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Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice...

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S l / L b k M k S a l e / L e a s e b a c k M a r k e t M i n n e s o t a C o m m e r c i a l A s s o c i a t i o n o f R e a l t o r s March 15, 2012 CBRE CBRE C CB B B / / / B L L B b b R R R k k R CBRE C CB S B a B l B e B / B L B B e R b R R R R R a R r R k R e R R M B i B n B n B e B s B o B t B B m R m R e R r R c R i R a R l R A R s R s R o R R R R R R R o E f E R E e E a E l E t E o E r E s E 5, 20 BRE C CB
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Page 1: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

S l /L b k M kSale/Leaseback MarketMinnesota Commercial Association of RealtorsMarch 15, 2012CBRECBRECCBBB///BLLB bbRRRkkRCBRECCBSBaBlBeB/BLBB eRbRRRRMRaRrRkReRRMBiBnBnBeBsBoBtBB mRmReRrRcRiRaRlRARsRsRoRRRRRRR oEfEREeEaElEtEoErEsEarch 15, 20CBRECCB

Page 2: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Contact Information

CBRE C

apital

Steve BussExecutive Vice PresidentCBRE – Capital Markets952 924 4618 M

arkets

Fort Parker

[email protected]

Fort ParkerVice PresidentAngelo, Gordon & Co. 212.883.2495

Timm Crowley

[email protected]

Tim CrowleyCo-FounderNet Lease [email protected]

CBRECBRECarkets

FCCCC [email protected] kBeBrBCCCCBsBiBdBeBnBtB, Gordon & Co. [email protected]

Page 3: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Outline

CBRE C

apital

1. Introduction

2. Participants

3. Sale Lease/Back Activity Markets

4. Corporate Motivation for Sale/Leasebacks

5. Typical Lease Structures

6. Role of Credit and Financial Strength g

7. Impact of Real Estate Fundamentals

8. Audience Q&A CBRECBRECarkets

4. Corporate Motivation for Sale/Leasebacks

Typical Lease Structures

Role of Credit and Financial StrengthCBREC g

of Real Estate Fundamentals

ence Q&A CBREC

Page 4: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

AG Net Lease FinancingAG Net Lease FinancingMarch�2012CBRECBRECBREG Net Lease FinancinCBRECBREAG Net Lease FinancinMarc 012CBRECBRE

Page 5: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

AG�Overview

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$22�Billion�in�Assets�Under�Management�*(as�of�September�30,�2011)

Residential/ Private

HedgedStrategies

2% Cash

PE & Special Situations

PPIP 12%

Residential/Consumer

Debt8%

PrivateEquity

5%

Cash2%

Distressed Securities23%

Corporatee Creditt Reall Estate

Real Estate Debt10%

Credit

* Estimate

Corporate Credit (Leveraged Loans)

15%

Real Estate23%

Credit

Real Estate

CBRECBRECBRE&��� �

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(as of S 30, 2011)BBRRRRRBeeeBsssBiiBdddB vvvRaaaaRtttReeeeRHReRRRRRSRtRrRaRRRRRRR2RRRRRRPE & SpecialtionsCBRECBRERBBBRRRRBBBBB2B%BRBeBsBiBdBRCBoBnBsBDBB8B vRaRtReeeRuRiRtRyyyR%RRRRRRR

Page 6: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Angelo,�Gordon�Platform

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Page 7: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

AG�Net�Lease�Realty�Funds

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Page 8: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Illustrative�Transactions

CBRECBRECBRECBRECBRECBRECBRE

Page 9: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Property�and�Tenant�Breakdown

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Page 10: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

NET LEASE HOLDINGS (“NLH”)Single-Tenant, NNN Sale-Leaseback Fund

Founded 1994:St. Louis, MO Headquarters

10Today’s MNCAR Panelist = Tim Crowley (Co-Founder)

