Commercial Real Estate Investing From A-Z

What are some ideas of how to think outside the box and negotiate real estate deals during these times? We asked Victor Menasce, host of The Real Estate Espresso Podcast, author of Magnetic Capital, and experienced investor and developer. You can read this entire interview here: https://montecarlorei.com/what-is-a-stranded-asset-how-to-look-for-opportunities-in-stranded-assets/ What is a stranded asset? And then we can jump into some examples of stranded assets. I'd like to make a distinction in defining the stranded asset. Most of the time people are thinking about distressed assets. Now, in a lot of cases, those distressed assets haven't appeared on the market yet, or if they are, it's really just the very beginning. We're in the midst of a moratorium on evictions, a moratorium on foreclosures. But we know there's a backlog at this stage of millions of distressed properties. I read a report last week that showed that 4.5 million homes in the United States are in either in default or in forbearance. And that happened literally in a very short time period. Now, if you think about the entire financial crisis that took five, six years to play out, a total of 10 million distressed properties, we have gotten half of that in just a few months. So the speed with which this market is gone into distress is unprecedented. A lot of money's sitting on the sidelines today just waiting for those distressed assets, whether it's single family homes, hotels, office buildings, retail, there's going to be a ton of distressed assets on the market and all the money will be chasing those distressed assets. Now the stranded asset is an asset that is a perfectly good asset. What makes it stranded is you can't get to it from here. One of the examples that I give is the following, there's a there's a lighthouse in Prince Edward Island called the Baywatch lighthouse. And you can actually book this lighthouse on Airbnb, and you can stay in it on for the weekend. It's in all the tourism brochures and that would be a wonderful income producing asset. Now, if you take that same lighthouse and you put it out in the middle of the Atlantic, and it's a little bit stormy, and it's not very safe to get to, it might be another very good asset from the perspective that it would be great to spend the weekend, that would be a unique experience, but it's stranded because you can't get to it from here, where it's difficult to get to it, it's inaccessible in some way. And that's what distinguishes a stranded asset. Now, we know that there are a lot of restaurants out there that are shutting down, because they've gone through several months now with no revenue, or insufficient revenue. In some cases, the owners are simply tired. I've come across several restaurants just in my own home community, where there's no reason for them to shut down other than the owner is 75 years old, and he doesn't want to go through the energy of restarting again.  there are going to be a lot of commercial kitchens for sale, those are maybe distressed assets. Maybe they just shut down because they decided that they're getting out of the business. Those aren't distressed assets. They're just stranded assets. But there's an even more important stranded asset, and that is the relationship between the customer and the menu. You pay them a royalty for every sale, and you deliver their favorite items. Victor Menasce http://victorjm.com/ Subscribe to our newsletter here: http://montecarlorei.com/ --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Today we learn what is CMBS, how are the delinquency rates of CMBS loans in each asset class, how does it differ from the 2008 rates, and what can investors do to prepare to take advantage of commercial real estate deals in the future. Jyoti Yadav, CMBS analyst at Trepp shares insights. You can read this entire interview here: https://montecarlorei.com/what-is-cmbs-how-are-delinquency-rates-today-what-can-investors-do-to-take-advantage-of-commercial-real-estate-deals-in-the-future/ What is CMBS? CMBS stands for commercial mortgage backed securities. It's essentially a financing vehicle to provide loans, or financing to commercial real estate property owners. This is not the only option available in the entire universe, CMBS accounts for 15 to 20% of the lending universe. It competes with insurance companies, banks and other financial institutions to provide loans to the commercial real estate industry. What happens in the market is that a bank, let's suppose entity A will provide, let's say, 10 loans to property owners across America, different property types, different geographic locations. That bank, if it has provided, let's say 100 million dollars worth of loans, will pull all of those loans together, that means the monthly mortgage payment that the borrowers are making to lenders. They'll pull all of that together and issue bonds which will be sold to investors. What is the current state of CMBS today? Since COVID, whatever happened before March 2020, was a completely different story. The market was performing in a completely different way. And now after let's say late March, the situation has drastically changed. What is really happening is that there