Assets - by Greg Whalen and Bill Wagner

Market Trends

“The sum of the parts...may be greater than the whole”

Rising real-estate values provide a cyclical opportunity for repositioning assets and generating cash. According to the WSJ, March 25, 2015 edition, Sears Holdings Corp just announced that it would split off as many as 300 of their best locations into a separate company by June to raise money.  Hudson’s Bay Co., the Canadian parent company of Saks Fifth Avenue and Lord & Taylor, announced last month a joint venture with U.S. mall operator Simon Property Group to sell and lease back 42 of their department stores with plans to split off the venture into a real estate investment trust (REIT). And Darden Restaurants, the world’s largest full service restaurant company, with brands such as Olive Garden, Long Horn Restaurant and Capital Grille, is exploring options for monetizing its real estate portfolio.

Do those same metrics hold true for the small, individual operator/investor as well? Absolutely.  It’s all about cleaning up the balance sheet. Whether you are a single or multiple property owner, with one or several locations, owner occupied or landlord, keeping an eye on the bottom line is crucial.  Think in terms of a property “check-up”. How healthy are my real estate assets? How often should the portfolio be examined/monitored? The short answer is constantly. Absenteeism on the property front does not make the pocketbook grow fonder. On the other hand, too much tweaking, tinkering and meddling will get you into trouble every time, a clear sign one is chasing the market. An annual in-depth performance review should be mandatory, coupled with an analysis to determine options for unleashing value and cash.

Rather than disposing of a real asset in its entirety, think in terms of its parts. Consider the example of a property comprised of land and a single building with multiple tenants. Options abound: sell the building only and retain the land in the form of a ground lease, sell the ground lease and retain the building, or convert the property to a condominium (include the site as part of the value for each unit or once again, retain the land in the form of a ground lease to the condo association and sell the bricks and mortar only). Liquidating an asset in parts will not always be the best solution, but it deserves equal consideration before making a final decision.

Check with Bill and Greg to help you navigate through these unchartered waters.     

Services

Off-Market Opportunities

The Portsmouth commercial market is replete with property owned for many years by the same family or entity. Whether as an owner or an active investor, often times you may be approached to see if you would be interested in selling your property or purchasing a new one. 

What to do and how best to respond? As this month’s Market Trends article suggests, you need to analyze your situation to see if you would consider selling or buying property, but only if the transaction meets the goals you and your family have established. These circumstances often require off market representation, which means the Whalen Wagner Team will use its expertise and client base to help develop a strategy which will enable you to achieve your goals, within the parameters you establish, by matching buyers and sellers with similar needs.

As a seller, you will want to address the following:

¨ What is the up-side potential of my property?

¨ How does the market perceive my property?

¨ Are there investors looking for my type of property

¨ How do investors evaluate the worth of my property?

¨ What can I do to increase its value?

As an investor you will want to explore the following:

¨ What types of properties meet my objectives?

¨ Are there properties in Portsmouth which meet that criteria?

¨ What is the best way to contact a prospective seller?

¨ Who can I rely upon to represent me in the marketplace?

¨ Are there opportunities in both the private and public sector?

As local service providers with a long track record of success, the Whalen Wagner Team will guide you through the process of making more informed decisions that will minimize cost and maximize value. With the Whalen Wagner Team you get an ally and aide-de-camp for sound advice and real estate stewardship.

Call us today for a creative perspective on how to advance your business plan and real estate objectives.

Greg Whalen

o: 603.637.2019 | c: 603.674.7800

gwhalen@nainorwoodgroup.com

Bill Wagner

o: 603.637.2014 | c: 603.494.7967

bwagner@nainorwoodgroup.com

28 Deer Street Suite 301 | Portsmouth, NH 03801 | 603.431.3001
nainorwoodgroup.com | info@nainorwoodgroup.com

How I Learned to Stop Worrying and Love Retail Real Estate

As we all know Radio Shack is now closing roughly 1700 stores across the nation, which has folks asking: Now where am I going to find that Co-Ax Cable to AV Cable Converter Kit? While many more folks are asking: What does this mean for retail real estate? Those who see the glass as half empty, see these closures of the harbingers of more closings for other retailers. More people are shopping online, pushing out the need for brick and mortar retailers and shrinking the retail footprint. However, we would argue that while Radio Shack does tell a story, it is not the Doom’s Day prophecy many fear.

As discussed in this forum back in September of 2014 (Resizing the Retail Footprint), there is a push for some retailers to shrink their footprint. Radio Shack was probably the lowest footprint it could go, and with none of their stores being in excess of 2000sf, real estate overhead was not the sole cause of the closures. Expenses to be sure are half of the story of operating income, but the revenue side is a large portion as well. Aside from cords and batteries, the hallmark of Radio Shack has always been phones, video games, cameras, MP3 Players, Walkman’s and of course old Dictaphones. Today your smart phone contains a huge chunk of the devices that Radio Shack had sold throughout the 1990's and 2000's.  