CBRECBRESingle-Tenant, NNN Sale-Leaseback FundCBRECBRE

Page 11: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

NLH Executive TeamTim Crowley (Co Founder) St Louis University (BA)Tim Crowley - (Co-Founder) St. Louis University (BA)Luke Fouke - (Co-Founder) Yale Univ. (BA); Washington Univ. (MBA)Rob Hill - Princeton University (BA); Pepperdine University (MA)

Lenders Accounting

Tyler Willibrand - St. Louis University (BSBA)

Single Tenant, NNN Real Estate FundLegal

EquityInvestorsg

Enviro.Survey

($)

Engineers

AppraisalsSurvey

CBRECBRECBRECBREy ( y (

Luke Fouke - (Co-Founder) Yale Univ. (BA); Washington Univ. (MBA)b Hill - Princeton University (BA); Pepperdine University (MCBREBBLBRRntingRCBRECBRErand - St. Louis University (BSCBREBRBRBRSingle Tenant, NNBRBCBCBBRREREEquR

Page 12: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

NLH Investment CriteriaTransaction Size (Purchase Price)

• $1 million to $10 million

GeographyGeography• Anywhere in USA (past examples plotted) �

Occupancy / Structure / Term• Single-tenant under an absolute triple-net (NNN) lease• [10] – 20 year lease terms (with shorter terms considered)• Annual rental increases (“Bumps”) = Yes; generally 2.0% or CPI

Property Types• Industrial, Warehouse/distribution, Flex/office, Healthcare, Medical, Retail

Tenant Credit ProfileTenant Credit Profile• Generally Sub-Investment Grade or Unrated Companies with Revenue between $10mm - $150mm

CBRECBRETransaction Size (Purchase Price)

million to $10 millioCBREA (past examples plotted)

y / Structure CBRESingle-tenant under an absolute triple-net (NNN) lease• [10] – 20 year lease terms (with shorter terms considered)• Annual rental increases (“Bumps”) = Yes; generally 2 0% EE

Page 13: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Some Past ExamplesMemphis, TNPurchase: $6,000,000

Springfield, MOPurchase: $3,400,000106,000 SF Office/Warehouse120,000 SF Office/Warehouse

Cincinnati, OHPurchase: $3,360,000

Saint Louis, MOPurchase: $2,948,069

84,941 SF Office/Warehouse 9,728 SF Medical Office

NLH Average CapRate @ Purchase = 9.74%

CBRECBRECMemphis, TNPurchase: $6,000,000 R

ringfield, MOse: $3,400,000SF Offi120,000 SF Office/WarehouseCBREC RC RCBRECincinnati, OH

Purchase: $3,360,000

t Lose: $2,948,069

84,941 SF Office/WarehouseC R9,728 SF Medical Office

Page 14: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Sale/Leaseback Activity CBRECBRECCBCBRECCBSBaB LReRaRsReRbRaRcRkRARRR iEtEyECBRECCB

Page 15: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

UHG – Optum Campus

CBRE C

apital

Buyer:Angelo Gordon

Seller: Markets

UnitedHealth Group

Square Feet:473,325,

Broker:Jones Lang LaSalle

Sale Price:$50,000,000

Sale Date:December 2011

Location:Eden Prairie, MN

Source: Real Capital Analytics

CBRECBRECarkets

tedHealth Group

RR rEeEFEeEEEE325CBREC R eErE:Es LanCBREC RR PErEiEcEeEE,000,000

Page 16: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Blue Cross Blue Shield

Buyer:: CBRE C

apital

Buyer: W.P. Carey

Seller: Blue Cross Blue Shield M

arkets

Blue Cross Blue Shieldof Minnesota

Square Feet: 1 040 9301,040,930

Broker: CBRE

Sale Price: $150,757,741

Salee Date:Sale Date:January 2012

Location:Eagan, MNEagan, MN

Source: Real Capital Analytics

CBRECBRECarkets

nesota

SRR eEFEeEeEEE930CBREC ,930RRR rE:ECBREC RR rEiEcEeE:E$150,757,741

Page 17: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Cargill – Excelsior Crossings C

