All Forum Posts by: Joel Owens

Because most owners of commercial properties are highly seasoned and have net worth of 8 or 9 figures and the ones who DO NOT often have counsel from very experienced people in the business to guide them properly when they want to sell.

Commercial is more relationship driven dealing with higher numbers millions to tens of millions or more.

Wholesalers might occasionally get a smaller commercial property but often at inflated prices.

Experienced sellers can see through the wholesalers GAMES. I have had hundreds contact me over the decades pitching properties at crazy prices. It's easier to tell other brokers what I want and they go find it for me. I buy value add NNN for cash typically and reposition.

I syndicate on the retail side for NNN. Currently buying about 2 a month and ramping up for next year. I have my book I wrote on NNN investing. It's free and on my website. My book doesn't really go into syndicating much. It's more for people owning directly and then investing passively as LP's.

If you want to syndicate more retail centers a friend of mine Gary Rappaport has a book called (investing in retail properties) the second edition. It's about 600 pages. He has been in the business about 40 to 50 years and owns about over 10 million sq ft of retail centers. The book mainly goes over syndicating centers and structure. 

Retail centers not as heavy management as multifamily but still way more than single tenant properties. I like single tenant more but will buy a retail center still if it has amazing upside for me to stabilize. If it's just good I pass on it because I want heavy value add for massive upside equity to me. 

I broker deals with my buyer clients making 6 figures per transaction so for me to syndicate the deal has to be really fat on the back end.

When tenant is 2.5 years out UNLESS you sweeten the pot for them to renew early there is generally little motivation. So you have to analyze how to make the deal sweet for them but also make it a win for you increasing equity and value of the property.

Trying to (blend and extend) the lease before closing tends to be a major no, no with a seller. They want you buying it as-is and if they wanted to extend and work on that they would do it themselves and get the value.

I buy for cash and then seek blend and extend after the fact. There are exceptions but in general a seller does not want you tying up a property to put in a pretty bow with blend and extend and fresh lease in place before closing. Lot's of the guru's teach that stuff but rarely happens. Some lease extension negotiations can take 3 to 12 months depending on variables. 

Roofer get core samples if flat roof. Could have pretty layer on top and all junk underneath in bad shape. Also could have too many layers and even if in good shape insurance company will not insure the buildings as too many layers is against code where the property is located.

A 50 year old property in retail whether single or multi tenant most times has outlived it's expectancy timeline UNLESS it has been gutted down to the studs and rebuilt with just the foundation.

Most properties are redeveloper multiple times by the 20 to 40 year marks.

The problems a property has doesn't phase me if the price is right for taking on and correcting those items.

As far as cap rates rising in single tenant NNN not so much yet for the best assets and locations. With an impending downturn buyers will pay up for A locations as a defensive position. There were about 30 billion proceeds dollars in 1031 exchanges nationally and that went to about 20 billion and recently about to 17 billion.

The sellers with premium properties with strong tenants and long term leases are hoping to land the 1031 buyer with a big tax penalty and putting a lot down. The buyer knows very little cash flow to start BUT they are hoping for interest rates to fall in 18 to 24 months when election gets closer and 1031 out to another property or refi with rental increases and make a bigger spread between debt and cap rate.

Most brokers including myself feel more February to March of next year more of the 1031 money will dry up leaving all cash buyers or regular buyers using debt in the market. At that point the sellers testing the market will mainly leave or place long term debt than take a large equity hit to sell.

There are always sellers such as merchant developers, estates, trusts, groups that have to exit per the operating agreement at a certain date and time, etc.

Most of my clients buy absolute NNN. A doctor making 1 to 1.5 million a year doesn't have TIME to get tenant notices with demands or communicate with a property manager to do it for them. They just need the property to GO and produce PASSIVE INCOME without their energy or time. Sometimes we will buy NN if it's just roof with a warranty that transfers to the buyer BUT do not want to own as much in coastal areas or cold belt states when the lease is structured that way. Those areas the properties tend to take more of a beating due to weather elements and often require more often maintenance requests.

Retail centers are a totally different animal all together. Not typically as involved as multifamily but still some involvement.

As far as tenants the hand holding INCREASES as you go down the quality stack from investment grade credit, to national company, to large franchisee, to small franchisee, to mom and pop. The sophistication of these tenants and how they run their businesses and operate changes drastically REGARDLESS of what they lease says. Even large investment grade credit tenants might not keep up their properties like they should. The facilities managers are often over hundreds of locations and unless a store manager bugs them or a buyer gets an inspection done and shows the report they might not know what work a property needs to maintain a standard of care.

As to 2023 if I get no more clients the rest of this year already easily looking seven figures next year in brokerage income just like this year. Buy more all cash value add for myself and syndicate the rest when too much cash out. Have over 100 properties on my radar for years end and making offers with sellers that want to get off the books for years end.