Now let’s get back to the retail real estate space. The need for retail real estate space has not changed but who fills the space has. The Wall Street Journal has reported that the Game Stop will be back filling 163 of the stores vacated by Radio Shack (click here for the article). So the reality is that the small Radio Shack will likely be filled by another electronics boutique but with a slightly different focus on the consumer products spin.

So what other tenants are out in front looking to expand and backfill? Grocers and food stores… Market Basket and Whole Foods are dominating the retail grocer expansion of the 2010's. Food store retailers such as Orange Leaf yogurt are expanding all over. These are retailers that cannot be replicated online. In that arena are gyms. Boutique fitness franchises are sprouting up. If you ever have a chance to talk to someone who is a member of Cross Fit, you will certainly find a “Rabid Fan”, which is why they are expanding in smaller retail chain and industrial areas.

As previously discussed in this forum, there are still those retailers whom we all think are going 100% online, but still do need bricks and mortar. Banks come to mind as a type of retailer that people may have expected to have moved more to online platform, yet branch banks are cropping up throughout the region as the landscape of the banking community continues to shift.

The lesson for today then can be summed up in the phrase “don’t believe the headlines”. Yes retail is shifting, so too are the tenants that occupy the space and the landlords that own it. And of course the brokers who live it each day. 

NAI Norwood Group Sells Land in Hooksett NH

Hooksett NH - NAI Norwood Group is pleased to announce the sale 19.66+/- acres of land located at 1227 Hooksett Rd in Hooksett NH. The land was bought by the State of New Hampshire and will be redeveloped to house a National Guard facility. Charles Goss and Mark Dickey of NAI Norwood Group represented the seller, Hecht Development, and Karl Norwood assisted in the transaction. According to the registry of deeds the property sold for $750,000 on February 16, 2015.

1227 Hooksett Road (aka Route 28) is located next to the Space Entertainment Center and across from the Cinemagic/IMAX Theater. With close proximity to Interstate 93 the location was perfect for any type of business.

NAI Norwood Group is an affiliate of NAI Global, the world’s leading managed network of independently owned commercial real estate brokerage firms.  Through this network of 355 offices in 55 countries, NAI Norwood Group is able to leverage their 45+ years of dedicated local experience around the world. With our extensive background and strong local contacts, we are able to assist individual corporations in negotiating leases, sales, business brokerage, investments, relocation, site selection and development. For more information please visit www.nainorwoodgroup.com. Or contact one of our offices: 116 South River Road, Bedford, NH 03110, (603) 668-7000 or 28 Deer Street Suite 301, Portsmouth, NH 03801 (603) 431-3001.

# # #

Update on New Hampshire Real Estate Tax

Last June we penned an article in regards to the New Hampshire Department of Revenue Administration (DRA) and their application of the New Hampshire Real Estate Transfer Tax (RETT). That article can be found here (New Taxation Looms: NH Real Estate Transfer Tax and the Ground Lease). At the time we wanted to let our customers and clients know that their past experience on the taxation of real estate transfers may have changed as it relates to ground leases.

The RETT, as you know, in New Hampshire is 1.5% of the total value of the transaction customarily split equally by both parties. So if you sell a piece of land for a bank to building a branch, both parties would split the fee. Historically leased office, industrial, retail or land has not been taxed under the RETT, however last year the discussion was raised that some ground leases were being taxed. So if instead of a selling that land to the bank you lease it to them, there was discussion that you would have to pay a tax.

For the most part people believed that the threshold for no tax versus tax was 99 years of leasing. Because at 99 years, you basically are selling the asset. However the DRA in their interpretation of the rules, believed the cut off to be 30 years, and almost all ground leases are over 30 years.

Now in this legislative session a new bill has been proposed that would insert into law that only ground leases over 99 years would be subject to the tax. (http://www.gencourt.state.nh.us/legislation/2015/SB0232.html) For those landlord’s who have ground leases or those tenants who are around our state’s airports and for many other users of land, this is a large deal. As of the writing of this article we do not have a scheduled date for the hearing on the Bill.

Written by Chris Norwood, NAI Norwood Group, cnorwood@nainorwoodgroup.com. 

Chris Norwood Appears in Episode 12 on CRE Elite's Podcast

Chris Norwood was recently interviewed by Justin Lamontagne from CRE Elite: By a broker, with brokers, for brokers. Click here to visit the page and listen to the podcast. According to the webpage outlining the podcast, you'll learn the interview includes:

Here’s What You’ll Discover

• The pros and cons of working with family
• New Hampshire’s economy is healthy due to it’s vibrant manufacturing sector
• What “abutter mentality is”
• What Chris gets out of simply writing.
• Chris’s featured deal highlights the importance of face-to-face meetings and leveraging momentum

Advice & Quotes

• Understand subtle practice differences from state to state
• “Don’t sweat the small stuff”
• Only serve on those boards you feel strongly about to develop real relationships
• Start your day with the hardest call on your list
• “I say yes to everything” – embrace opportunities
• “Positive attitude” is 99% of our day.

: