IndefiniteHorizon
@LongTermOwner
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Deal guy for fund w/ $2B portfolio. We don’t sell. Sharing things I hear along the way.
Joined May 2023
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When I was 23, I wanted to raise a $100m real estate fund. I had zero experience, was in a different industry and had no business even discussing that.
I cold emailed the head of real estate law at a white shoe law firm. This guy represents REITs and his bio lists countless $1
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SWFL is absolutely remarkable.
Love bringing the family down here. Miami is for me and my wife, Naples is for the family.
We pretend we live here for a week. Botanical garden. Zoo. Sunsets at the beach. Bike rides.
Kids wonder “why can’t we live here, dad?”
I bring my kids
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In August, we bid $49m for a multifamily asset. We were 2nd highest bidder; another group blew past the herd at $53m. Rates started to rip, and I knew that buyer would have a tough time getting debt, let alone raising equity.
I called the broker every 2 weeks to remind him
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@realEstateTrent
The american middle has slowly deteriorated over the past several decades. Long gone is the time one when parent could work and the other could stay home on the average salary. Upper middle class is the new middle class class.
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Howard Marks of Oaktree said it best:
“Our goal isn’t to find good assets, but good buys. Thus, it’s not what you buy; it’s what you pay for it. A high-quality asset can constitute a good or bad buy, and a low-quality asset can constitute a good or bad buy.”
Words to live by.
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Grabbed drinks tonight with a gentleman that owns more than $10 billion of real estate across the country. His partners are a who’s who of Private Equity and Insurance companies.
Cold called him a year ago.
He has a few deals I want to buy, but that was maybe the last 90
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I run acquisitions for a fund with a perpetual hold period. We buy assets on our own book and never sell. We have never done LP equity, but get asked all the time because people know we have money.
We entertain it, discuss it, but ultimately pass.
All the GPs I talk to wish
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Life as Director of Acquisitions.
None of these were scheduled calls.
Not pictured were the calls that started at 8am as I was driving my youngest to preschool. Also not scheduled.
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Broker sends me a message on LinkedIn, says he has “off market deals” that he’d liked to send me. Asks if i’d pay a 1% fee if we buy a deal.
Tell him no problem; happy to do it, I’ll just gross up the purchase price. Many benefits to doing so.
This dude proceeds to send me
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@realEstateTrent
Multifamily, hands down. Hundreds of families. Maintence requests. Chasing rent payments. Evictions. Headaches.
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Broker I’m moderately close with called me and asked that I submit an LOI on a retail power center he had listed.
I told him i’m at 10.25% cap (don’t laugh!) vs the ask at 8.25%. I didn’t see a point in submitting, knowing there were offers higher than me. Told him thanks,
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@investingcre
Sounds like the family office is in a position to recapitalize these deals at a 30% discount to 2022 prices.
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Two years ago, a guy I know bought a value add multifamily deal for a 3.2% cap. Midwestern market. He killed it on the renovations and is getting >$400 premiums.
His current DSCR is 0.3x and his loans matures imminently.
MF1 is the lender. They have tons of stuff like this on
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Separate from my day job, I buy sub 100-unit apartments with my partner. We syndicate the deals with our friends / family.
My uncle. Our lawyer. His dad. Our loan broker. My neighbor. A few others were not as close with. People like that.
We do one a year.
Just got numbers
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I spy
@OmarMora1es
selling Miami. We don’t buy in FL, but I spent 30 minutes with him discussing the business. High energy, infectious personality and a great person all around. Thanks for your time Omar!
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I run acquisitions for a shop you've never heard of. We just beat a Sovereign Wealth Fund and LifeCo in the acq. of a Class A building. We bid 2 days after listing, I called the broker regularly, toured with the broker and took him to lunch, did well on the buyer interview call.
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$350,000.
That’s the commission the broker earned on the deal we bought today. From email blast to closing, about 75 days.
It took him 10yrs of building relationships and a platform to earn that.
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Earlier today, I bid a 6.5% cap on a Class A industrial warehouse with 10yr lease term and decent tenant (not credit).
Broker: Look, that’s probably where this deal should trade. If you want it, you need to come in 10bps due to seller expectations.
