All Forum Posts by: Abhishek Sahni

@Abhishek Sahni, at the surface level, real estate investing is real estate investing.  When you dive into it, there are a lot of nuances.

First, there are subsections of retail: single tenant NNN, small unanchored neighborhood, grocery anchored, shadow anchored, power centers, regional malls, lifestyle centers, etc.

Then you get into tenant mix and market specifics. 

On the buying side, there are not really "re agents" per se in most commercial deals. There are listing agents, but buyers are almost always self represented with legal counsel helping negotiate LOI and PSA.

Loopnet and Crexi are the most common platforms for listings, but many brokers don't list properties there.  So, you will be going to CBRE, Marcus and Millichap, Cushman, Colliers, and likely some local brokerage websites to find various listings.  Most brokerages will have a retail investment sales team and likely a retail leasing team.  You will want to talk to both.  Sales, clearly for actual investment opportunities.  Leasing to understand market rents, pros and cons of specific assets, any insider knowledge on tenant interest, etc.

Then you get into the day to day operations.  Leasing, property management, tenant billing, lease administration, finance, capex budgeting, etc.  

Your leasing broker will be able to help with this, but things like which side of the street you are in can make a big difference.  Coffee shops like the "to work" side.  Grocers like the "coming home side".  Ingress/egress is considered, other tenant mix to draw foot traffic, exclusive use clauses, pylon signage, visibility, parking ratios, etc all matter. 

The biggest thing though is retail is not entirely price sensitive. Most retail tenants will happily pay more in rent if they can get more sales.  

I worked for a retail operator for many years.  The partners spent their careers in retail real estate and made a ton of money.  And like all real estate, the more stable the asset, the lower your yields will be.  The more risk you are willing to take, the higher the potential return, but also the more chance it will all crash down.

A super basic step one would be to set up a "newly listed within the last week" custom search on Crexi, Loopnet, whatever. You're going to be scouring the "stale" listings anyways, but what you should be focused on are things that have not already been passed on by everyone else. To the extent that a price reduction may make a "stale" listing appealing, worry not, you will get those notification emails on auto pilot anyways.

Start doing the compare and contrast, maybe make a spreadsheet to evaluate opportunities, play a game of "spot the patterns." One thing to look at in detail is the advertised cap rate and advertised NOI. A lot of times they will prominently display an appealing cap rate, and then you look at the offer memorandum and it's clear that they are advertising a "projected" cap rate based on "projected" rents. What you generally care about, however, is the actual & current revenue.

Once you start to focus in on a property that looks like it might be a good fit, the next conversation is with a commercial mortgage broker (I would be one example, among many) to go over what the financing of that property might look like. Everything is property specific in commercial, so you need at least one example property identified to have the conversation. 

If you see a retail shopping center with one or more vacancies, hop on google/yelp/etc to find out what business used to be there (old yelp reviews, for example). In cases of environmental contamination, that can limit what could be there in the future, for example a former car repair shop (that you found the stale yelp reviews for) is likely sufficiently contaminated that it can only ever be something like that, you won't be able to put a daycare center or restaurant in there. 

When commercial lenders are evaluating a first-time CRE investor, they like when the sponsor is within driving distance of their first investment, so pat-on-the-back for staying local on deal one, it makes it a more prudent transaction for all involved.