampton Avenue.
Tighter Team, More Parking, and Freed-Up Funds
At 11,000 square feet, 2121 Hampton was large enough for the entire STLDD staff. Consolidating to one space, they feel they’ll be able to use their finances in a more directed way, serving those with developmental disabilities better.
The space required some remodeling before STLDD could move in, and Ball and McKay negotiated for significant changes to the building into the lease. Lauren Talley of Cushman Wakefield operated as the landlord’s project manager. Braun Construction Management Service was the contractor.
The move also meant they could make some badly needed technological updates: The staff will be able to replace computers that had reached end-of-life, and the conference room will gain a projector for board and partner meetings.
Plank said, “Hal and Patrick were both great. They were very responsive and really understood what we needed.”
St. Louis Mayor Lyda Krewson
Mayor Lyda Krewson has taken notice as well. She attended STLDD’s open house on September 12, 2019.
Is Your Building Still Serving Your Company?
Not every upgrade means “bigger” or “more.” Sometimes the biggest upgrade you can make for your company and your staff means “tighter,” “smarter,” or “more efficient.”
When you look at your real estate, is it optimized for your business as it stands today? Will the size, price, and location allow you to grow into the future?
If you need to re-assess your property, talk to one of Hilliker Corporation’s Commercial Real Estate Experts. We’ll help you take a holistic look at your current property and options. If it makes sense to move, we’ll work as consultants all the way through the process.
Broker, Frank Yocum, Recognized as “Best of Maryland Heights”
On August 14, 2019, Hilliker Broker, Frank Yocum, was recognized as one of the “Best of Maryland Heights” by the Maryland Heights Chamber of Commerce.
With years of commitment to the community, Frank Yocum is currently helping 5 businesses find and negotiate optimal locations in Maryland Heights, while also volunteering to build the community through dedicated volunteer work with:
- The Maryland Heights Chamber of Commerce
- The Taste of Maryland Heights
- The Maryland Heights Development Committee
- The Maryland Heights Business Expo
- The American Legion Post 213
- CHAMP Assistance Dogs
- Leftovers, Etc.
Congratulations, Frank on your well-deserved recognition!
St. Louis entrepreneur uses business as springboard into investment, then retirement
Multifamily Investment Property in St. Louis’s Metro East
Dan Lester is living the American dream.
Having begun his career as a mechanic, Lester opened Lesco Enterprises, a pre-owned car dealership and auto repair shop, in 1987. As Lesco grew, Lester was eventually able to stop leasing from someone else. He purchased property for the business in Cool Springs, MO, near West Florissant and I-70.
In 2009, he continued to diversify. He learned about a nearly 12,000 square foot multifamily investment property for sale at 1901 State Street in Granite City, IL.
The building was booked solid with tenants, promising an immediate source of income on day one. The bottom floor was ideal for a new business idea he had — a showroom for selling used appliances. Positioned in the business district and close to a bus stop, the location was right. He purchased the building as an investment for the future.
With Lester as landlord, tenants enjoyed a full-service lease, and Lester determined not to raise the price as long as he was the owner.
Though Granite City went through tough economic times (the city’s top employer, US Steel, had stopped production in 2015), the building stayed leased. For Lester, it served as a reliable investment for many years.
A Set-Back Turned into an Opportunity
Unfortunately, in 2016, the building suffered from a fire. Though no tenants were hurt, the building was devastated. It needed a complete overhaul if the tenants were going to move back in.
Though it was not an ideal situation, Lester decided to turn it around to improve his property’s value and his tenant’s experience.
He took the insurance payout to remodel the building, inside and out.
- He updated the roof.
- Had the exterior professionally tuckpointed.
- Painted the interior and exterior.
- Installed brand new carpet.
- Updated the bathrooms with modern sinks, toilets, and bathtubs.
Additionally, he covered up the cinder block walls, framed in the apartments, and put in drywall. The building became more beautiful, matching a steadily redeveloping downtown area.
Making a Dream Come True
By 2017, Lester was ready to cash out and transition into retirement. Lester had a specific goal. He wanted to move to Thailand.
Having spent vacations there many times, he had fallen in love with the culture, people, and way of life. He wanted to find a way to spend the rest of his years in the South Pacific.
