Carving a Niche
Marketing Specialty Properties Gives Brokers a New Slice of Business.
Do you have a niche? Amid the commercial
real estate industry consolidation that characterizes today’s brokerage
environment, it can make sense for some brokers to specialize in a
property type. Being considered an expert in a particular area can make
you the one that people turn to when needs in your property segment
arise, supplementing your overall business.
available to those who wish to concentrate on an area they enjoy," says
Steven S. Lampinstein, CCIM, broker/owner of the Lampinstein Company in
Dallas. "Whatever you do, find out what makes your area of expertise
unique—and what are the pitfalls."
The following examples of
niche properties—churches, day-care centers, and former bank
branches—won’t be appropriate or available to everyone. However, they
may stimulate ideas for other niche opportunities in your market or
offer tips to apply to other specialized property segments.
The Ministry of Church Sales
sales run in the family for Matthew D. Messier, CCIM, director of
commercial/industrial sales for Trammell Crow Company in Orlando,
Florida. "Marketing a church is similar to marketing any other
commercial property from the standpoint of identifying what the
possible uses are of the property and then marketing the property to
users who fall into those categories," says Messier, who specializes in
the segment and other special-use properties with his father, Richard,
who has worked the niche for more than 30 years.
other respects, it’s very different from the norm, he says. For one
thing, interested brokers often must compete for business with brokers
in a church’s congregation. "Often times, the brokers in the
congregation plan to give their commission back to the church to help
‘save the Lord’s money’ and we have to show that by using a specialist
who can truly create value, they will actually be saving the Lord even
In addition, churches often have residential zoning
or are special exceptions to zoning codes and have very limited uses.
Marketing for or to a congregation also may be unique. "Instead of the
president or comptroller of a company making a decision, you have 200,
300, 1,000 people in the decision process. Because of this, churches
tend to move very slowly."
Messier finds his buyers locally and
nationally. As noted, zoning dictates usage, but Messier has sold
church buildings for a variety of uses, including other churches,
schools, clubs, halls, funeral homes, offices, and nursing homes. "We
have a detailed database and know of just about every church, school,
club, etc., who owns property in the markets we are in." Marketing
includes brochure mailings, targeted magazine advertising, and phone
Church valuation may differ from other property types,
too, Messier says. "If uses for the property are limited and the likely
buyer is going to be a church, the income approach, cost approach, and
often times, the market approach are of little help, he says. Instead,
the value is determined by who the buyer is. For instance, the buyer of
a 300-seat church likely will be a congregation of about 150 to 175
people. "It does not matter that the pews are padded, there are
stained-glass windows, gold inlaid molding, etc.," he explains. "Those
are nice, but a congregation of 150 to 175 people can only afford a
certain amount of payment. The building could be valued at a million
dollars using the cost approach." However, based on its size and the
buyer’s financial means, a user only may be able to pay $350,000, he
On the other hand, if the property can be used for other
purposes or razed to build new homes, the value would reflect those
uses, he says.
Messier, most of whose church-related business is
the resale of existing buildings, also handles land purchases for
church groups, but says the non-profit genre offers little development
potential, as "99 percent of churches are users, not investors."
Texas, Lampinstein has learned that the world of day-care center
properties is not child’s play. As many brokers have found in the
course of their work, when unfamiliar property types emerge, some
education is required. "I was forced to become an expert" in marketing
day-care centers, he says.
"The opportunities are there in the
day-care field," he says. "It’s a growing market. Many of the national
chains are going to larger units—10,000 square feet plus—leaving the
smaller existing units in the 4,500-square-foot range for independent
operators." Many start-up operations prefer to lease rather than to
buy, he notes. However, once they have been in business for a few
years, they may be candidates to buy. "There is plenty of money
available to owner/occupants," he says, "especially through SBA [Small
Business Administration] programs."
The valuation of day-care
centers fluctuates greatly, he says. Those sold as operating businesses
are sold on a per-student basis. But, as a real estate offering, they
may be limited to relocations or start-ups if the former
tenant/operator will not allow someone to open up immediately upon its
"Some state licenses require that you occupy the
property before they can do their inspections," Lampinstein explains.
