$250m+ in Medical and Flex Warehouse with Brian. C Adams
Oct 10, 2023
auto_awesome
Brian C. Adams, President and Founder of Excelsior Capital, shares his advice for raising capital from family offices. He discusses his ideal buy box for medical office properties, including off-campus locations. The opportunity in flex warehouse space is also explored, along with the challenges Brian is facing in his business.
Flex properties present a value-add investment opportunity by bringing below-market rents to market levels and significantly increasing NOI.
When approaching family offices for capital, it is crucial to understand their individual needs, build relationships, and offer tailored solutions to establish trust and long-term partnerships.
Deep dives
Flex Properties: A Misunderstood Asset Class
Flex properties, which are partially office retail and partially distribution warehouse storage, are often overlooked and misunderstood in the commercial real estate market. These single-story assets offer a cost-effective solution for office users who prefer to avoid high-rise buildings. With their typically triple net lease structure, the main focus for landlords becomes parking lot and roof maintenance. The lack of common areas and elevators simplifies property management, reducing expenses and maximizing cash flow. Despite being an unsexy asset class, flex properties present an opportunity for value-add investments, as many existing properties have below-market rents. By bringing these rents to market levels, investors can significantly increase net operating income (NOI).
Navigating Family Offices in Real Estate Investing
Family offices, with their significant wealth and unique challenges, can be an attractive source of capital for real estate investments. However, it is essential to understand that not all family offices are the same. Some family offices operate like private equity funds, seeking control and substantial returns on their investments. Others prefer a passive investor role. When approaching family offices, it is crucial to listen and understand their individual needs and priorities. Building relationships, often through shared interests or warm introductions, is key. Instead of presenting a product or a deal, focus on understanding their problems and offering tailored solutions. By addressing their specific challenges and delivering value, you can establish trust and build long-term partnerships with family offices.
Investing in Medical Office Properties
Medical office properties offer a unique investment opportunity with their stable cash flow and potential for upside. Typically located 10-20 minutes away from major medical centers, these multi-tenant buildings cater to various outpatient healthcare services such as podiatrists, LASIK centers, and dialysis clinics. The low barriers to entry, relative stability, and demand from local demographics make medical offices an attractive asset class. Investors can capitalize on the opportunity by acquiring value-add core-plus properties: stable assets with rental rates below market levels. By bringing the rents in line with the submarket rates, investors can significantly increase net operating income (NOI) and generate solid returns.
Unlocking Value in Light Industrial Flex Properties
Light industrial flex properties are often overlooked but present an opportunity for investors seeking attractive risk-adjusted returns. These assets, typically located in suburban or exurban areas near airports, offer a cost-effective solution for businesses that require office and light industrial spaces. Unlike traditional office properties, flex properties do not burden landlords with excessive tenant improvement costs. Moreover, the lower rental rates and triple net lease structures, which shift expenses to tenants, contribute to higher cash flow and profitability. The unsexy image and the scarcity of new construction in the flex market further increase the potential for value creation. By acquiring undermanaged flex properties with below-market rents and maximizing NOI through lease optimization, investors can capture the advantages of this misunderstood asset class.
In this episode, we discuss Brian's top advice for real estate private equity firms and syndications that want to to raise capital from family offices. Brian describes his ideal buy box for buying medical office properties, including leases that are below market in off-campus locations. We finish it off with a discussion on the opportunity in flex warehouse space and the biggest challenges Brian is facing in his business right now.
Brian C. Adams is the President and Founder of Excelsior Capital, where he spearheads the investor relations and capital markets arms of the firm. He has 10 years of experience in real estate private equity and has advanced knowledge in best practices for strategic real estate investing.
