Commercial Real Estate Investing From A-Z

In this episode we're learning  why you should invest in self storage, how to select the location to invest, what are the biggest challenges with self storage and how to select and hire the best property manager for your locations. We're interviewing Ryan Gibson, a co-founder of Spartan Investment Group. You can read the full interview here: https://montecarlorei.com/making-a-case-for-self-storage-investing/ Why should real estate investors invest in self storage? Self storage is something that we looked at back in 2016, we made a pivot from investing in residential real estate, we were building condos, new houses, flipping houses, and we landed in self storage for a couple of reasons: 1. We liked how straight forward it was, how operationally easier it was to manage than a multifamily property. We looked at vacancy trends, rent growth, saturation and all the things that people like about self storage. It is also one of the least foreclosed upon asset classes during the last recession. How do you guys go about deciding where to invest in self storage? We focus on 150 MSA’s across the United States. And those MSA’s have a key component of population growth. Population growth is the number one driver of self storage utilization, overall market saturation, job growth, demographics of our ideal consumer, income levels, job placement, migration trends, and we look for cities and areas, or an MSA that are trending positive and have a good outlook for population. We look at rental rates as well. We have a hard time justifying building in certain markets, brand new storage, if the rental rates are, say less than $6 a square foot, it would be difficult to do that. What are some of the biggest challenges with self storage? I would say the number one challenge is finding the right projects. We looked at 880 projects last year, we put out six offers, and we bought three. It's a very institutionalized asset class. A lot of projects that are over $5 million are getting all cash offers, so it’s very difficult to compete with a lot of the institutional capital, and larger players in the market because they have a lower cost of capital than we do. Because we're offering our investors a market rate return on equity and they have a good team of folks that can find the same data that we're finding. Moving on to property manager, how do you select and hire the best property manager and what do they do all day long?  Some folks will hire third party property management companies like Cubesmart, Extra Space, West Coast Self Storage, Public Storage. They might hire a company like that to come in and do the property management for them, but they're still going to have to hire somebody that works at the desk, that the owner is responsible for covering that expense. The property management companies will take a fee, usually 6% of gross revenue, to manage that facility. We do the property management asset management in house. What is your second favorite asset class after self storage and why? We own an RV park in west Texas and that has been my favorite deal ever. Very similar in characteristics to a mobile home park in that the tenants are there full time and they live there right now, rent is about $800 a month (and utilities are included in that). Not to have a whole lot of amenities and have the lowest entries for housing, we just collect a lot rent and the folks bring in their own RVs and mobile homes, they purchase their own homes, it does well in good times, and in bad times. Ryan Gibson www.spartan-investors.com ryan@spartan-investors.com --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

In this episode we'll learn if investing Silicon Valley could be a good idea, what happened to office spaces during the last downturn, things an investor should cover when looking at purchasing an office, what types of leases are standard for office space, and what does the future of office space could look like. We're interviewing Eduardo Zepeda, an asset manager and leasing director of a family's holdings, he manages north of $100M in combined assets comprised of multi-tenant office and retail property. You can read the full interview here: https://montecarlorei.com/should-you-invest-in-silicon-valley-what-does-the-future-of-office-space-look-like-what-happened-to-office-spaces-during-the-last-downturn/ Making a case for investing in Silicon Valley: Why do you like this area?  It’s the perfect storm of supply and demand economics where you have a finite fixed amount of land and a very strong demand not only for housing but also for space to occupy, whether it’s office, industrial or just land to develop and improve. The macroeconomic factors for the Bay Area are very compelling, whether you’re looking for a short term value add project with an exit, or a long term hold, there’s a compelling argument in both cases for investing in this area even during this economic times. The challenge is that prices are very lofty. What was the vacancy rate like during the 2008 recession and what were some of the major issues that the properties that you were managing were facing? We were doing deals somewhere in the $20’s/yr/sf, sometimes even in the high teens and there was a lot of inventory space back then. The demand was pretty low, especially compared to now where the vacancy rate in San Francisco is around 5% for office. The demand didn't stay very strong throughout, on a rental rate basis it was quite different than what it is now, from $20/sf back then. What are offices charging per square foot nowadays? It depends on the building type, within our portfolio we have multi-tenant, and class B and C properties. Depending on the part of town and the part of the Financial District, or South of Market, anywhere from the high $40’s/sf/year all the way up to the high $60’s- low $70’s for a class B. For a high rise, you can go anywhere from the mid $70’s-low $80’s all the way up to $100’s or higher, depending on the building and the area.  