Me: We’re not inclined to
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How to lose $10m of equity in 2 years:
On Dec 20, 2021, Brentmoor Apartments in Raleigh sold for $52.25m, or $229,167 per unit. Wait for it - that was a 2.8% cap based on NOI at securitization. Prior to that, it sold in 2012 for $82,000 per unit.
The purchase was funded
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Friends with a Highly successful RE investor. He primarily does $5-25m LP investments via his fund. Has an email address, but no computer.
If you send him an email, his secretary prints it out. He hand writes his response. The secretary types it up and hits send.
Few actually
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On a call today with a CBRE/JLl/Cushman industrial broker.
Broker: There is this guy on twitter. They never sell, kinda sleepy firm. Reminds me of you.
Me: Oh yeah?
Broker: Good content. You should follow him. He’s buying industrial, too.
Me: I’ll take a look.
👀
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@realEstateTrent
Not a chance. Housing would become even more unaffordable for the masses. You’re more likely to see a 35 year mortgage.
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We don’t do reserves. Lenders always ask, and we always say no.
TI reserves. Tax reserves. Insurance reserves. Replacement reserves.
We didn’t get to where we are by putting our money in other peoples hands.
**To be clear, all of our loans are at 50-65% leverage**
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Dollar Tree announcing it will close 970 underperforming Family Dollar stores this year, a little more than 10%.
Millions of value eviscerated for the real estate they occupy.
These buildings are usually in rural areas, are built cheaply and there are few (if any) other
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Underwriting a deal in the southeast. Secondary market. Amazing demos - better than anything in our portfolio.
Seller’s fund is maturing, so they are market sellers.
Broker (think Newmark/Cushman/JLL) were going to list it in early 2023 for $260,000/unit.
Pricing guidance is
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Complex capital stacks are sexy. I love nerding out over the various layers.
Lots of projects simply aren’t feasible without them, especially public sources of funds. Those can make or break deals.
There is a whole industry of consultants that exist to help identify and
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Hot take. We don’t like off market deals.
We prefer deals where the seller has to sell. Distress. Fund reaching end of life. Seller retiring. And so on.
We want a motivated seller.
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I just reviewed an LP equity request for spec industrial. Dev yield is 6.25%. Projected exit cap (in 2 yrs) is 5.0%. Market for Class A industrial is 5.75% to 6.25% today. That developer is betting on rates falling. Not for me.
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Bidding on a >$40m multifamily deal. Great asset, great location. Seller is a large institution. The type that has investment committee and 37 people are CC’d on an email chain.
Asked the broker, a good friend, if this will go to a 3rd round of bidding?
Broker: “I advised
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Update. I’m bidding $88m. All cash, 30 day close (using line of credit).
Rents down 2.0% YoY and concessions ticking up. Submkt vacancy 9.5%. New supply = 10.4% of existing stock. Yield will be shit for 3 years until mkt corrects.
The broker will likely laugh. Or not.
Raleigh MF deal on market.
Sold 2021: $121.9m
Whisper: $100m
Oops.
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If you lose in the bidding of a marketed asset, check back with the broker every 30 days until it closes. Deals are falling apart left and right.
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@realEstateTrent
What is cindy up to these days? Either a doctor or working at the checkout line.
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Lots of talk about the Fed and when they will cut rates.
But, much of the real estate market is valued off of the 10yr treasury.
The long end of the yield curve is much more meaningful than the fed funds rate.
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We’re closing on a Class A industrial deal. Pricing is in the mid 5% cap range and debt is not accretive. That doesn’t make sense for most. However, we like the long lease term, below market rents, credit tenants, below mkt rent increase, etc. Basis well below replacement cost.
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For a large part of my career, I worked at a firm that used REPE as a source of JV equity. Loved discussing merits of a deal and underwriting assumptions with those groups.
I don’t have that anymore. It’s internal capital and 3 of us make the call. The only “outside” view is
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Some Advice:
It’s real estate, not rocket science.
The Blackstone analyst is no more capable than the local operator with a modest portfolio. Blackstone just just has more money.