isn't as aggressive lending out there in the commercial real estate space. Lenders are extremely cautious. They want to really analyze the property. Let's suppose I am lending to office space in Houston, Texas. Before this crisis when oil prices were not that low, and the market was doing okay, they would look at the tenant roster, they would see who the tenants are and, most of the time there were no issues. Now in Texas, energy companies have been battered and the credit quality of the tenant has become an issue, you do not know if the current tenant of the property will continue its lease. You do not know if they will continue to make payments and that is really making lenders take a step back and understand who should they lend money to, and all sorts of analysis they need to do. Because of that, we have not really seen a lot of lending for hotels, of course, because hotels have suffered a lot and are still suffering a lot. So, there is a lot of hesitation in lending. And even when there is lending, there's a lot of analysis that's going on, and this also has increased the cost of borrowing for borrowers. How are the different asset classes doing, the different property types performing in the CMBS world? The June delinquency report that we published had a delinquency rate of 10.32%. This means that more than $50 billion worth of loans are behind on their payment, and there is distress in the sector. If we compare it to an earlier crisis, in the last financial crisis, the number was 10.34%. So we are fairly close to the peak that we have ever seen. How long did it take to get to this 10% in 2008 because we are just four or five months into COVID? 10.34%, was in July 2012, the crisis started in 2007/2008, so it took some time for us to reach that number. Fast forward to April 2020, that number was 2.29%. And now in June of 2020, it's at about 10%. So it was a very fast increase. Jyoti Yadav info@trepp.com --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

For the first time ever, we recorded our monthly Mastermind Call with several experienced real estate investors across multiple asset classes. Joining us in this month's mastermind were Beth Azor, Victor Menasce, Andrew Lanoie, Todd Sulzinger, Christian Cascone, RK Kliebenstein. Each investor shares what they are currently going through in their specific situation, market, and asset class. Watch the entire recording here: https://youtu.be/-HUUIv1hDmA Read the entire transcript here: https://rb.gy/frif7o Steff Boldrini, Retail, Self Storage San Francisco is a ghost town. Nobody wants to quarantine in four walls with no access to work at a coffee shop or in common areas of their buildings. There are deals in the rental space that are completely unheard of and we would have never imagined they would be happening like one to two months off, and as much as 30% rent decrease. Andrew Lanoie, Mobile Home Parks In general have been down a little bit, not too bad. A lot of parts of our business have have been frozen, we sent our construction company home. And as everyone knows, some of the lending dried up a little bit, some lenders are back, and some stayed the same through all this. We're just figuring out how to get back into acquisition mode, and all of the Capex and all the projects and things that we have in our world for our portfolio. Todd Sulzinger, Mobile Home Parks In our parks, we've had some struggles with collections as well, I have parks in Georgia and Tennessee and we've had more issues with collections in Georgia. It has been a combination of some tenants who were affected by COVID related situations where they lost their jobs due to the pandemic. And in those situations, we reached out to them and said, If you actually were then please fill out this form, and get proof from your employer that your job was affected by the pandemic. In other cases, we've had people really take advantage of the fact that the courts have been closed. Beth Azor, Retail I own six retail shopping centers, we've had a ton of retail bankruptcies from Tuesday Morning, Pier One, Ascena is about to file, 24 Hour Fitness, GNC Gold's Gym, Starbucks will close 400 stores. The national dealmaking will be on hold until 2021 because of the inability to travel, anyone that owns shopping centers looking to fill retail space in the next 6-9months, will be focusing on local and regional players.  Victor Menasce, Developer We are making some progress on getting debt for new construction and even some equity as well. It's tougher than it was. We're not doing anything in retail or office, thankfully. But in the multi-family and senior housing asset classes, we are able to find both debt and equity. For the moment, it appears as though rent collections in multi-family are pretty strong. RK Kliebenstein, Self Storage Our industry has always been regarded as recession resilient. Delinquency is now hovering somewhere between 5 and 7%. We look at it as not being devastating, but certainly as being cautionary. When money from the Cares Act runs out that will be a better tell. Christian Cascone, Developer, Multi-Family The market just has gotten too unpredictable at this point. There's capital being injected in the wrong places and we feel like it's causing