Last year is generally considered the start of this long and bumpy recovery, and for a firm to log in a 20% year-over-year revenue gain is a respectful accomplishment, something any major, global company could look to with pride. But what if the year of comparison is 2007, when the industry, still in its heady go-go days, was firing on all cylinders? That's exactly what the small, tight-knit team who helm Miami-based United Trust Fund has accomplished.

UTF has built that success on a carefully designed, carefully focused platform, one that hasn't deviated since president and CEO Sidney Domb founded the firm four decades ago: sale/leasebacks. Counter-culturally, it's a success that's been built without multiple offices or in-house experts on the ground around the country. But within the narrow scope of its parameters, UTF has built a solid reputation for service and flexibility.

"All we have is money and experience," Domb tells Real Estate Forum. "We're the oldest firm specializing in sale/leasebacks. But the key is that we do only sale/leasebacks." That specialty, and the flexibility UTF displays within that specialty, is what sets the firm apart from the competition.

In addition, UTF skirts the need for a nationwide staff and multiple offices simply by avoiding the maintenance the competition embraces. "All of our deals are absolute, singletenant, triple-net," which means the tenant pays for everything.

The private structure of the company is another differentiating factor, Domb stresses. "Our requirements are directly related to the credit of the tenant," he says. "We don't charge any fees and we're not sidetracked by shareholder inquiries, SEC filings or any other issues that have no relation to the core business. Bureaucracy prevents a lot of institutional investors from closing as quickly as we do."

With every asset UTF acquires, the team goes in with the expectation to hold the property forever. "We want to make sure that the real estate will stand the test of time," says director of acquisitions Fred Berliner. "Now, whether we own it forever or not is a different story. But we buy it with that in mind, and so we're very careful of what we buy."

"We've often held many of our properties well into their options," adds VP of investments Buzz Sampson, "and we're obviously pleased when our tenants do in fact exercise those options."

And what does the client get for that purchase? It's been changing, Berliner, a 30-year company veteran, reports. "In the early years, terms were 20, 25 years. Somewhere along the line, 15 years became standard. More recently, some people have been asking for 12 years. Everyone thinks shorter is better. But we'd rather have longer. Some of the smaller deals are 12. But most of our office or industrial deals are 15-year terms."

In every potential deal, the team ensures from the outset that the tenant is clear on what an absolute net lease means. "We give them the money and don't have to do anything after that," Berliner says. Beyond that, the flexibility kicks in. "If we get what we want, we can do pretty much anything." That includes options. "If you consider a tenant with a 15-year lease and six five-year options, that gives them the building for 45 years, and they control the property for its useful life. They have all the value-add."

As executive VP and CFO Jim Nolan explains it, the rent tenants pay is typically "substantially less than what they'd have to pay if they took a long-term mortgage on the property. When we buy the property, we pay 100% of fair-market value.

"So if they sign a 15-year lease, every five years thereafter they can look at the facility and determine if they need it," he continues, "and they have no capital in it because they already got all of their capital out of it." By contrast, if they owned, they'd still have 30% money in the property, a balance due on the mortgage and the interest.

Nolan explains that acquisitions are funded through three essential sources of capital. First of course is the rental stream from the properties in the portfolio. "In addition, we have bank lines," he says, adding that Bank of America is prime among them. "And we have institutional, long-term financing sources including just about every major insurance company." Pru, Equitable and State Farm are listed in that roster.

The various benefits clients gain through the SLB structure has contributed to a healthy repeat business. For instance, UTF has had a years-long relationship with Mercy (formerly Sisters of Mercy), that began with the $20-million purchase of one of its medical facilities in St. Louis and culminated last year with the start of a $203-million forward-funded build-to-suit.

Kevin Voss, president and CEO of St. Louis-based Triax Real Estate Services LLC, was the engine that brought Mercy and UTF together for that first deal. "They had engaged us to analyze and assist in the monetization of assets," he recalls, referring to a portfolio that tallies in the millions of square feet. "We first identified core and non-core assets and took the non-core to market for bids. UTF was one of the respondents and ended up being the overall buyer."

Voss says the UTF proposal was simply the most thorough and best reflected Mercy's needs. As an ice-breaker, the first deal would lead to another 16 SLBs for the healthcare system over the coming years.

But it was in last year's dual build-tosuits— a 196,000-square-foot orthopedic hospital in Springfield, MO and a 225,000-foot medical office asset in Edmond, OK—where UTF fully displayed its penchant for flexibility and service. That came in the dual challenges of the need for forward-funding and the threat of shifting FASB regulations. (According to Nolan, who oversees BTS, about 10% of the firm's overall business is based in build-to-suits.)

"The difficulty in this transaction was that it was literally an 18-month forward commitment of capital," says Voss. "We had to do a forward commitment and lock in our lease terms, which a lot of guys didn't want to do. They wanted to mark to market when the buildings got their CO. Mercy couldn't live with that because they needed a fixed number 18 months out."

They also provided the means of protection against lease-accounting changes currently being forged by FASB and IASB. "There was a lot of heartburn over that," Voss recalls.

Berliner explains that a simple reversion clause settled many an upset stomach. "Mercy's position was that if they were forced to forge these as capital leases rather than off-balance sheet, they wouldn't derive the tax and accounting benefits they had bargained for," he says. "So we added a clause, giving them the right to buy the assets back if FASB decided to eliminate the off-balance-sheet treatment for leases."

