NetLease Q & A: Calkain’s Hipp on Survival in Changing Times

Can a specialist in the net lease business survive and even prosper in an ill-starred real estate market? Jonathan Hipp, president & CEO of Reston, Va.-based Calkain Cos. Inc., has no doubt of it. In fact, he says, he’s looking forward to the rest of the year, as opportunities occurring in a down market tend to reveal themselves. Also, Calkain recently buttressed its platform by making a strategic alliance with McLean, Va.-based Fraser Forbes Co. L.L.C. to improve the services they each offer. Fraser Forbes focuses entirely on raw land deals, while Calkain focuses on income-producing properties stabilized by a finished building and strong tenancy. By integrating these core strengths, Hipps says, both can offer everything from land disposition and acquisition to stabilization of an income-producing asset. Recently, CPN spoke with Hipp about the new alliance, and the prospects for the net lease market going forward. CPN: Why undertake such a strategic alliance now? As a way to compete with the larger shops? Hipp: Fraser Forbes is the pre-eminent broker of raw land in the Washington metro area, and raw land is a non-income-producing, non-depreciable asset. What do you do with it? If owners want to sell their raw land, we can show them how they can go from that kind of asset to an income-producing, depreciable asset by investing in a net lease product. The alliance gives him some additional tools to help his clients, and we get additional clients. It’s also a strategy to compete with the CBREs or Eastdills of the world, who have all these abilities in-house. This is especially important because we sell nationally, though we do more net lease deals in metro Washington than anyone else. CPN: What do you foresee for the net lease market? A continuing slowdown? Hipp: Only part of the market has slowed down significantly. The market is still active in $15 million-and-under deals, because there are still a lot of private investors looking for those kinds of deals, including a trickle of investors from Canada and Europe. The under-$15 million space is also one in which you can get financing from local banks and insurance companies. In that kind of deal, we aren’t quite as active as we were last year, but we’re still very active – we’re having a great second quarter, and we’re looking forward to the third quarter. CPN: Are current conditions affecting the competitiveness of the net lease business? Hipp: Yes. There are fewer brokers doing what we’re doing. Times like these thin the herd, so there are fewer other brokers calling our sellers as there once were. Sellers are attracted to brokers that have a track record, and we offer that. The turndown in the market will ultimately be good for us – it’ll increase our market share and help define us as players in the industry.