some problems as far as the free market is essentially dead at this point. We're trying to see if there's going to be some opportunities down the road for high quality assets and great locations in the US, 12-18 months from now. We're seeing opportunity zones get hot again, as people have huge capital gains that they're able to deploy into, Join our newsletter here: www.montecarlorei.com --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What does it entail to invest in land? Where are the opportunities and how can you monetize land investing? Today we are talking with Ryan Pettitt from Prosperity Aid. You can read this interview here: https://montecarlorei.com/how-to-invest-in-land-and-what-are-the-pros-and-cons-of-land-investing/ Tell us what your experience has been with regards to investing in land. When we first got started we were introduced to some folks in the industry. One Mark Podolski with the Land Geek, and then also to Jack and Jill with Land Academy, understanding the premise behind investing in land and creating a business around it. And this is undeveloped raw land specifically, and looking for those opportunities to resell and generate cash flow from it. Like any investments, you can either do it actively or passively. So we had the passive experience and our goal was to expand into active investing and creating a business structure around it, so that was the first venture into doing that. But we first got started with finding opportunities to buy vacant land below market value, and find an end buyer and continuing to sell it below that market value to be competitive in the marketplace, and ultimately being able to sell it to them as a flip transaction, or creating cash flow by fronting the capital and collecting monthly payments. So that's how we get started with the business. And then there are opportunities within land to expand beyond just the parcel itself, because you can look at ways that you can turn it into a more productive and sustainable piece of property and doing things like a better use with agriculture, potential developments, a lot of people land bank and so there's a lot of different routes that you can go within the land that can be considered an investment, either from an active or passive standpoint. Are there any tax advantages of holding land, as there are with commercial properties? If you talk about land itself, it's actually not an incentivized asset, you can't collect appreciation on it. And the purpose of the land being vacant is that there are no structures on it. So there's nothing that you could utilize from a taxation standpoint. However, as you look into different opportunities to change the use or classification, for example agriculture, you can always make those improvements to the land and create some tax incentives. Right now, there's actually a huge push in the marketplace to continue to focus on agricultural land, farming use because of the need of our surrounding communities and access to those fresh fruits and vegetables. The government is actually providing grants and low interest loans as an incentive to develop those properties and create something that is sustainable. The land itself is not but then you change it into a better use, and then you can realize some tax advantages from that. What are the potential downsides of investing in land? It's not a tax advantage asset on its own. You have to create those opportunities, and especially as we talk about cashflow, that's not something that resonates with a lot of folks that invest in structures. But you can generate that cash flow by holding that property and being able to collect monthly payments.  The other thing is that a lot of folks believe that this can be set up very passively from a business perspective. And I'd say that there are a lot of moving parts and there are a lot of intricacies to the business that it takes some time to establish those structures, those processes, and it's definitely a very active business and a lot involved with it. Ryan Pettitt ryan@prosperityaid.com Subscribe to our newsletter here: www.montecarlorei.com --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

How to evaluate a self storage property? What do self storage REITs look for when buying new properties? Kris Benson, Chief Investment Officer for Reliant Investments shares some insights into this recession resistant asset class. You can read this entire interview here: https://montecarlorei.com/how-to-evaluate-a-self-storage-property-what-do-reits-look-for-when-buying-new-properties/ What are some of the things that you look for in a property before making an investment? Where we start is the market and we’re looking at very similar demographics to what you may look for any asset class. Traffic count is a big one, understanding how many cars are going by per day in storage is interesting in that the market is really the one, three, and five mile radius around your facility. That’s the data that really matters. Because people typically are not traveling too much farther than that to come to a storage facility. We don’t have amenities, it’s a garage. There’s not necessarily specific amenities people will travel to like they may for a multi-family property or an apartment. Population