He sold the auto repair shop and pre-owned car dealership. Then, he contacted Jake Shepley of Hilliker Corporation, who listed 1901 Granite City for sale. Together, they went to work looking for a buyer.
It wasn’t easy at first. Granite City real estate was moving slowly, and investors were looking for a high capitalization rate of return (cap rate). Shepley and Lester had to price strategically if they were going to attract an investor.
For the first year, they didn’t see any serious buyers. However, the city had a boost when its primary employer, US Steel, restarted production. Bringing back 800 workers in 2018, Granite City became a more attractive place for investors.
Soon, they heard from Kelvin Lai of Eugene Investments. Based in Atlanta, Lai has several holdings in the St. Louis area. He sent his local property manager and appraiser to tour the building several times.
They were impressed by Lester’s recent renovation, the quality tenants, and the town’s rising employment numbers.
Lesco, represented by Jake Shepley, sold 1901 State Street in Granite City, IL to Eugene Investments. Combined with the proceeds from the sale of his business, Lester is making plans to move to Thailand this year.
Where Are You in Your Commercial Real Estate Lifecycle?
Hilliker’s brokers are here to guide their clients into profitable decisions wherever they happen to be in their Real Estate Lifecycle.
- STARTUP — Are you looking to make your first lease or purchase? We’ll help you make quality decisions that will work well for your current needs. We take the long view, however, and look to set you up for success.
- GROWTH & MATURITY — As business owners tire of paying rent, they often want to buy their own building. We help business owners purchase commercial property. Then, we set them up for success through our tenant acquisition, lease negotiation, and property management services.
- EXIT — Is it time for you to cash out? Or roll your current real estate into a hands-off investment? Hilliker, in partnership with our Westwood Lease Advisors, offers services to help people just like you make your transition into retirement.
Wherever you are in your Business Lifecycle, we want to help. Give us a call today.
Insulite Glass Finds Custom Industrial Warehouse for Sale
A Growing Enterprise
When Shannon Waterman was hired to manage the St. Louis branch of Insulite Glass Company in 2004, he found himself at the leading edge of flat glass fabrication.
Founded by Beau Guyette in Olathe, Kansas, the company manufactures insulated glass for buildings ranging from single-family homes to skyscrapers. They ship the glass throughout Kansas, Missouri, Nebraska, Iowa, Illinois, and Oklahoma.
In 2000, Guyette became an early-adopter of an automated manufacturing process. It catapulted Insulite’s growth, leading them to add to their staff and open the St. Louis location.
After several successful years leasing their current space in Soulard, when Waterman called to renew their lease in early 2019, he received some challenging news.
The anchor tenant was planning to expand, and Insulite had five months to move out.
Industrial Warehouse for Sale or Lease—Searching St. Louis
Insulite’s custom process and equipment required them to find a very specific kind of building.
First, workers move glass through their warehouse using a crane with an 18-foot hook height. The crane swings through the building, requiring open space both vertically and horizontally. Unfortunately, most warehouses are constructed with numerous supporting poles that wouldn’t allow for such a crane.
The building also needed garage doors at street level so trucks could drive directly into the warehouse space. Dock-height doors were out of the question as the glass needs to be placed directly onto the truck from above.
Though ramps could be installed, they increased the likelihood of breakage. And if the glass happens to break during this sensitive process, the St. Louis branch doesn’t have the resources to recut it. They would have to wait for another shipment from headquarters in Olathe.
Guyette and Waterman had moved the branch twice before, each time having relied on the expertise of Will Aschinger at Hilliker Corporation. They called on Aschinger again.
Since Aschinger already knew the particularities of their business, they were confident he could help match them to a new space.
As the team went looking for properties, Waterman asked his staff if they would be willing to move to a new part of the St. Louis area. He was relieved to find out they were. With their needs in mind, Aschinger and Waterman began touring properties in Soulard, Hanley Industrial, Fenton, Arnold, and even Hillsboro.
After viewing approximately 30 properties, Waterman finally stopped to notice a new industrial warehouse under construction near his home. Located in Pacific and under development by Joe Bosse of NEC Commercial, he wondered if the new building would be available for lease.
Going from Leasing “Paying Yourself Rent”
Aschinger was on the case. He discovered the building at 509 Route 66 Business Parkway would be 20,000 square feet of warehouse and office space. It sits on more than an acre of land, leaving room to grow. It has an open warehouse and can accommodate street-level garage doors.