Looking to acquire 3 properties a month next year as a baseline on the syndication side.

Life is whatever you want to make it to be. Probably work about 4 days a week next year and refine my back end system processes to get my returns per hour even higher. Just hired some more employees to have systems and let the machine run and I stay doing the highest and best use of my time and what I am passionate about.    

For the roof ask if it has warranty that transfers to the new owner and ask to see the warranty requirements for maintenance and any documents that have to be signed for the transfer.

Make sure roof type that was put on has not been recalled, the contractor has not gone out of business, or the material with roof company has not gone out.

Also make sure another layer was not just added to the top. If it has too many layers the insurance companies will say not to insuring the building. In that case the whole roof has to be tore off and redone. Get core samples to see quality down to the decking. if a new layer is just on top of a bunch of crap it will fail early and be worthless.

Check parking lot for cracking. Reseal and coat depending on size can be over 100k sometimes. if you have to mill the parking lot down can go into the stratoshpere. 

If the place has elevators they can be a few hundred k each to replace. Don't put blinders on because of the owner finance. Still do a complete DD.

What I mean by 10 cap could be 7 cap is not that the market is 7 caps for what people are buying.

What I am saying is sometimes say a lease was done in 2005 on a 20k sq ft building and market rents were 25 a foot. With rental increases now the rent at 32 a foot and based on existing income it is your 10 cap as you say. The current market for that building size might now be 23 a foot as the area has changed over time from new town development to old town where action is not as strong anymore.

Now when 2 years is up tenant wants to renegotiate rent down to the 23 a foot or they leave the old building for a new building a developer completed with all the bells and whistles for close to what they are paying now. You have to not just think about value TODAY but what it will likely be in the FUTURE.

I assess current in place rents in income to what current rents are in the market and where the market is trending to offer for my price.

I can buy Walgreens with 2 years left on lease for a 10 cap but it has Dollar Tree sublease and when Walgreens no longer has to subsidize the lease I have a 6 cap for what Dollar Tree would pay on their own for that space. if I have 6 cap I might as well go buy Walgreens on the hook for 10 to 12 years. Alot of this analysis comes with decades of experience in the field.   

Yeah I do have doctors where the spouse claims re professional status and then married filing jointly so not capped ( this is not legal or tax advice! )

Their accountants give them a detailed form to log the hours to hopefully stand up to an audit if one occurs.

It's true NNN is mostly passive so really can only count maybe a few hours a year toward that. What my clients do is keep a certain percentage of their portfolio holdings more on the active assets to log the hours and then still buy NNN for passive and do a slow conversion of assets over time.

I have also seen where the man or woman who is not a doctor is licensed in RE full time but as a residential agent and they know nothing of commercial so they still reach out to someone like me a commercial broker for help in purchasing NNN.

On the value add NNN side I have about 100 plus properties I am writing offers on. I call them DMD's (double money deals). I want to at a minimum double the money on exit ( nothing is guaranteed of course like any investment). There are some investors who do volume on 20 to 25% upside margins but I do not want that kind of life. I would rather do less volume and more fatter deals and arrive at close to the same place with more time for myself and my family to enjoy life versus working endless hours.

This type of thing with charges could take many years to resolve. An example is the Chrisleys television show investors. Their case took years and then now looking at 12 years with the verdict but they are appealing.

Nobody knows what happened with this Matt person. His Facebook mentioned doing 500 million deals in 1 year and going for 1 billion the next. If it's currently 35 million in allegations then there could be a lot more out there with more loans and banks you just never know. With bank loans if there was no real money involved for the down payment then the bank can't do accurate underwriting on a loan to assess risk of the borrower, the property, and a lot of other metrics that go into a yea or no on a deal by deal basis. Had the banks knows all the facts would they have still done the loan? If the answer is no then by omitting key and crucial facts that could make the case to appear to be fraud.

Everyone is entitled to their due process and not guilty until proven otherwise in a court of law.   

Yes you can syndicate retail. I syndicate retail centers sometimes but has to have high upside for me or not interested. I like single tenant NNN more where I buy a vacant building and get new tenant in with a lease.

Joseph Gozlan - 

Article:

The case against Onofrio is the result of an investigation done by the FBI, IRS and Federal Deposit Insurance Corporation, according to the U.S. Attorney’s news release.

That's pretty serious. Don't think they would investigate and then bring charges and waste time.  

The 10 cap is irrelevant. That could be a 7 cap if the market rent for that box size has fallen since the original lease was done or the last option renewal.

5 years remaining is the standard. Most won't do under 7 years. There are some before for investment grade credit that would do less than 5 years.

The buildings you have to make sure absolute NNN and not NN because on older building the capex for roof and parking lot on larger properties could be 500k to over 1 million.

That does not include TI credits where the tenant might want to stay instead of moving elsewhere.