What should investors look for when buying an office building?  1. Get a working knowledge of the building systems: the HVAC , boilers, chillers, electrical, and those types of systems that depending on the way that the leases are structured could be an expense of the landlord, or they could be expensive to the tenant. 2. Having some working knowledge as to the way that they are operating at that property. 3. Have a working knowledge as to the different types of leases that are active in the market, or typical for this kind of building.  4. Know the difference between a full service gross lease, an industrial gross lease, a net lease, or any variation thereof. That's pretty important because it will dictate how much is going to be an expense to you as a landlord. 5. If it's a building that has some vacancy, or that has some holes in the leases in the next one to three years - know what the market is doing in order for you to able to accurately predict what you're going to be able to lease those spaces for on a per sf basis. Eduardo Zepeda ez@cma-re.com https://www.meetup.com/SFREConnection/ --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

In this episode we’ll learn how to manage multiple companies at the same time, how to hire and inspire the best people, what types of asset classes and what markets are interesting to invest in today’s market, and we will also learn what are opportunities zones and how you can leverage OZ's in your investments. We’re interviewing Greg Dickerson, a serial entrepreneur, real estate developer, coach and mentor. Over the last 20 years he has bought, developed and sold over $200 million in real estate. You can read this full episode here: https://montecarlorei.com/what-are-opportunities-zones-how-to-hire-the-best-team-what-types-of-asset-classes-to-invest-in-todays-market/ How do you make sure that you're successful when you're doing everything from fundraising to investing in all kinds of asset classes? You have done multifamily, retail, medical center, offices, how do you make everything move forward?  Education. I didn't go to college but I am very highly self-educated, I've always developed myself personally and professionally. I've never owned one song, only audio books and courses. Business and personal professional development are important in order to accomplish things. You need to be a visionary, a leader. What is it that you're trying to accomplish? Create the vision, communicate that vision in a way that people understand it and can see it even though it's not there. Put together the right team, inspire the results out of that team, delegate, motivate, and lead. Is now a good time to invest in commercial real estate? What are your favorite markets? It’s always a good time to invest in commercial real estate, but it's not always a great time to invest in every asset class. And every market is specific. Everybody says that real estate is local, I call it hyperlocal, real estate is local down to the block of the neighborhood within the city and the subdivision you're investing in. You could say that multifamily is a great, safe place all across the country, which it is, it's the safest bet from a real estate investment standpoint, especially at the low A, high B level. That's an asset class that's probably never going to go away, people need housing, so when you start going down in the B, C, D classes it can get a little risky in certain areas, but they can be slam dunks in other areas. What are Opportunity Zones, and how can people leverage them within their own investments? The Tax and Jobs Act from 2017 gave governors of all the states in the US the ability to designate certain areas as opportunities zones. The idea behind it was to incentivize investment into lower areas, primarily in business and in real estate assets. Each governor was able to go through their state and pick zones within cities of the state as opportunities. It was created to spur investment in businesses and in real estate in lower income, distressed areas.  With opportunity zones, you get to defer capital gains, let's say that you sell stock, art, or property - anything that generates capital gains. You then can invest into an opportunity zone fund, and for the first five years 10% of that gain is a written off. After seven years you get an additional 5%, and an after ten years anything that you make on that gain is tax-free. You can also refinance, sell assets and reinvest in another opportunity zone within a year and roll it over. You could invest $1 million, make $10 million within a year, reinvest that gain and keep on going. Greg Dickerson gregdickerson.com Cel: (434) 326-3903 --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

