Executive Spotlight: John Hammill, Capview Partners

John Hammill and partner Ken Shulman set their sights on becoming the leading investment and consulting firm focused strictly on single-tenant net lease properties. The result was Capview Partners. Hammill talks about opportunities in the space.
John Hammill Head Shot

When Jones Lange LaSalle acquired The Staubach Co. from football hero-turned-real estate leader Roger Staubach in 2008, the firm’s two experts on single-tenant net lease retail real estate decided to strike out on their own.

John Hammill, a managing director at Staubach focusing on net lease and capital markets, and Ken Shulman, a longtime commercial executive with extensive retail real estate experience, set their sights on becoming the leading investment and consulting firm focused strictly on single-tenant net lease properties—a niche with potential for investment growth. The result was Capview Partners.

“We’ve tracked $24.8 billion worth of merger-and-acquisition activity in the last 18 months, and we estimate the net lease space is still only about 10 percent consolidated. We think it’s going to take about 10 to 15 years for it to get anywhere near the consolidation level of shopping centers and multi-family,” said the Dallas-based Hammill in a recent interview with CPE. Capview Partners’ goal is not to have the biggest portfolio of such properties. Instead, it is trying to provide dependable returns for investors with the best portfolios, like client USAA Real Estate Co., a division of San Antonio-based insurance giant USAA.

CPE: Can you describe what the single-tenant net lease retail landscape looks like today?

Hammill: In our estimate, malls are 95 percent consolidated by REITs, pension funds and insurance companies. Shopping centers and multi-family are 50 to 65 percent consolidated, whereas net lease retail is about 10 percent consolidated. We’re starting to see the space consolidating due to technological and communication advances. The process of aggregating net lease properties is a cleaner and simpler proposition than it was 30 years ago, simply because of computing technology and Internet communications.

The average size of the assets is about $2.5 million. In other segments, it’s $25 million to $50 million, and sometimes much larger.

CPE: What are the investment advantages in this market segment?

Hammill: In our estimate, net lease offers a higher average total return across portfolios, with less risk than other segments.

We like to look at portfolios of $50 million to $200 million as more like a virtual shopping center without any co-tenancy. You have tenants like McDonald’s, Chase Bank, Walgreens and other major players, but you don’t have mom-and-pop donut shops or nail salons. You have 100 percent occupancy with nothing but great brand names. When you average out the net lease space, you might be able to get a portfolio together for a 7 percent cap rate, whereas if you go and buy a 100 percent-leased shopping center with nothing but brand names, you’re going to be down in the high 5s.

We feel like it’s a lower-risk segment with a greater total return that requires some sweat to put it together.

CPE: What are the strongest markets for single-tenant net lease retail right now?

Hammill: Texas, with the energy renaissance that’s ongoing, continues to do well. We didn’t have as low of a low during the downturn as a lot of other segments did, and our return is looking very robust. We’re continually gaining population here and the economy is doing very well.

CPE: How did you end up focused on this specialty?

Hammill: Our goal was to offer a better investment opportunity in the single-tenant net lease retail space than what other people were offering. We don’t necessarily want to be the biggest in this business; we just want to be the best.

My business partner, Ken Shulman, has spent 40 years in the retail investment space. I was fortunate to get into the single-tenant net lease retail space when I joined Staubach in the mid-90s and have been almost solely focused on that space since then. Some people spend 10,000 hours (to master a skill or area of expertise); I think I’ve spent about 20,000 hours and my partner has spent 40,000 hours on this space.

A lot of real estate investment managers don’t know the space as well as we do. We’ve spent so much time on it and know it so well that we’re able to produce capital-preserving, yield-producing investments with upside that others don’t see.

CPE: What was it like to work for Roger Staubach?

Hammill: Roger is one of these people that’s beyond words. He maintains an incredible level of integrity despite being so successful in life. It’s not often that you see people succeed the way he did and also maintain a great level of integrity and commitment to their values. He’s the most consistent, incredible guy, who is humble while also incredibly capable and trusting. He’s able to trust good people to handle things for him and delegate well. I admire him so much.

CPE: How do you differentiate your business from larger players in the market?

Hammill: By being a smaller, more efficient company, we strive to offer our investors access to higher-quality single-tenant net lease retail investments and investment strategies, relative to the alternatives that are out there. We try to do this by having greater selectivity in our asset selection. We also try to offer lower fees compared to (competitors). We try to offer a higher yield as part of that lower-fee value proposition.

In the end, by not being the largest in this business but by trying to be the best in it, we try to give our investors a higher total return than they can find elsewhere. We try to keep investor fees as low as possible, because if we serve an investor well and better than our competitors, we’ll stand out, and that’s really our objective.

CPE: What does your model investment strategy look like?

Hammill: We have successfully aggregated individual properties together into portfolios that become more valuable than the sum of their parts by essentially matching up a diversified group of assets, one at a time. It may be one McDonald’s and one Wendy’s and one Wells Fargo and one Chase Bank, one Applebee’s and one Denny’s. But by diversifying across credit, lease term remaining and those types of factors, it’s like putting an oxygen atom with two hydrogen atoms. You get something different when it’s put together than what you had with individual units.

I would say that one of our greatest successes was when USAA Real Estate Co. engaged us to partner with them on a $100 million investment strategy. One of our greatest successes was proving to them that this alchemy does in fact exist, and that the investment thesis of a portfolio aggregated of net lease assets does return a greater return than the sum cost of the assets acquired.

CPE: What’s next for Capview Partners?

Hammill: For the last four years, we have been developing private equity limited partnerships while partnering with USAA Real Estate Co. on their investment fund in net lease retail.

Now, we are developing the Capview Income and Value Fund. This is to take the best of everything we have to offer and provide a better investment product in single-tenant net lease retail than what investors can find elsewhere. That fund is now launched—we have about $30 million of assets acquired or under contract and over the next couple of years we will be focusing on growing that fund to a $250 million to $500 million portfolio.