All Forum Posts by: Joel Owens

You pay cash and offer a high pref. Tenant in place with long term lease on NNN. No payments to stop if high quality tenant and strong location.

All these rosy pro-forma's folks you all are in investing in where all the debt and rental growth and all that are called VARIABLES to an investment. The more you have of those the more you have a chance of things not going as predicted. That is why land development as an example for multi-family carries extreme risk. The project takes many, many years to even get to a point where they are starting to lease up units. The longer a development play goes in an investment cycle the longer risk can increase in many cases unless project started on upward cycle so when project comes online for lease up market is mid to up cycle and gets full before the downturn.

There are all kinds of LP investments.

As example:

1. Raw land purchase and flip

2. Land entitlement ( getting zoning and all approvals and selling to a developer)

3. Land develop ( taking a project and finishing it out until stabilization )

4. Existing property full stabilized being sold off by the developer or 2nd or 3rd generation owner.

5. A property that was stabilized but now is disrepair and aging. Work to get existing use performing again fully.

6. A property to be torn down or re-adapt the use to something else

7. Then there are deals that are debt based LP investments and equity based.

There are all kind of so called returns and timelines. You have to decide what is right for YOU and the risk tolerance to your capital. 

Looking at someone today I would ask for recent exits in last 12 months if the strategy is value add growth.

Taking a summation of every full cycle exit over hot and cold points in an investment cycle doesn't give you really what is happening TODAY and in the recent PAST.

It's good see to see long historicals but that should not be given too much weight for investing now.

Sorry Ron and others are having difficulties. Hopefully your other investments are doing well.

There is an old saying ( Pigs get fat. Hogs get slaughtered ).

For every aggressive GP on pro-forma there is naive LP to take the bait. I think nobody really could have predicted rates doubling at that fast of a clip. What I take issue with is an GP manipulating ( talking general not this specific thread) debt and then setting best cap super low cap exit range that might be reasonable for a limited period of time if everything goes close to perfect.

You have debt and investor sentiment change with economic times and boom that plan is out the window.

What likely happened is when rates were low everyone was chasing capital from LP's to leverage and raise less equity per deal. Do more deals and scale, scale, scale and hopefully have some winners in there. So to win capital some GP's had to put out rosier and rosier stuff to get the money over the next GP and their deal and hope that markets and cap rates with debt would make it come true over time.

If sponsors would have just used long term fixed rate debt that was assumable many would be absolutely golden right now and if they needed to sell there are tons of buyers for assumable debt deals.

The other properties it's a kick the can down the road and see if they find food to live or croak and the property goes back to the bank and the vultures on the side wait for the right time to take their spoils. Investing is survival of the fittest. 

A GP could say some deals do not work out and oh well but the negative press your company gets and the LP losses incurred those investors will be lost forever on future deal and they will tell everyone their story. There are about 14 million millionaires in the United States so only about 4% of United States population.

Personally I like accredited investors that have already made alot of money and not looking for high risk deal and just want that steady coupon and if they get upside great but not required to invest in the deal as equity upside is a secondary focus versus the safety and stability of the investment. 

Oh he doesn't tell investors that or on deals. These are just talks we have from time to time on experience with how a GP thinks when sourcing and evaluating deals.

For value add I only do very fat deals now to syndicate for single tenant. I still make good money but I am also a broker with my own company with clients buying properties. So small deals where GP upside to me is 250k for 7 to 8 months work on single tenant is not great for me as I can make that on one transaction with clients buying to own NNN themselves.

As my friend that syndicates for 40 years now says ( I look for upside high and lower risk ) deals. If everything has to go perfect or close to perfect on projections to hit a number I pass on the deal. 

Wow what was shown in the video at 40:44 remaining was astonishing.

Projecting to sell at an exit 4.0 cap to hit a projected 1.6 equity multiple for multifamily and 5.0 cap at highest?

They talk about NOI growth alot. The question becomes even if improvements are made can the tenants pay it or are they already maxed out with their incomes on rent affordability? If that is the case the renovations won't matter because rent growth won't be realized.

A property is just like a business. How many multiples of potential like left or is it close to being tapped out?

Abba sorry to hear that. 1.5 to 2% return is very low for a retail center. I have been in NNN 20 years investor and principal broker and owner of my company. I specialize in in single tenant and multi-tenant nationally.

My friend owns about 15 million sq ft of retail centers who has been owning over 40 years. Typically pref can be from 6 to 8 depending on variables with the center. Super high quality and all national tenants with long leases maybe 6%. Center with more mix of mom and pop versus national more 8 pref as volatility with small tenants. It's important to know if existing in place rent on the purchase is at, above, or below market for those inline retail box sizes.

Some more inexperienced think retail centers are absolutely better than single tenant because you have multiple tenants paying but it comes down to lease, location, tenant strength, market in place rents for risk factors. Some of my clients buy retail centers but I just do not want to own them. I like high quality single tenant for myself with less management. Our pref is typically 6% and up to accredited LP's. Single tenant has risk too if area is bad, tenant too weak, rent above market tenant is paying due to high tenant improvement credits from owner to get them in their and opening,etc.

Hope things turn around for your investments soon.

Here is another nugget for people. When looking at a property the listing brokers for almost any asset class like to put you with their capital markets broker. They do this because they want to know you can really qualify but also tend to sell you a bill of goods knowing their mortgage guy will try to use a debt instrument to make the deal look better than it is at the cap rate the seller is trying to sell at. The listing broker wants a quick win for their seller by imposing more debt risk on the buyer with non-optimal financing.