The outgoing tenant usually makes sure that the students relocate
before a new operator opens. "Without students, you are looking at the
land and improvement values only."
Day-care centers can be
adapted into other uses, he says, including senior citizens centers,
offices, and churches. "Day-cares are not always located in good retail
areas, so office, educational, and religious uses should be
considered," he advises.
Brokers also should be aware of any
special requirements for day-care center properties in their area. "In
working with day-care centers—as well as other special-use
properties—there are many changes in the occupancy codes that you need
to know," Lampinstein says. "In Dallas and surrounding areas, for
example, grease traps are now needed, not small ones, but large ones,
some the size of Volkswagens—not a cheap addition."
Lampinstein recently needed buyers for day-care facilities in Lubbock
and Houston, Texas, he says he found some interest from local brokers,
but feeling a need for urgency, he turned to resources he knew of from
leasing Head Start facilities. "I knew licenses were needed to operate
day-cares and found out that the state of Texas had all the day-care
centers in the state on computer disks—names, telephone numbers, number
of students, date of license, etc. It was an instant database of
prospects with many search options." He also mined the telephone book
and CD-ROM telephone directories of the country, ultimately completing
a lease in Lubbock, a sale in Houston—and a subsequent sale in Grand
Bank Branch Brokerage
recent wave of proposed bank mergers is likely to mean that more
consolidating financial institutions will want to dispose of excess
bank and thrift properties that overlap in their markets. "There is
definite opportunity there," says Rhonda D. Nuxoll, a vice president at
David Kaufman & Company in Chicago. "The banks are going to want to
be selling off those assets."
Despite increased alternate methods
to reach customers such as automated teller machines and Internet
banking, the number of U.S. bank branches increased from 51,935 to
57,788 between 1992 and 1996, according to Federal Deposit Insurance
Corporation (FDIC) information in a recent E&Y Kenneth Leventhal
Real Estate Group report. But with the recent spate of bank mergers
nationwide, many financial institutions will find their newly merged
selves with overlapping branches in the same markets.
of such branches "is a good opportunity for [brokers] to tap into their
investor database and market to those investors whom they know are
creative with alternative uses and would go for that type of a
property," says Nuxoll, who has marketed a number of bank properties
nationwide for the Resolution Trust Corporation (RTC) and FDIC via
But the ability to sell the branch for any number of
reuses makes the marketing process more involved. "Whereas we can just
run an ad in the newspaper for houses [being auctioned for the
government] and know that will attract buyers," marketing some bank
branch properties requires more thought, she says. While she has used
newspaper ads to announce the RTC and FDIC auctions, she also has
purchased mailing lists and used databases of companies in different
industries beyond other financial institutions in which she thought she
could find buyers, such as office, retail, or restaurants.
potential buyers to reuse bank branches "depends on where the bank
branch is located," Nuxoll says. "We consider the surrounding
properties and try to think about what other uses there might be a need
for in the neighborhood. You have a little more room to be creative in
your thinking regarding what the possible use is and where you can
In determining bank branch values, "It’s been our
experience that buyers and their appraisers and lenders will project a
reasonable rent for the space and apply a 12 to 15 percent cap rate,
assuming the property is vacant," she says. "Banks make good sellers
because they’re practical about these market forces," Nuxoll says.
They’re looking to get the property sold and reduce holding costs and
"they need brokers to get it done fairly quickly."
case, the government agencies disposing of the properties didn’t want
to hold onto them, so they chose to sell via auction, "which draws a
great deal of attention to a property and can produce a sale in as
little as 45 days," she says.
Another banking-related real estate
possibility is a new trend recently reported in the New York Times of
pairing bank branches with retail offerings—a new twist on branches
locating in other retail establishments such as grocery stores. Wells
Fargo Bank this year has added retail tenants such as Starbucks Coffee
and dry cleaners to some of its lobbies in California.