growth, job growth, average income, median household value, those are some of the pieces that we’re looking at to understand who the potential tenant may be, and the strength of the market. And then, a big component of it is understanding the competitive set in that particular market as well. Who are the competitors going to be? Are they going to be institutional REITs or is it going to be a mom and pop competitive set? So we try to build a story around each one of the properties we’re purchasing. So it’s a number of different data points that we bring together. What are some of the ways that you add value, or look at adding value in a particular property? On our side it’s different for each property that we are looking at. We don’t go into a particular value add strategy and it’s the same for every property. We’ve sold 36 properties, and the majority of those have been sold to the REIT’s. So we look at each property with a lens of what our exit could be. Sometimes we may go into a facility that’s cash flowing currently, and maybe it’s been operated by a mom and pop owner and they have some additional acreage that they’ve not capitalized on and we may build it do an expansion. We could build an additional 15,000 square feet and get that leased up. Our goal is to try to grow the NOI on that particular property. That can be one value added strategy. What’s interesting about storage is that the marketplace is very fragmented. The REIT’s own about 20 to 25% of the market and the rest is very much fragmented between regional operators like us at Reliant, and operators, like mom and pop shops who have one or two facilities. And usually in those mom and pop operated facilities, there’s a lot of low hanging fruit to glean additional revenues. And so sometimes the value add is building out some ancillary income streams like doing U-Haul truck rentals, or a retail component where we’re selling locks boxes, those types of items where maybe the mom and pop operator just didn’t capitalize on that opportunity. So, we look at each property differently and then as we underwrite we add what that value add is, or business plan may be. When you look at exiting to a REIT, what do they look for in your properties when they are purchasing them? Typically they’re looking for a market presence in an area that they think has upside, that will help them grow their portfolio, where they don't take construction risk. Kris Benson https://www.reliantinvestments.com/ Subscribe to our newsletter here: http://montecarlorei.com/ --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Today we are recapping the highlights of a 3 day virtual conference that I attended recently. We'll cover: The state of this crisis and what the outlook is. How you can leverage the 3 loan options from the government and what does each of them mean. Things that you can do today and what you should be thinking about for the future. You can read this entire episode here: https://montecarlorei.com/action-items-to-take-today-for-your-real-estate-investments/ Three loans available: PPP – Originally: you had to use it within 8 weeks from the time you got the loan, you needed to use 75% of it for payroll, and 25% for rent, mortgage, utilities. There were no payroll tax deferral if you took the PPP. Now: you have 24 weeks to use it, and the number is 60/40: 60% must be used for payroll, and 40% for rent, mortgage, utilities. And now you can defer 50% of payroll taxes until December 31st. EIDL – gives you $10,000 per employee. When you apply for this grant, you’re applying for the loan, and the SBA is granting these loans, the maximum amount you can get is $150,000 per company, regardless of the number of employees. If you have a management company and a real estate company, you get $300,000. You have 1 year deferral, so you don’t have to pay the loan for 1 year. This is a 30 year loan, at 3.75% interest. Pay close attention to terms of the loan, and get the opinion of an SBA expert. Main Street loan – it’s backed by the Fed, not an SBA loan. There’s no 500 employee limit, talk to your banker for clarity. All 3 of these loans are bank loans, you have to go to the bank and apply, and the SBA pays the bank back. You can get both PPP and EIDL. If you already got the PPP, you can also get the EIDL. What are the things that you can do today, from looking at your existing properties to how you can negotiate for new properties. And what you should be thinking about for the future. Stay away from auctions that will come up because lots of people are looking for that. Hotels are at 22% occupancy, there will be lots of defaults on hotels. Lots of major hotel operators have reserves until October, they have $700-800 fixed cost per door per month. Example of a deal someone just closed: It was a stadium, that cost about $13M to build, it is not being used currently, and has an income from a cell tower on the property, the income from that is $50,000/year. The seller has been trying to sell for just over $1M, two of the previous offers fell through. They came in and offered $900,000 cash, they sold cell tower right away for $700k at closing ($50k income/month at 7% cap) and now they purchased an entire stadium for $200,000! Action Items To Take