In this episode you’re going to learn how to get started in real estate investing with zero money down. If you’re feeling a little overwhelmed by the fact that you need a lot of money to get started in real estate investing, fear not! There are opportunities out there where you can partner up with people. We interviewed Ellis Hammond to find out how he got started in real estate investing with no money down. Read this podcast here: https://montecarlorei.com/how-to-get-started-in-real-estate-investing-with-no-money/ What are some things that you did to get to where you are, and what are some things that you wish you did when you were starting? Build your network before you need your network is the best advice I can give to someone who wants to get started into real estate. That’s really how I went from owning no real estate to doing a $2 million deal last year, and we have two deals right now that will be over $15 million in real estate. I found a mentor, and that mentor opened me up to his network and other networks. I showed up at conferences that have people that you want to connect with. What are some ways that people can get into real estate investing without any money?  It’s finding the deals or finding the money. That’s essentially what it comes down to. Which one of those can you begin to play a part in? I think the nice thing about commercial real estate is that it’s a team sport and there are multiple roles within commercial real estate. That’s why I like it. That’s why I really got out of the single family space because commercial real estate allows you to specialize in what your superpower is. What is your superpower? What are you really good at doing? I’m really good at networking. I’m really good at building relationships.  If our listeners were to raise all of the funds, or raise 50% of the funds for a particular deal, how much would they own of that deal? For big commercial deals, the person who raising the capital can normally get paid 2-3% on the money that they raise. If you raised $1 million, you could make 2-3% or right off the get go on that million dollars you bring into the deal. So that’s nice to get some money right away. But you want to be a partner in the deal and with the people that you’re investing with. For syndications there are two sides of the deal: the general partner who’s the sponsor, or the operator, the ones who are putting together the deal. And then there are the investors, which is it called the limited partnership. So you then negotiate for a percentage of the general partnership and the equity so that you have consistent cash flow throughout the life of the project. If you’re raising all of the money, you would look to have about 10% of the deal or 25-40% of the general partnership equity.  There is another side to this that you could also start with: finding deals. Can you elaborate on that? If you don’t like asking people for money, the best thing you can start doing is looking for deals. In this market, if you get really good at finding deals, you’re gold. People will pay to find good deals because good deals are hard to find, especially in this market. This is a super power, it takes a ton of follow up, it takes a ton of detailed work. I tried to do both sides and I just realized that a lot goes into this one. So to get started learning how to find deals, go to a website called listsource.com – it’s a database website where you can filter real estate by asset class.  Ellis Hammond invest@ellishammond.com https://www.linkedin.com/in/ellis-hammond-435b40156/ --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Today we'll learn what is a real estate syndication, what types of asset classes are safer so we can be prepared when we go into a recession, how do to underwrite and pick deals, as well as what does replacement cost mean. We're interviewing Matt Shamus, the founder of Driven Capital Partners, a real estate private equity firm based in California.   Read this episode here: https://montecarlorei.com/what-is-a-syndication-how-to-underwrite-deals-what-is-replacement-cost/ What is a syndication? A syndication is pooling assets together to achieve something that neither of us could achieve on our own. That term is used very commonly, especially today in real estate investing for a structure where you have the sponsor who is outsourcing the deal, underwriting the deal, packaging it together, and then raising money from individual passive investors, that structure is called syndication. I actually don’t love the term syndication or syndicator, and I don’t really apply that to what we do because it has a bit of a connotation. In fact, one of our investors recently told me that he considers our group a little bit more like an investing club than a syndication, and I think that’s the approach that we’re taking. Is there a particular asset class that you prefer today? “Today” is a very important modifier to the question because we are in May, 2019 and in the middle of a trade war between the United States and China, there’s a lot of uncertainty in the stock market. There’s a lot of uncertainty with regard to when are we going into a recession, and our belief is that we will be entering a recession at some point. What that means as a real estate investor is that you have a choice: Do I stay on the sidelines and see what