Not only that, it was still under construction when they discovered it. The building could be customized to the new occupant’s specifications—even allowing for the installation of a crane before exterior walls were completed.
It was perfect for Insulite.
The building was listed “For Lease or Sale,” and Guyette decided to put in an offer on the property. Though leasing had worked well in the past, Guyette wanted to build equity and obtain control of their real estate.
Aschinger negotiated a deal that would permit Insulite to move their operation in on closing day, allowing them to keep production up and revenue flowing.
Waterman doesn’t anticipate losing any staff members, and they’re ready to add positions as well. They believe the area around Pacific will provide them with the talent pool needed to bring them into the future.
Insulite Glass, represented by Will Aschinger, purchased 509 Route 66 Business Parkway for $1,202,000.
Real Estate Consultation for Every Business
Do you have a unique service or product? A process or equipment that requires a customized building? Employees or customers that need you to stay in a specific geographic location?
Hilliker brokers are attuned to your needs, working to find a “solve” for whatever problem you face. They know the St. Louis area and know how to match your needs to available properties.
If you’re ready to find commercial real estate for your unique business, call us to find out how we can help get you the space you need.
St. Louis success story, Pic the Gift, expands with new multi-purpose space lease
Entrepreneur Finds Success in St. Louis
Wes Pickering founded Pic the Gift, LLC, in 2012, believing there was a growing desire in the marketplace for on-demand printing.
Here’s how it works: Pic the Gift allows customers to choose from a variety of printable products through an online design portal. Their customers, both individuals and corporations, customize the item’s look. They can select its color or a pre-created pattern, then add logos and photos.
Some of their printables are relatively small (mouse pads, holiday ornaments, and no-show socks). But some are comparatively large (lounge chair covers, shower curtains, blankets, and beach towels).
They also print on a wide variety of surfaces: cloth, glass, stainless steel, and ceramics, among others. The production process requires a range of large printers able to handle any scale and media.
Since they’re in the center of the country, Pic the Gift can ship to anywhere in the US in fewer than four days. Their market niche, location, and excellent service have made them an in-demand vendor for potential buyers throughout the country.
About the company’s growth, Pickering says, “We’ve been busting at the seams for eight months, growing much more quickly than we projected.” He needed a short-term solution to handle his inventory while he looked for a larger space for his business.
Commercial Industrial Warehouse Space in Overland, MO
The staff at Pic the Gift was only twenty people in July of 2017. By the beginning of June 2018, they had grown to fifty, and expect to bring on another thirty to forty employees over the next six months.
At the time, they were leasing two spaces totaling 15,000 square feet, much of it occupied by large production equipment of various kinds. They were dependent on their properties because their equipment requires more electrical service than most buildings can handle: 1,200 amps and 480-volt power.
Lacking the space to continue to grow his staff, Pickering had to turn down projects the business didn’t have the resources to handle. He didn’t want to have to do that again. For him, the growth has meant “a fun ride, but it certainly is challenging.”
It was near the end of 2018 when Pic the Gift realized it had an immediate need, which was to find space to store seasonal holiday inventory. They already had leased auxiliary warehouse space, but it had filled up much more quickly than he had expected.
After looking at approximately twenty separate buildings, he got a tip from a friend.
Picking Space with Help from Hilliker
The friend, who leases a portion of 10838 Ambassador, had seen a 20-year tenant vacate their space in the same building. The friend put Pickering in touch with Jeff Altvater of Hilliker Corporation, who represents the landlords.
Altvater showed Pickering the building. At 30,620 square feet and with 16 feet of ceiling clearance, it was a little larger than Pickering needed at the moment, but that wasn’t a bad thing, given their rate of growth.
When he toured the space, he liked the layout – 15% office, 85% warehouse with five loading docks. Only a half-mile from his current building, it maintained continuity and convenience for his staff, local customers, and vendors.
In fact, it offered everything a business like his needed except for one thing: enough electrical power for his equipment. Regardless, he could envision the building as a long-term office and warehouse for his whole operation.
For their part, the owners of 10838 Ambassador were highly motivated to win over Pic the Gift. They liked the story of the company—that it’s local, growing, and operating a smart and lucrative business model.
They offered to upgrade the bathrooms, as well as the previous tenant’s old fluorescent lights to LED.
