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Case Study: A $12.2 Million Sale-Leaseback Sold Over Asking Price

Legacy Pharmaceutical Packaging, St. Louis, MO

August 14, 2019

$12.2 Million

Extract Maximum Value with a Sale-Leaseback

Dave Spence, the owner of Legacy Pharmaceutical Packaging in St. Louis, Missouri, engaged Hal Ball from Hilliker Corporation to assist with a sale-leaseback transaction of the Legacy property. Ball originally sold the property to Spence in 2013, but with this being a sale-leaseback transaction, Ball referred Spence to Hilliker’s subsidiary, Westwood Net Lease Advisors. Westwood specializes in helping business owners structure sale-leasebacks to extract maximum real estate value while optimizing long-term control of their businesses.

Westwood Net Lease Advisors’ Vince Vatterott and Jason Simon consulted with Spence to align the lease and asking price with fair market value in order to sell the property at top-dollar. Not only did the property sell quickly with a lease that was beneficial to Legacy, there was also a bidding situation where Spence ultimately received more than the asking price – $12.2 million.

The Lease is Critical for Maximum Sale Price, Profitability, Flexibility

As with many sale-leaseback transactions, Westwood represented Spence as the seller and the tenant – his goal was to sell the building and 12 acres of property, then lease it and continue with business as usual. To be an attractive investment for large institutional investors, particularly real estate investment trusts (REITs), Vatterott and Simon counseled Spence on structuring the sale price and lease at fair market value with at-or-below-market annual rent increases, and a single-tenant, absolute-net, long-term lease. He already met their other criteria: a high-credit, stable, mission-critical business with strong sales, long-term blue-chip customer contracts, and state-of-the-art facility.

The Legacy lease had to first protect the client’s ability to have operational control of his business, as well as remain attractive to investors, so the lease was perfected to make it ideal for both parties before Spence’s property went to market. He ended up with a 15-year, absolute triple-net lease with below-market rent and slightly lower than market annual increases, and all the benefits of a seal-leaseback.

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How Westwood Found the Ideal Buyer

Westwood’s advisors stay in touch with and continually track the appetite of various REITs, many of whom they’ve worked with previously. Westwood advisors know the REITs preferred deal size, yield preferences, and lease terms which allows them to quickly identify the right buyer/seller/tenant arrangements. Once Legacy’s proposed lease structure was finalized, Vatterott and Simon contacted their network of REITs that fit the transaction and quickly received many qualified offers, two over the asking price, and ultimately sold to Royal Oak Realty Trust of New York for $12.2 million.

Mr. Bruce Bender, VP of Acquisitions at Royal Oak commented, “Legacy was a mission critical facility and Dave Spence checked every box for our investing criteria. Our success is based on our tenants’ success; we couldn’t be happier with our acquisition of Legacy and the way the sale was facilitated by Westwood Net Lease Advisors. They balanced the deal between what we were looking for and making sure both parties were happy and well-represented.”

To Wrap it Up – A Profitable Deal for Both Parties

With Vatterott’s and Simon’s expertise behind him, Spence benefited from the competition between REITs to end with a final sale over asking price, a long-term lease with advantageous rent and structure, and the ability to monetize a significant asset and re-invest the capital. Spence and Royal Oak both have the long-term security of knowing each other’s businesses are reputable, profitable, privately held companies that value their clients and continue to be outstanding representatives of their respective industries.

If you are interested in freeing-up capital in a sale-leaseback opportunity, contact Vince Vatterott,314-563-2204, or Jason Simon, 314-563-2206 today. Westwood’s elite team of advisors offers no-obligation consultations and decades of experience that can significantly enhance your investment portfolio.

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