happens and forgo potential gains for the sake of being “conservative” and waiting it out? Or do I take the approach that everything that I’m investing in, I’m looking at a little bit more closely, specifically through the lens of “we’re going to enter a recession at some point”. Our investors want the benefits of investing in real estate, but they don't have the time or expertise. Can you elaborate on what does it mean when a property is below replacement cost? I’m writing an offer today on an industrial warehouse, it’s 86,000 square feet, it’s mostly warehouse in a great location appealing to someone that needs a distribution center, high height space, which is essentially space that a large truck can back up into and you can stack the merchandise very high so you can maximize the square footage, and also has office space. That combination is very appealing in this particular market. We are looking at buying this property for less than $60 a square foot. If I were to build this exact same property on a similar parcel, I couldn’t build it for $60 a foot. I’d have to pay more just to build the property and then I would have a vacant property sitting there waiting to be leased. So the risk associated with the development is meaningful. What we look for is where can we buy something that is below the cost to replace it. That’s one way of determining if it’s undervalued, and it’s one way that a lot of brokers will use if you look at an offering memo. One thing to watch out for is that brokers are salespeople. It’s easy to say that this asset is below replacement cost, but what they will never they tell you is “this actually would be replacement cost, and here are the real numbers that we used”. Below replacement cost is a term that is used very loosely with a lot of brokers. Matt Shamus matt@drivencap.com www.drivencap.com --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

In this episode we cover what does the base year mean in office leasing, what are specific things that startups want to negotiate on a lease, what happens when a startup goes out of business, LOI’s, lease negotiation & TI’s (also called lease concessions), and lastly, what makes for a good office landlord. You can read this episode here: https://montecarlorei.com/office-leases-lease-negotiation-points-what-makes-for-a-good-landlord-what-does-base-year-mean-on-a-lease/ For offices, are the leases typically NNN? No. It's typically what's called a "full service lease" where you pay your rent, and it's pretty much in all in rent. The landlord covers the utilities, the janitorial,  the operating expenses, and real estate taxes. The way that it works is you get what's called a base year. So let's say we completed our lease in 2019 and we do a three year term. You get a "base year" and 2019 is your first year, you don't need to pay any real estate taxes and operating expenses. But in the following year you are responsible for paying your proportionate share of the increase in operating expenses and real estate taxes. So let's use round numbers, for example let's say that you occupied 10% of a building. The operating expense in real estate taxes were $100 in 2019 and they went up to $200 in 2020, a $100 increase. All you need to pay is your proportionate share of $100, in this case $10. But as you do a long term lease, 7-10 years, it's growing every year, and that number can become significant. So a lot of companies will renegotiate their lease, they will do what's called an extension, or they'll expand and renegotiate the lease to get a brand new base year so that they don't have to incur those costs. Has it ever happened that a startup went out of business, and what happened to that contract? What are the recourses for the landlord?  They go into what’s called a default and the landlord eventually ends up needing to collect their money. This situation has come up numerous times and what we do is find a new tenant to sublease the space. We market it for sublease, and once you come to an agreement on terms, the landlord will say “Okay, instead of subleasing from this company who has gone bankrupt, we’ll wrap up that lease and do a new direct deal with this new tenant”. So we’re able to bring a new tenant into the space and, by doing that, cut our client out of any rent responsibility moving forward. What are some specific things that startups want to negotiate in a lease that we haven't covered yet? The few things that we've covered so far are the big items such as rent, term, free rent, tenant improvement allowance, and the security deposit. Things we haven't talked about yet are: let's say a landlord is forcing us into a five year deal, but we know we're not going to be able to make it for the full five years. We try to negotiate a termination option where after three years we can terminate with no penalty, or a very small penalty such as two months rent. Another item is sublease rights, a landlord will generally give you the right to sublease, but any profit that you get for that sublease is split 50-50 between the tenant and the landlord since they want to discourage tenants to take space and sublease for a profit. When you're in rapid expansion mode we try to negotiate what's called a right of first refusal, where if a space becomes available in the building, the landlord is required to present it to the startup first at a fair market value. Reuben Torenberg reuben.torenberg@cbre.com Steffany's Linkedin: https://www.linkedin.com/in/steffbold/ --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