But most of all, 10838 Ambassador’s owners were prepared to make a substantial investment in bringing the requisite power to the building. That included bringing in Ameren to put in a new pole and a dedicated transformer. They were also willing to pay to have the trench dug to deliver power to the building.
Pickering said, “This has been an easy, straightforward process and overall good experience. Which is what we needed, because we didn’t have a lot of time to go back and forth. We couldn’t afford to play games.”
Looking Forward to Growth
Most of Pickering’s staff has been able to tour the building. They’ve expressed excitement about the move. He says, “We’re looking forward to stretching out.”
Planning to move in August 2019, Pickering is personally overseeing construction of the new space while his staff prepares for the move and incorporates new technologies.
He’s proud of his workers, saying, “They treat people well. They do a great job.” That, along with an in-demand service and properly proportioned new office and warehouse, is what positions Pic the Gift to keep growing.
Entrepreneurs: Are You Looking for Light Industrial Warehouse Space in the St. Louis area?
When a business starts growing faster than projections, it can feel like “the best of times and the worst of times.” Though the company may be prosperous, it leaves owners with little time to consider how to deal with the sudden influx.
Hilliker Corporation understands this. We’re the entrepreneur’s choice, coming alongside to advise you. We make it our goal to improve your life, making your work more manageable, and your real estate transactions as smooth as possible.
Increasing Investment Value - a Testimonial
A successful client sent in this letter describing Hilliker Senior Vice President, Principal, and all-around great guy Hal Ball. It takes time and energy to send positive feedback, and we appreciate that Mr. Anderson did so!
I am writing to recommend the services of Hal Ball at Hilliker Corporation. While I grew up in Pacific MO, I moved away in the 1960’s. About the same time my father Ralph Anderson built post offices in Pacific and House Springs Missouri. When he passed in 1986 my brother and I inherited these properties and have owned them since.
Last year my brother’s health declined and we decided to sell the buildings. A local business friend who was also affiliated with the SIOR top commercial realtor network recommended we work with Hal. Once I spoke with Hal I knew I had the right guy. Polite and attentive Hal listened to our goals and promptly laid out a plan for success. Rather than a quick cheap sale, Hal worked with the USPS to extend the term of both leases. This increased the value of the properties and Hal was able to sell quickly thereafter to a qualified buyer for a great price.
Hal and Hilliker Corporation have our highest recommendations.
Ralph Anderson Jr.
Dave Spence sells pharma HQ for $12.2M
The North County headquarters of Legacy Pharmaceutical Packaging has been sold for $12.2 million.
The buyer was New York-based Royal Oaks Realty Trust, which owns more than 3.6 million square feet of property across 13 states.
The sale, which closed Aug. 14, includes a 15-year leaseback agreement with Legacy, which services the branded, generic, wholesale and major retail pharmaceutical markets. Lease rates in North County average $4.30 per square foot, according to the most recent data from CBRE.
Big Sky Properties Principal Dave Spence, a one-time Republican gubernatorial candidate who also serves as CEO of Legacy, was represented by Hal Ball of Hilliker Corp. in collaboration with Vince Vatterott and Jason Simon of Westwood Net Lease Advisors. Hilliker had represented Big Sky when it acquired the property in 2013 for $6.5 million.
The sale follows a multimillion-dollar investment from Legacy, which said it spent:
- $6 million over the past two years adhering to new track and trace rules from U.S. Food and Drug Administration
- Over $20 million on equipment and clean rooms since 2014
- $1.5 million in property improvements since 2013
- and $350,000 on a locker, bathroom and cafe remodel that wrapped in April.
- Legacy, founded in 2004, produces over 800,000 units a day, company officials said.
Legacy Pharmaceutical operates in the 189,555-square-foot distribution facility at 13333 Lakefront Drive in unincorporated north St. Louis County. Similar properties nearby have sold for roughly the same price as Legacy’s over the past two years, according to real estate data firm Reonomy.
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.
Divest for Success — Here’s When to Sell Your Commercial Real Estate Investment
Over 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.
- Make sure a lawyer structures your holdings by filing your business and real estate under separate corporate entities.
- Have a qualified real estate broker (like Hilliker) properly value your property and qualify the new owner’s credit-worthiness.
- 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.
- 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.
- 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.
- 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.
When 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.”
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.