For Your Real Estate Investments: As far as your existing properties: trim fat and cut expenses As far as preparing yourself for the future: Look into Captive Insurance – need to learn more about it, but it sound like it’s something that you could do to prevent future problems like this shutdown. Will do a podcast about what it is. Invest in Blue cities in Red states. Look at Industrial – Instacart can pick up from industrial instead of supermarket Become valuable to valuable people. Help people solve complex problems. Now is a great time to build a great team. Ask yourself “How can I?” The state of this crisis and what the outlook is: This is far worse than 2008. The implications of this debt is ultra low interest rates, forever. There will be lots of opportunities in 6, 12, 18 months. Subscribe to our newsletter at the top of the page here: http://montecarlorei.com/ --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

We continue our conversation with Russell Gray, the co-host of The Real Estate Guys Radio Show, he is a financial strategist with a background in financial services dating back to 1986. You can read this entire interview here: https://montecarlorei.com/how-can-investors-prepare-to-ride-this-recession-and-what-asset-classes-could-thrive/ How can investors prepare to ride this recession since we are in the early stages, and hopefully there's still some preparation that they can do? There's a thing in business called a SWOT analysis where you do a strengths, weakness, opportunities and threats assessment on whatever you're doing. If I would have done that, in 2008, I would have recognized some of the vulnerabilities that ultimately took me down. So I think that's the first thing you have to do, you have to just look at your portfolio, you have to say, What if interest rates went up? What if rents went down? What if vacancies went up? What if this local market economy changes? You just have to begin to go through and ask yourself, what are some of the things you're hearing, what are some of the possible or probable outcomes of what's going on and how will my portfolio respond to that.  And then begin to take corrective action, you're probably going to realize that you've got some things in your portfolio that are marginal, they're not really that strong. You might want to think about getting rid of those. That's what my buddy Kenny McElroy did. Coming into this, he just began to look at his portfolio and say, I'm going take everything that isn't top performing, super strong, great market, great tenant, great management, great property condition, anything that isn't top tier. They're all good, but I'm going to take the bottom few, and I'm going to get rid of them. I'm going to get liquid because I think the market is going to turn and I think there's going to be opportunity. And that's number two, get liquid now. Getting liquid can be selling things and sitting on some cash. It could be borrowing. Well, the borrowing is good if you still have equity and you still have good credit, documentable income and there are loans available for the types of properties that you have. And you can lock those rates and payments in long term. Now is a great time to do that. I think you might be a little bit late to the party. But if you can do it, I would definitely be doing it. Some people say, Why would you want to increase debt in the middle of all of this that's going on? Don't look at it as increasing debt, look at it as increasing liquidity, because the equity is probably going to end up disappearing for a period of time. As prices fall, your debt is not going to fall, your equity gets eaten up. So if you can liquidate that equity and protect it from the market that serves you in a couple of different ways, when in a downturn, when things are tight and things go wrong, it's always good to have some cash. Number two is if credit markets fall apart, which I think is a likely outcome and that doesn't mean they're going to be gone forever, but it'll be like it was in 2008, where things get tight. We're already starting to see some of that. Then being liquid gives you a competitive advantage. The debt coming out of the marketplace is going to cause prices to drop because not as many people can compete because they can't get funding. But if you have cash, then you can take advantage of those lower prices. And when funding comes back, then that puts air back in the pricing and equity happens. And you end up with a boost of equity. You can't have that boost if you aren't able to buy when air is out of the market, and then ride it up. Russell Gray https://realestateguysradio.com/ Join our newsletter here: http://montecarlorei.com/ --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Today we get insights from Russell Gray, one of the hosts of The Real Estate Guys Radio Show, he is a financial strategist with a background in financial services dating back to 1986. You can read this entire interview here: https://montecarlorei.com/why-this-downturn-could-be-worse-than-2008-russell-gray-explains/ I would love to hear your thoughts on what you’re seeing is happening right now in commercial real estate. On one side of the commercial real estate ledger, you had retail spaces under