CBRE C

apital

Buyer:Hines

Seller: Markets

Cargill

Square Feet:254,915

Broker:CBRE

Sale Price:$69,489,923

Sale Date:December 2011

Location:Hopkins, MN

Source: Real Capital Analytics

CBRECBRECarkets

Cargill

qEuEaEEEEEEEE254,9CBREC BErEoEkEeErE:ECBRECBREC aElEeEEEEEEE69,489,923E

Page 18: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Sale/Leaseback Volume - US

CBRE C

apital

$16.13 $16.00

$18.00

Markets

$10.05

$13.17

$10 00

$12.00

$14.00

olla

rs

$6.23

$9.20

$7.97

$6 00

$8.00

$10.00

In B

illio

ns o

f D

$2.91

$4.27

$3.40 $3.72

$4.69

$2 00

$4.00

$6.00

$0.34

$-

$2.00

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: Real Capital Analytics

CBRECBRECarkets BRERC

$13.17

$12.00CBRECBREBRC $9.20

$7.97

$6 00CBRECBREBREC 91

$

$3.40 $3 40

$4

$4.0

$6.00

Page 19: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Sale/Leaseback Volume - Minneapolis

CBRE C

apital

$327.76

$275 00

$300.00

$325.00

$350.00

Markets

$206.90

$200.00

$225.00

$250.00

$275.00

Dol

lars

$86 86

$161.22

$101.40

$132.78

$125.00

$150.00

$175.00

In M

illio

ns o

f

$44.60

$86.86 $101.40

$78.94

$55.76

$32.43 $23.72

$35.05

$25 00

$50.00

$75.00

$100.00

$-

$25.00

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Projected 2012

Source: Real Capital Analytics and CBRE

CBRECBRECarkets BRERE200 00

$225.00

$25CBRECBREBRE$

$161.22

01.40

$132.78

25.CBRECBREBRE$44.60

$ 1.40

$55.7

$35 05$35 05

$75.

$100.00

Page 20: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Corporate MotivationCBRECBRECCBCBRECCBCB pRoRrRaRtReRMRoRtRiRRRR nECBRECCB

Page 21: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Benefits�of�Sale�Leaseback�Transactions

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�$���� ����$���������5B�������D* ���#�� 3I�CBRECBRE#���$��������5B�������$�������!�������L��������������!#����������#����#�����% %��/���������$�������

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Page 22: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Use�of�Proceeds

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Page 23: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Typical Lease StructureCBRECBRECCBCBRECCBTByBB aRlRLReRaRsReRSRtRrRRRR rEeECBRECCB

Page 24: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Sale/Leaseback: Components of Value

CBRE C

apital

CorporateTenant/Credit

Markets

LeaseStructure

Real Estate Fundamentals

A il blAvailableMortgage

Debt

CBRECBRECarkets RBCBREC LeaseLea

StructureStrReal Estate Real Estate

FundamentalsFundamentalsCBREC RB

Page 25: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Triple�Net�Lease�Defined

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6 "������!��!� ��������* ���������#��������$�%���������$����������7�����������$�

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Page 26: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Sale/Leaseback: Typical Terms

CBRE C

apital

Investment Grade Sub-Investment Grade

Lease Term 12-25 years 15-20 years

Markets

Rate Market Rate Below Market to Market

Annual Increase Flat to 2 0% 2 0% to 3 0%Annual Increase Flat to 2.0% 2.0% to 3.0%

Lease Structure Net or Bondable Net Net or Bondable Net

C h if CInvestor Financing Cash, Low Leverage Life Co, CTL CMBS, Bank

Investor’s Type REITs, Pension Funds, Foreign REITs, Single Tenant Funds,PrivatePrivate