According to Voss, the plan was a hit with the firm's auditors. "We hadn't thought of that." Both buildings are currently under construction, with development being handled by Mercy's own in-house team. "These guys did everything they said they'd do. They understood Mercy's goals, and I didn't feel at any point that they were playing games. They didn't try any silly stuff."

Berliner says that medical facilities have been on the rise in UTF's SLB universe, although the product type really varies by market condition. Office currently comprises 21% of the business, retail 16% and special purpose (gas stations, banks, restaurants and the like) 31%. Edging all of those out is industrial, at 32%.

With all clients, no matter the product type, special needs must be addressed, as evidenced in the work of long-time client Boise Cascade. The Boise, ID-based provider of lumber products felt the pinch of the single-family downturn, but in 2007 it was expanding and planning a new 87,000-square-foot warehouse/office facility in Milton, FL. "Since we distribute building materials from that site, a large portion of the acreage is paved and used for outside product storage," states Wayne Rancourt, Boise's senior VP, CFO and treasurer.

But plans were threatened with the appearance of a gentleman who apparently had a prior claim on the mineral rights of that land. "We convinced him, essentially, to sell them back at a reasonable price," Rancourt notes. "UTF was very good about helping us work with that owner to come to a reasonable compromise. It was a unique situation to run into and their flexibility and willingness to work with that owner was very helpful."

As the economy picks up, Rancourt sees more build-to-suits in Boise's future and sees UTF as a part of those plans. "We'd entertain working with those folks again, depending on how much appetite they'd have for our company's credit exposure," he says. "We found them very flexible, and their decision-making and responsiveness was excellent."

Conducting a build-to-suit with no local presence isn't as challenging as it might appear. According to Nolan, "We work in concert with the client company through the whole planning process, beginning with their architect and their team members who are instrumental in guiding the vision. We third-party all of those relationships, from planning, site selection and the entitlements to the selection of the general contractor and ultimately the whole construction process. We're the quarterbacks, directing everybody where to go. Then we deliver the football for the touchdown."

Nationally, there are some favored go-to providers in Nolan's database. Local projects in smaller markets simply go out for local bids.

UTF's basic SLB formula does vary a bit when a potential client gives the firm the chance to get a bit more opportunistic. Sampson, a 26-year UTF executive, explains that a few years back, furniture maker HON Industries of Muscatine, IA was looking to get into the retail side of things with its Hearth & Home division. The firm had located a former 10,000-foot restaurant in Minneapolis.

"The owner wanted to sell, but HON didn't want to own it," Sampson recalls. "We stepped in, bought the property, leased it to Hearth & Home and provided all the additional dollars they needed to retrofit the facility for their particular use."

Sampson adds that since the additional TI monies were built into the terms of the lease, "the tenant ended up with a property under a long-term lease without any capital outlay." He estimates that some 10% to 15% of UTF transactions are done on an opportunistic basis, and the pipeline is looking pretty good. "We're getting very active straight across the board."

Berliner agrees, and while the private firm won't reveal revenue numbers, he notes that, "We're seeing more potential sale/leaseback transactions than before." Frankly, he admits to being at a loss as to why, especially since "about 50% of our business is with investment-grade companies with relatively easy access to capital. And lately we're seeing a lot of investment-grade quality. Maybe it's simply a matter of a business philosophy not to own real estate and the tax and accounting benefits of the sale/ leaseback structure."

"I see the glimmer of light," adds CFO Nolan, who's been with UTF for three decades. "Retailers are starting to look for new locations in a more aggressive fashion. In 2008, companies like CVS found themselves under tremendous pressure to open new stores. In 2009 it all but died. But in the past year, as was evidenced at ICSC, it seemed like the mood was positive. Everyone was looking for new sites. Retailers are starting to come back, and that usually bodes well for other areas of commercial real estate."

It's not just the flexibility hidden in the absolute net lease structure that sets UTF apart. In an industry defined in large part by tech-averse brokers, mobility, the web and social media are prime tools for sourcing leads, says John Oks, vice president of acquisitions. "The new generation is defined by technology and how they do what they do," he says. "Things are being done these days more electronically," he says, relating that he's actually closed entire deals via email, "without much conversation, pretty much soup to nuts." In fact, he notes that it's usually easier to reach someone via email than by phone. "The oldschool broker who relies entirely on his phone to do business nowadays is passé. Your computer and your handheld are the way you do business."

Mobility makes deals happen in real time, and the social networks only add fuel to that rapid pace. He takes a pass on Facebook but says the more business-oriented LinkedIn is the tool for him. "My job is to create new contacts in the brokerage community and let them know what we're looking for," says Oks, a 10-year company veteran. "Hopefully they'll keep us in mind and send us deals."

With 99% of the firm's business coming through brokers—as was the case with Mercy—Oks says agents are "our lifeblood. In terms of creating new broker contacts, LinkedIn allows us to find them simply through people who happen to be on the same net-leased or sale/leaseback groups. Today, contacts can be made with a click.

"Plus, you can communicate massively with everybody just by announcing that you're going to a convention or that you just closed a deal," he continues. "All of your contacts will see it."

United Trust Fund is indeed a firm of apparent contradictions. It's an old-line firm with a flair for evolving technology. It's a tightly knit, one-shop operation with a national reach. Its model is strictly and narrowly defined and yet clients come back for the flexibility and service they receive.

But whoever said there was anything wrong with contradictions?