After building a successful business selling mostly retail properties and portfolios, Jonathan Hipp takes on larger transactions for institutions private-market clients
Net lease expert Jonathan Hipp entered the workforce as a stockbroker with Dean Witter (today Morgan Stanley), but his love for real estate was already clear. While trading equities and bonds, he was also trying to raise money to buy a car wash.
“I liked the idea of hard assets,” said Hipp, who has been president & CEO of Washington, D.C.-based Calkain Cos. LLC since 2005.
The net lease brokerage and advisory firm has completed more than $12 billion in net lease transactions for nearly every major national brand in every category including: CVS, Walgreens, Rite Aid, Chic-fil-A, Burger King, Wendy’s, Wawa, Royal Farm, Murphy’s, Circle K, and many others. It has opened offices in Atlanta, Boston, Nashville, Philadelphia and New York and its net lease data is highly respected and sought-after. Last June, Calkain launched NetCMG to focus on transactions of $15 million to $100 million for institutional and private-market clients.
‘BONDS WRAPPED IN REAL ESTATE’
Back when he was a stockbroker, Hipp learned about net lease from a friend who worked in residential real estate. He explained selling net lease real estate was like selling a bond. Hipp was hooked. He had already sold hundreds of millions in bonds and was a believer in fixed-income investments.
After leaving Dean Witter, Hipp tried to get a position with all of the major commercial real estate brokerage firms but none would hire him. In the end, he took a job in the commercial division of a small real estate brokerage in Fairfax, Va.
He began with office leasing but eventually began cold calling developers to see if he could get into the net lease business that way. Finally, Hipp sold a net lease asset to the founder of Adams-Nelson in rural Winchester, Va. A principal of Adams-Nelson offered Hipp a job to which he countered with what he thought was a ridiculous proposal. When the firm accepted with no counter, he accepted.
Hipp bought two small net lease deals with the principal of Adams-Nelson as well as a piece of land out of bankruptcy. He carved off and sold a piece of that land for a post office and then reinvested it in a warehouse in the Shenandoah Valley that he also bought out of bankruptcy and still owns today.
Frustrated by Adams-Nelson’s lack of name recognition, Hipp eventually moved to Grubb & Ellis (today Newmark Knight Frank) and there he rapidly built a book of net lease business. He became one of the top producers in the D.C. region, though his manager at Grubb & Ellis never understood what he did, Hipp recalls.
Hipp left Grubb & Ellis in 2005 to start his own firm. He built his practice on $1 million to $10 million deals. Within the first year, however, he got a call to bid on a $50 million portfolio of Havertys furniture stores spread out across the Southeast.
Hipp says he won the business by convincing the client that nobody would work harder to get the job done. Calkain sold the real estate, and the client―US Realty Advisors―remains one of the firm’s best and top clients to this day.
A couple of years after launching Calkain, the market crashed. “(There were) some sleepless nights, but we never laid anybody off and actually hired through 2009 because our feeling was that the market is definitely going to come back and when it does, we want to be ready to launch into it and gain market share,” Hipp said.
By that time, Calkain had offices in Boston and Florida in addition to D.C. He had also built a reputation for producing consistent and reliable net lease research, which is accessible through a website hosted by Calkain called NetLeaseAdvisor.com.
In 2018, Calkain expanded its focus to include transactions with values of $15 million to $100 million for institutions and private-market clients. The NetCMG team has already completed a $35 million CTL financing of a children’s hospital in Maryland and plans to put more money in the client’s pocket when the NetCMG team sells the zero cashflow deal on the transaction. NetCMG is also working on a $65 million leaseback, a state-of-the-art behavioral treatment center in Vail, Colo., slated to open in October.
Terry Richardson, president & COO of Baltimore-based Petrie Richardson, the developer of the children’s hospital, says that he now engages the Calkain team for its research and to consult on all of his net lease properties, which have included such investment-grade net-lease tenants s IHOP, Bank of America, PNC, Dairy Queen, Arby’s, and Chic-fil-A, to name a few.
“(Jonathan Hipp’s) expertise in the net-lease arena is really unrivaled,” said Richardson. “He has a wealth of information and he’s very forthcoming and open about sharing the data that they have.”
Calkain Cos. engages in community service through the company’s philanthropic arm, called “Calkain Cares,” which has been recognized for its fundraising efforts to support organizations like Hero Dogs and Canine Companions. Last year, Calkain launched an annual real estate scholarship and announced the first recipient last November.
Read the June 2019 issue of CPE.