Real Estate-Driven Capital
March 1, 2006
Real Estate-Driven Capital
A number of distributors who are undertaking expensive acquisitions and consolidating have been turning to National Beverage Properties (NBP), Los Angeles, as a real estate partner to strategically provide the financing to purchase real estate assets.
William Anderson, NBP’s chairman and chief executive officer, with experience as executive vice president at his family business Topa Equities, began NBP because he saw a need for a different type of capital source for beverage distributors. He also witnessed how well the car dealership REIT had performed for car dealers, and saw similarities between car dealers and beverage distributors.
“Both are primarily family-owned businesses,” Anderson explains. “They have strong cash flow-operating businesses, and they don’t necessarily need to own the real estate that they are operating under. And both industries are going through quite a bit of consolidation so they have fairly urgent capital needs to grow their businesses going forward.”
Beverage distributors across all channels, but particularly beer and spirits, are finding NBP’s services useful. Formed in 2005, NBP provides capital for beverage distributors through value-added real estate solutions. For example, NBP provides sale-leaseback solutions for warehouse acquisitions and expansions, setting the stage for enhanced bottom-line results.
NBP offers its distributor partners real estate and capital strategies, such as providing growth capital to beverage distributors who are purchasing a new distributorship, including the seller’s warehouse. In these cases, NBP buys the warehouse for the acquiring distributorship, which allows it to save its capital for brand acquisitions. NBP then enters into a long-term lease to provide the distributor with an industry-specific real estate partner and long-term control over the real estate.
The company also constructs, renovates and develops new, larger and more efficient facilities for distributors. NBP takes care of tasks such as site acquisition, design, permits and construction management. The distributor, in this case, receives operational benefits from a new facility designed to meet its specific needs, and moves into the facility with no disruption to its existing operations. NBP also is able to assist the distributor with flexible options for a 1031 tax-free exchange on its old property.
In the second phase of NBP’s business strategy, the company plans to become a public real estate investment trust (REIT), and in doing so, provide estate planning and other tactical solutions through REIT-structured transactions. By distributors selling their warehouses to NBP in exchange for shares in the company, they are provided with a long-term tax deferral proposal, diversification, the ability to time their liquidity events and an estate planning strategy.
“What we see is a number of distributors looking at a very expensive acquisition of another distributorship, and they would like a well-capitalized real estate partner to come in side by side with them and purchase the warehouse that’s associated with that distributorship,” Anderson says.
This strategy makes sense, he adds, because they are able to save capital for their operating business and NBP is able to come with its capital and buy the real estate and provide a long-term lease, which leaves them in control of the real estate for the long-term. BI