Cap Rate 5.5% to 7.5% 8.0% to 11.0%

CBRECBRECarkets CCBRECBREBRCBRECBREC ERate Market Rate Below Market to Market

al Increase 0% o 3 0CBRECCBRECBRECBREBRCBRECBREC Ecrease 0% o 3.0

Structure Net or Bondable Net Net or Bondable Net

ifCBRECCBREBRCBREBRCBREC Envestor Financing Leve Life BS, Ban

I Ts Single Tenant Funds

Page 27: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Role of Credit & Role of Credit & Financial StrengthCBRECBRECCB ooRlReeRRRRRRdddRiiRtttRRCBRECCB oRlReRRRRRRdRiRtRRaRnRcRiRaRlRSRtRrReRnRRRCBRECCB

Page 28: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

T ’ S l d Fi i l Hi

Role of Credit and Financial Strength� Tenant’s Sales and Financial History

� Balance Sheet and Income Statement Needed for Past 3 to 5 years� “How Much Leverage/Debt?” and “What are the Profit Margins?”

� Tenant’s Industry Trends, Competitive Dynamics & Customer Concentration%y p y� Track Record of Private Equity Firm or Business Owners’ Equity Investment

Comparative Analysis to Industry Based CompetitorsComparative Analysis to Industry-Based Competitors(Use SIC Code Comparison of Larger Publicly-Traded Competitors)

"HOT BUTTON" PREFERENCES: StatisticFixed Charge Coverage Ratio (FCCR) > 1 25xFixed Charge Coverage Ratio (FCCR) > 1.25xGross Profit Margins (GM %) > 30.0%EBITDA Margins > 10.0%Net Debt / EBITDA (Leverage Ratio) < 4.0xTotal Revenues or Net Sales > $10,000,000Return on Net Assets (RONA) > 25%

CBRECBRE� les and Financi

� ce Sheet and Income Statement Needed for Past 3 to � “How Much Leverage/Debt? “What are the Profit Margins?”enant’s Industr , Comp itive Dynamics & Customer ConcentratCBREp y

ord of Private Equity r Business Owners’ Equity Investment

Comparative Analysis t dust d CompetitorsCBRECompara Analysis t dust d CompetitorsCBREUse SIC Code Comparison rger Publicly-Traded Competitors)BRR"HOT BUTTON" PREFERENCES StatisticRRBR

Page 29: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Real Estate FundamentalsCBRECBRECCBCBRECCBRBeBaB sRtRaRtReRFRuRnRdRaRRR tEaElEsECBRECCB

Page 30: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Impact of Real Estate Fundamentals� Strategic Importance of Property to Tenant’s Business� Demographic Analysis Helps Determine Ability to Re-Tenant Building� Engineering Report & Appraisal Determines Asset Quality and Construction Cost� Analysis of Available Square Feet in the Local Market vs. Building Size� Analysis of Available Square Feet in the Local Market vs. Building Size

NLH Target Opportunity: Building Cost Should Never Exceed Replacement Cost“I t t G d ” “S b I t t G d ”“Investment Grade” “Sub-Investment Grade”

Walgreens = $550/sf on 14,500sf Kele, Inc. = $50/sf on 120,000sfCBRECBRE� Strategic Importance of Property to Tenant’s Business� Demographic Analysis Helps Dete Ability to Re-Tenant Bu

ngineering Report & Appraisal Determines Asset Quality and Constructioalysis of Available Square Feet in the Local Market vs. BuildinCBREvaila Feet Loca uildin

rget Opportu Building Cost Should Never Exceed Replacement CoBRE“I t I t t G d ”CBRE“I tmen nvestm ade”Walg = $550/sf on 14,500sf = $50/sf on 120,0ERE

Page 31: Sale Leaseback Presentation 3.15.11.ppt Leaseback... · CBRE Capital Steve Buss Executive Vice President CBRE – Capital Markets 952 924 4618 Markets Fort Parker 952.924.4618 steven.buss@cbre.com

Q & A CBRECBRECCBCBRECCB QR&RARCBRECCB


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