tremendous distress because their retail customers, the demographic they served, companies like JC Penney, whose business models were being completely disrupted, these anchor tenants like Sears and Kmart, were just getting wiped out by people ordering online. On the flip side of that, on the industrial side, you saw warehouse and distribution and logistics, just going through the roof. And so there’s always going to be winners and losers in this current environment. You’ve a lot of people changing the way they behave. Companies are finding out that they can have a remote workforce and actually get things done. They may decide, hey, we don’t need all this fancy office space, people would prefer to live at home, or work at home. So maybe we’re going to cut back. I think that if you’re in the office space, you need to really look at the nature of the work that the companies are doing. And does it require physical proximity and collaboration? Or is it something that could be moved to a more diverse workforce, people working at home? You could be vulnerable. Why do you think this will be worse than 2008? COVID-19 hit and now the Fed balance sheet is over 7 trillion. It has nearly doubled just in the four months that we’ve had COVID-19. So on the one hand, you’ve the powers that be the Federal Reserve and the Treasury way in front of the crisis as opposed to 2008 where they were way behind. That’s the good news. The bad news is, this is so much bigger because it isn’t just a small percentage of subprime borrowers that are having a hard time making payments. You have major corporations like Hertz, companies that have been in business for 100 years that are declaring bankruptcy. And the quote in the article that I just read, in fact, I featured it in today’s newsletter is, “No business is structured for zero revenue”. So what we have is a health crisis that turned into an economic crisis, which means that we shut the economy down. It's like having a giant heart attack. And if you can imagine currency, money stopped, like blood stops flowing because the heart stops beating, the economic heartbeat stops beating, the blood stops flowing, then, individual cells, people, and organizations, or organs, they all start to die. And if you don't get the heart started quickly and get the blood flowing quickly, then you get permanent damage. And it remains to be seen if that's going to happen. But when those payments stop being made, then the debt goes bad. And now we're right back where we were at 2008, but much, much bigger. And the problem is everything we did wrong leading into 2008 with the margin and the rehypothecation occasion of the debt in Wall Street, the derivatives are worse today, global debt is worse today than it was in 2008. And the cessation of payments and the defaults and the bad debt out there is much bigger. So just based on that alone, it says that this is probably going to be worse. Russell Gray https://realestateguysradio.com/ Join our newsletter here: http://montecarlorei.com/ --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

This is our second mastermind call with a group of experienced investors to understand where each investor is, and how they are dealing with the Covid-19 quarantine and its consequences on their properties. We had nearly 200 years of real estate investing experience in the call. You can read this entire episode here: https://montecarlorei.com/multiple-asset-classes-mastermind-what-are-top-investors-doing-during-this-crisis/ Mixed Use, Construction, Senior Housing, Multi-family, Short Term Rental Investor Even though businesses are starting to reopen, that doesn’t mean that we have conquered Covid-19. From the capital perspective, for new construction loans, out of the 15 insurance companies that lend in the real estate space, 13 have stopped altogether. The largest one laid off the entire loan origination staff. They don’t plan to get back to loan originations for a while. Capital for construction is almost non-existent unless it’s with HUD. If you go with a bridge lender it’s expensive: Libor + 9 + floor on Libor rate, which is what was happening in 2008/2009.  There is not a lot of appetite for new deals unless they’re deeply distressed, it will take time for deals to start to emerge. People that are trying to do deals now look desperate and lacking in perspective of where the market is really heading. He would be patient. Passive Investor (since 2002) This guest invests in stabilized assets. He said that it takes time for prices to come down, and from his experience, it can take 1-2 yrs for things to hit bottom. He has been sitting on the sidelines until prices drop since late 2016 across all asset classes. He pushed his operators to sell in 17, 18, 19. He thinks that rents will be down, vacancies will go up and cap rates will go up. He is skeptical at looking for things this year, unless it’s very unique. He will be waiting for vacancy levels, market rents, and market prices and will see if cap rates will adjust. Even if the cap rate is better, we don’t know what the NOI will be in one or two years, it may be lower then. He has been hearing that syndicators are getting about 1/3 of the normal responses for deals, another syndicator dropped his