U.S. factories boosted output last month, and December ended up being their best month of growth in five years.Millions of dollars in local commercial real estate is being advertised for sale online. The growing inventory represents enormous opportunity.
At least three types of owners are represented there. Some sellers are marketing real estate vacated by businesses now closed. Some struggling business owners are trying to sell properties before they have to resort to bankruptcy. And some investment groups are trying to diversify their holdings by selling buildings already leased to thriving tenants.
The number of online property listings – and interest in them – has been growing.
LoopNet Inc., a San Francisco-based online commercial real estate service, listed 713,610 properties for sale or lease as of June 30, a 14 percent increase over June 30, 2008. The listings are from more than 1,000 commercial real estate firms nationwide.
LoopNet’s registered members grew to almost 3.6 million by the end of the second quarter – a 21 percent increase over last year’s second quarter. The number of unique monthly visitors increased during the second quarter to about 950,000, a 9 percent increase over the same three months of 2008.
Some listings are for the land, building and business inside. But that’s not always the case.
Misleading meaning
Bruce Kraus, Eddie Merlot’s director of operations, said some people read too much into online postings.
A few years ago, the Fort Wayne-based restaurant chain listed both its local and Indianapolis locations for sale, fueling speculation that the steakhouse was floundering. The rumor was as juicy as an Eddie Merlot’s filet mignon. But it wasn’t true.
The company just wanted to raise some quick cash, Kraus said. He wouldn’t give a dollar figure but described it as “a profitable transaction.” Selling a building and leasing it back also offers certain tax advantages, he said.
Scottsdale, Ariz.-based Spirit Finance Corp., which didn’t return calls seeking comment, listed the Fort Wayne Eddie Merlot’s building for sale earlier this year.
But the online listing has disappeared, and Eddie Merlot’s founder Bill Humphries said a Spirit Finance employee assured him earlier this month that the property is not currently for sale.
For sale, not closing
But some of its Jefferson Pointe neighbors are, including Biaggi’s Ristorante Italiano. Again, it’s just the building we’re talking about.
The landlord has listed the property, but the restaurant has a long-term lease and no intention of closing, Biaggi’s officials said.
A representative for the building’s owner said periodically selling real estate is just part of the business plan.
St. Paul, Minn.-based AEI Capital Corp. pools investors’ money into funds that last for seven to 10 years. At the end of the specified time, AEI has to return investors’ money, said Mike O’Toole, a sales associate. That forces AEI to sell some properties that have good tenants. Listing a building for sale doesn’t necessarily signal strained relations.
“There are no problems (with) Biaggi’s,” O’Toole said. “They’re very strong, and we’re very happy with their performance. They’re a class act.”
Best Buy, Staples, Applebee’s, Starbucks and Dick’s Sporting Goods are among the retailers with which AEI regularly does business. Many retailers and restaurants sell their buildings – then lease then back – to finance expansion, O’Toole said.
Typically, a business leases back its building for a 20-year term with one or two five-year options, Eddie Merlot’s Kraus said. The long-term lease protects the tenant from rate increases, even if a new landlord buys the property. As part of the standard deal, the tenant pays for maintenance, painting, landscaping, improvements and taxes on the building.
But after a business sells its building, it can’t control who holds the deed. As tenants, they aren’t always privy to their landlords’ business plans.
“We’re just as surprised as you are,” Kraus said about seeing the local Eddie Merlot’s property on LoopNet. “We see it listed, and then we don’t see it listed.”
Kraus likened an investment group’s selling a property to a bank’s selling a home mortgage. In both cases, the parties occupying the buildings send their monthly payments to a different address but, otherwise, life goes on as usual.
“We’re not going anywhere,” he said. “It’s a tough economy, but we’re a strong organization.”
Not a sign of trouble
Every listing has a story, including the LoopNet entry for Steel Dynamics Inc. The Fort Wayne-based steelmaker is selling its corporate headquarters. But it doesn’t signal the end of the company.
When Steel Dynamics bought scrap metal processor OmniSource Corp. from the Rifkin family in 2007, the $1 billion deal included corporate offices. To reduce costs, the manufacturer has consolidated its two headquarters into the OmniSource building at 7500 W. Jefferson Blvd., spokesman Fred Warner said.
The former SDI corporate space is available for sale or lease.
Despite its appearance on LoopNet, Chappell’s Coral Grill at 2725 Broadway isn’t for sale.
“It’s just an old listing,” owner Gary Chappell said. “We’re actually opening it back up.”
After opening a restaurant last year in the former Joe’s Crab Shack building at 5820 N. Coldwater Road, Chappell closed the Broadway location.
He was simply burned out from getting a new business off the ground. And the recession didn’t help. But after getting a much-needed break, Chappell is ready to oversee two busy restaurants.
“Times are getting better,” he said.
The Broadway location could reopen in as little as one week, he said.
Reasons for sale
Pontiac Mall’s owner, Hassan Nassor, wants to sell the south-side retail space so he can invest that money in expanding his cab company.
Nassor invested about $50,000 to get Yellow Taxi Cab off the ground in September with a three-vehicle fleet. He owns 12 taxis now and wants to add more. Some customers have also shown interest in renting limousines. The entrepreneur would like to buy at least one of those, too.
The mall has been listed for sale for more than seven months, and Nassor has talked to some interested parties, but no one has made a serious offer.
Marilyn Moran Townsend is biding her time, waiting for the right party to show interest in her listing, CVC Communications’ headquarters.
“We’re looking to either sell or lease it,” she said. “Our business has changed so much in the past decade that we really need a more high-tech space.”
The building at 811 Lawrence Drive would work well for light manufacturing or as a warehouse, she said. CVC Communications will continue to occupy it until an attractive opportunity turns up, Moran Townsend said.
Property owners can wait for the right opportunity. But those who lease space have to be more flexible.
Lindi Miller, owner of Deli 620, knows her landlord has been trying to sell her building for years, even holding an auction late last month. But no one bid on 620 S. Calhoun St.
“So that was a big relief for me,” she said. “We’re just kind of up in the air. We don’t intend to move. We don’t want to move.”
If the building sells, Miller would have to find out whether the new landlord is willing to offer affordable lease terms when her current contract ends. She doesn’t have a long-term rate locked in like Eddie Merlot’s and Biaggi’s do.
“I sure do” want to stay in business, Miller said. “More than anything.”