Work hard, give a shit, do the blocking and tackling and ask to help others with whatever they’re
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Brokers prefer selling to people they enjoy working with. Sellers prefer selling to the highest bidder.
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When we buy assets, we expect to own them indefinitely.
As such, we operate our properties differently than someone who expects to own it just 3-5 years.
We spend more money than most asset owners. And it works.
Not saying it’s right. It’s just what we do.
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We own a 200,000 SF cross-docked building in the southeast. Second gen with 32’ clear, but one of very few cross docked buildings of this size in the market.
Current tenant has occupied the space for 15+ years and pays $3.90 NNN.
They missed their option, which was a 5% bump
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A small excerpt of the email.
I was actually 25.
You’ll see it led to a chain of 17 emails.
I actually haven’t followed up with him in all this time. A huge mistake on my part.
I’m going to do that on Monday. I think he’ll be happy to learn what i’ve been up to.
When I was 23, I wanted to raise a $100m real estate fund. I had zero experience, was in a different industry and had no business even discussing that.
I cold emailed the head of real estate law at a white shoe law firm. This guy represents REITs and his bio lists countless $1
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515
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I personally sponsored a 100 unit deal in Dec ‘22 (not my day job). T-3 revenue +31% over sellers collections. Mostly driven through mark-to-market, as we renovated just 10 units. Blew through our Year 1 pro forma. Incredibly pleased and so are our investors.
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@realEstateTrent
Siesta Key is also quite nice. As is A1A, but a little colder this time of the year
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I know a gentlemen that landed his helicopter on the large geeen space at the center of his 500+ unit property.
He was there to assure residents “all is well” even though their water was being shut off for non payment.
He wasn’t paying the utility bill. This place was huge -
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Today in "I'm screwed, let's see if we can avoid losing our property by raising retail capital."
Got an email from a local syndicator today looking to recapitalize a BIG deal he owns in Texas. He says owns > 5,000 units. This is a guy with youtube channel and facebook page
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Like i’ve said, we don’t sell.
Asked our principal if I could sell one of our retail properties. Legacy asset. Not something i’d buy today.
I had a very compelling argument.
He said no.
Not sure why I expected anything different.
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I read the OA for Cardone Capital Fund V earlier today.
Class B shares (the promote) gets 35% of the cash flow right out of the gate. He also gets 35% of profit after Class A (the investors) get a return of capital.
No hurdles. Just straight off the top.
So if this investor
Internet will break if Cardone crushes it lol
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@MikeGillYYC
17.5% annualized. Default and the buyer loses $11.5m of equity. We could ask for equity in the deal, but went more aggressive on the downside protection
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The last few years were challenging for us. Lots of deals closing at big numbers. We we’re very selective. Brokers were chasing the hot money.
Today? We’re submitting more offers than ever before. Brokers are calling us. This is the type of environment where we grow.
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Cash Flow. Cash Flow. Cash Flow.
That’s our version of Location, location,
location.
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Was in Miami last week. Wife and I were riding our bikes on South Beach and she popped into CVS to buy me a Celcius.
I casually leaned against a railing and read the small plaque on the far right. It noted:
“This is the actual staircase that was used in the filming of the
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Hot take from an industrial broker:
If economic conditions weaken and the 10yr remains near current levels, net leased industrial with >8 year WALT and credit tenancy will see cap compression.
For the last 18 months or so, deals with below market rents and less than 3yrs of
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@WarehouseLease
If you’re going to own it for 50+ years, does a 6.0% cap materially differ from a 6.25% cap?
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Pet peeve.
Can we please stop referring to apartment homes as "doors."
The only people who measure the size of their portfolio by "doors" owned are multifamily syndicators with a Youtube channel.
Somehow the parlance from owning $25,000 single family homes in Memphis and
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Real estate is 10th grade math. We're just solving for a return. The assumptions in that equation, however, require experience.
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@KyleInserra
@BobKnakal
You honestly think JLL wants to sell a course? These guys are selling deals for institutions and prestigious developers (among other clients) who hire kids from top MBAs. Goldman, Hines, Prologis, etc.
I’m not sure where
@BobKnakal
ranked internally, but there are some HUGE
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How many RE guys watched 60 minutes tonight for the first time in years?