minimum investment for the first time ever. He will be on the sidelines regardless of what’s happening to the economy in the short term, but more because the election that is coming up, and how this may have an impact in real estate. Diversified Portfolio Investor Their multi-family properties are performing well (B-class), in April and May they performed better than anticipated. Some of the people that lost their jobs have higher income now with unemployment. Medical office: they reached out to tenants and offered rent relief proactively, about 50% of tenants took them up on it. Their properties are in areas that are now reopening, they will reach out to the tenants in June and find out what is happening and if they need any further assistance. NNN properties: they are performing very well. Some investors still need to place their cash somewhere. Looking forward to understanding where’s the most pain for the most extreme distressed properties. Pricing hasn’t changed yet, price expectations from sellers haven’t come down to meet price expectations from buyers yet. Multi-family Investor and Broker The 2 deals that he was working on during the pandemic actually ended up closing, despite the fact that banks asked for more reserves. The sellers gave concessions, about 8% concession on the price, the seller also put up escrow money and provided insurance on the income over the next 6 mos. Subscribe to our newsletter at the top here: https://montecarlorei.com/  --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What are DST's and how are they different from other forms of real estate syndications? Can you 1031 exchange out of a DST? Jason Salmon, Senior Vice President and Managing Director of Real Estate Analytics at Kay Properties and Investments LLC shares some insights with us. You can read this entire interview here: https://montecarlorei.com/what-are-dsts-1031-exchange/ What is a DST and how is it different than syndications and REIT's? Most upfront would be the 1031 eligibility, REIT's are not eligible for 1031 exchange straight away. There's always a way through different channels to eventually get there. But apples to apples, one cannot 1031 exchange directly into a REIT and the DST through what's called revenue ruling 2004-86 is on the books and there's a way for people to 1031 exchange in. Additionally, when that real estate is sold, they have the opportunity to do another 1031 exchange out moving forward. In and of itself, a DST is a syndication, but it's a hybrid because it's a really specialized sort of syndication whereby it is 1031 eligible. And in many cases, syndications of different sorts, whether it be partnerships or LLC's or any which way in that format would not be a 1031 vehicle for fractional, partial ownership. Those entities themselves could do a 1031. But if it's made up of private fractional ownership, it doesn't fly. So from a 1031 exchange standpoint, I think that's the linchpin of everything there. Notwithstanding from a direct cash investment standpoint, they all could work in similar ways, REITs could be public or private. They take on different complexions that way. If it's a syndication in and of itself could be put together, it could be friends and family. Whereas the DST, at least the DST space that we dwell in would have multiple layers of due diligence on various levels, specifically the real estate, the deal itself, and then the asset manager, or the sponsor firm running the deal just to be able to have that deal, see the light of day if it passes that due diligence. It's just a little bit different format. But again, going back to the beginning, I would contend that the 1031 eligible eligibility is the biggest differentiator. I did not know that the accredited investors themselves could not 1031 into another property in a standard syndication. That's very important to know because it has significant tax implications. They could all go together, theoretically, if it was a partnership or an LLC. But as far as being comprised of multiple partial or fractional ownership, that's where it wouldn't pencil. Can you talk about how asset managers don't get any returns? They pass everything to the investors. There is a cost of doing business generally. But in the Delaware Statutory Trust structure on the back end, unlike most syndications, there is no waterfall. Basically, they can't profit share at the back end, there is a disposition fee that is built in. Those have varying degrees. I wouldn't be able to cite it on this call. It would be deal specific, but it's there and it's akin to closing costs. Like anything else. But it wouldn't be like your typical two and twenty model or some kind of promote on the back end, because structurally in the DST they cannot profit share. So if a 100 million dollar deal was sold for one hundred and twenty million dollars after four or five years, if that was a net number, net of closing costs and all the associated closing fees, then the investors would indeed get their pro rata share of those proceeds. That's the bottom line for how DST's are structured. Jason Salmon jason@kpi1031.com Subscribe to our weekly newsletter here: http://montecarlorei.com/ --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support