NS Retail Holdings acquires Festival Foods property for $17M in sale leaseback deal

The Board of Review meeting held on June 2, 2025, in Verona, Wisconsin, focused on the assessment of a commercial property currently leased to Festival Foods. The meeting began with a detailed presentation regarding the property’s specifications and valuation methods.

The property in question encompasses a total building area of 76,760 square feet, which includes a second-floor office mezzanine. The site spans 7.77 acres, designed to accommodate a supermarket and its associated parking. The building is noted for its high-quality construction, featuring a 20-foot wall height and a fully sprinklered system, along with an elevator for access to the mezzanine. The paved parking lot covers approximately 47,000 square feet.

The presenter provided a breakdown of the property’s value, indicating that the building alone is assessed at $10,855,800, translating to $141 per square foot. However, when considering the total assessed value divided by the building's square footage, the figure adjusts to $174.47 per square foot. This discrepancy arises from differing calculations of the building's square footage.

The current owner, NS Retail Holdings LLC, acquired the property from Festival Foods in October 2023 for approximately $17.1 million through a sale-leaseback arrangement. This type of transaction allows the seller to receive immediate cash while continuing to occupy the property under a lease agreement. The presenter explained that such arrangements are common in commercial real estate, as they provide benefits to both the seller and the buyer.

The discussion also highlighted the motivations behind the sale-leaseback model. Festival Foods received substantial cash from the sale while retaining occupancy, thus shifting from property taxes to rental payments. The buyer, typically a real estate investor, seeks stable income-producing properties, often under a triple net lease, where the tenant assumes most operational costs.

The meeting further delved into the income approach for property valuation, which is crucial for determining fair market prices for leased properties. The presenter outlined the process, including calculating gross rental income, accounting for vacancy losses, and deducting operating expenses to arrive at the net operating income. A capitalization rate of 7% was applied, resulting in a property value indication of approximately $14.4 million, which exceeds the current assessed value.

In conclusion, the Board of Review meeting provided a comprehensive overview of the property’s valuation, emphasizing the significance of income potential in determining market value. The discussions underscored the complexities of commercial real estate transactions and the factors influencing property assessments in Verona.