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Be kind. Be a good person. You will do well.
Many people think being a tough negotiator means you need to be an asshole.
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@NNNIncome
I absolutely love guys like this. It’s their life. They collect rent, lease, sign contracts and negotiate like they’re Donald Trump 😂
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10yr tumbling and borrowers are cheering.
Lenders casually widening their spreads.
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Most real estate investors are just leveraged bond traders. They just done know it or refuse to accept it.
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@carthage35
Working through it, but likely Lien on property + pledge & assignment of buyers equity interests.
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@jchal
Our founder: “Somebody wants to meet with you? Get breakfast or lunch. Go home to your family for dinner.”
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Marcus broker calls me w/ a retail deal in Nashville MSA.
Not for us.
Me: "You should call
@realEstateTrent
"
Broker gets excited: "I did! Talked to his acquisitions guy! The boxes are too big for them."
That's all. I thought it was funny.
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Investment Sales brokers are being more selective now. They’re making sure their clients are market sellers. They don’t want to waste their time on a seller with unrealistic expectations
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Seller listing a multifamily deal they bought in late 2021. They expect to sell for a $25,000/unit loss.
Not a distressed asset. Low leverage loan; the seller is a fund also owns several office assets that are bleeding.
They need liquidity and this is where they can find it
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$28m offer vs $34m guidance. Almost 20% off. Multifamily. Midwest. I almost didn’t submit bc i was busy with a closing.
1 of 3 invited to Best & Final.
Yikes.
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Compare 2021 NMHC attendee list to 2024. Drop offs strongly correlated with groups buying 3% caps with floating rate debt.
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This reminded me of a story.
Friend is looking to buy 1,000+ acres in the south to develop an industrial park. Old landowner says “All you city slicks keep calling. Why don’t you come down and meet me?”
Friend flies down, rents a car. Pulls up to a long driveway and is unsure
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@mu2myoc
Where the hell does one build 1200 units on that parcel?! You gotta be fucking kidding me
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If I wanted to buy an office building in SF, what broker should I be talking to?
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@realEstateTrent
I get so many letters in envelopes, i throw them away.
The fedex ? My heart skips a beat and I open it up.
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@realEstateTrent
Don’t people work like crazy to make $2m annually so that they can invest passively and generate $500,000?
I’ll take the $500k. You’ll find me golfing or on a beach,
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@jayparsons
Long midwest. Great Lakes is 20% of world’s fresh water supply. That will matter sooner rather than later.
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@mjznyc
I want the borrower/buyer to be successful. I just want to get paid while we help getting him there. We’re strong negotiators, but we’re not vultures.
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Today. Trader Joe’s anchored center; suburban market. Broker says his client wants 6.25% cap. Grocery anchored asset next door traded at 8.25% cap when 10yr was at 3.8%.
His client was confused when best offer came in at 8.0% cap. “he’s waiting for a 1031 buyer”
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@CaseyMericle
For $15m and up deals:
Power Centers: 9% Cap
Bulk Industrial: 5.75% to 6.25%
MF: 5.75% to 6.25%
Grocery Anchor: 7.25-7.75% (grocer must be at least 50% NOI and performing well with lease term)
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Talked to an industrial broker today that sells a few billion annually.
Six deals in some stage of negotiation / closing and he was nervous.
Last year, buyers were retrading as rates ripped higher. Now sellers think they can do better as rates tumble.
50bps on $2m NOI is
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@MultifamilyMad
Many of these masterminds guru syndicators end up selling to other syndicators. Its wild.
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I personally bought a 100ish unit property in a tertiary midwest market in December with a few partners. 70s vintage owner by the daughter of the original developer. This update from our regional manager makes me so happy!
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@investingcre
Reading this again. So much wrong here. Most notable of all is an unwillingness to engage lenders with a plan to save the assets via loan modification or similar. Lenders don’t want the keys, but they do want a plan. Otherwise, it’s waste and that makes a non recourse loan full
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@realEstateTrent
Also, it’s about scale. Your strategy may yield exceptional returns, but could you do it with a $5b fund?
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Asking questions, listening and not interrupting is a super power.
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