Three-Property Industrial Sale Leaseback for L.S. Starrett Company in Minnesota and Ohio

Background:

The Ascension Advisory team represents MiddleGround Capital, a leading middle market private equity firm. MiddleGround recently acquired the formerly-public L.S. Starrett Company (“Starrett”) in a take-private transaction. Starrett is a premier manufacturer of precision tools, gages, measuring instruments and saw blades. Starrett serves global customers in various end-markets and operates out of several mission-critical facilities in Waite Park, Minnesota, and Westlake, Ohio. 

Client Objective: 

Through the private equity acquisition of the business, MiddleGround had acquired three of the company's facilities, totaling over 163,000 square feet of production space on 12 acres of land. The MiddleGround and Ascension teams have a history of successful collaboration implementing the sale leaseback strategy across several companies in the MiddleGround portfolio. The MiddleGround team utilizes the sale leaseback strategy as a key component of their investment approach, enabling them to unlock capital tied up in real estate assets that can be reinvested into newly acquired operating businesses like Starrett. MiddleGround decided it would be most efficient to implement a sale leaseback of the three Starrett facilities as soon as the take-private transaction was completed.

Solution: 

The Ascension team hit the ground running, beginning the process even prior to MiddleGround completing its acquisition of Starrett. The Ascension team implemented a tailored marketing and investor outreach process focused on a wide network of private and institutional sale leaseback investors. After multiple rounds of bidding, the deal was awarded to a sophisticated investment firm targeting industrial assets leased on a long-term basis. The transaction closed smoothly and quickly and all parties were pleased with the outcome. 

Conclusion:

The successful sale leaseback closing provided MiddleGround with additional capital that would otherwise be tied up in Starrett’s real estate assets on the balance sheet. However, now that capital can be redeployed into the operations of their newly acquired company, Starrett, where the capital can generate a much higher return. Meanwhile, the company will remain in control of the facility with all new, long-term leases, allowing for continued, uninterrupted operations for the foreseeable future.