In this episode, we interview Reuben Torenberg, a commercial real estate broker who specializes in helping startups, technology companies, and venture capital firms find office space in the San Francisco Bay Area and beyond.  You can read this episode here: https://montecarlorei.com/what-do-startups-look-for-when-leasing-an-office/ What do startups look for when leasing an office? Every startup is in rapid growth mode. At the very beginning you don't know exactly what your projections are 12 months out, even six months out. So you are looking for a space to do a few things: 1. Attract talent. 2. Manage growth. You don't want to get an office that's too big and be hemorrhaging money. 3. Staying flexible. It's very hard both in San Francisco and throughout the world to find space that will let you stay flexible as you continue to grow larger, as landlords are looking for three to five year terms. You have to be creative in how you're able to position your client to stay short term. One of the things you can do is actually get into subleasing. A lot of companies that are growing too quickly or shrinking faster and they'd hope need to offload space for 12 months, 18 months, which tend to be very, very attractive situations for our clients. Who would be responsible for subleasing that space? The tenant or the landlord? The tenant is responsible. They become a sub landlord in that instance, and they put the space in the sublease market, usually at a premium here in San Francisco because it is so attractive to startups. And then once they managed that whole leasing process, they need to get the landlord's consent where they present the sublease to the landlord and the landlord has 30 days to say, yes we would like this new tenant, or no. Another huge thing for startups is being near public transit. Attracting talent in San Francisco has become extremely difficult. They're now looking to the East Bay. There's also a lot of talent down in the South Bay with Stanford, with Berkeley in the East Bay. Being near Caltrain and being near Bart is a huge plus, and rents are much higher near those areas. So startups try and find something in between. Subleasing is one option.  What are some other things that they look for when leasing an office? It all ties into the big main question: will this place help us attract talent? Once you get past that, it goes into a lot of the comfort stuff, so a big one is how many meeting rooms are in this space. A lot of times startups like to be in wide open environment to maximize the amount of people you can fit in, and to endorse collaboration, to have everyone talking, hanging out, help the culture. But everyone at some point needs to enclose themselves in a room to have a private conversation. The question is, are there enough meeting rooms for us to fit? This is frequently a pain point. We have a metric actually for it, and it will vary between companies, but we say that startups should have at least one meeting room for every 7 - 10 employees. So if you have 50 employees, you should get at least five meeting rooms. Another one is size. Can we fit all of our employees for the duration of the term? If this is a three year lease, but we're going to be blowing out of it in a year, do we need to take on more space? Are there enough restrooms? Reuben Torenberg: reuben.torenberg@cbre.com Linkedin: https://www.linkedin.com/in/reuben-torenberg-b985b646/ Twitter: rtorenberg021 Instagram: rtorenberg021 --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Today we are reviewing the Investors Summit at Sea. I’ll also share a few lessons learned on this cruise that are simply invaluable. You can read this full episode here: https://montecarlorei.com/review-of-the-investor-summit-at-sea-and-lessons-learned/ Lessons learned specifically for real estate investing: – Have a team, management is key, get very good managers. – When things go wrong, it’s almost always because you had the wrong people in the wrong chairs. – Don’t try to do things that are too small because you cannot afford to get the right people in the right chairs, so go big in order to be able to afford the right people. – Really evaluate if you want to get into a tertiary market. – Cut your losses early. – A market has thousands of submarkets. Just like within your city, there are very good areas and within that very good area, or that upcoming area. – Make sure to change your investment strategy if it is reaching a peak. – Don’t say I can’t do it. Say, how can I do it? (you can do a joint venture deal, you can get a few partners, etc). – Always be building and growing your team. – The best time to get started is yesterday. – Get mentors and ask them questions that you already think you know the answer to. – FHA HUD loans can take a while to get approved, they have heavier fees, but when it’s done, you get a 40 year loan, fixed, non-recourse debt. This is very good for construction loans and refinance loans. – Don’t wish for no problems, wish that you get better at solving them (I love it!). – Statements, close the mind, questions open it. (Double love it!) How you can prepare for what is coming in the economy: – You should have five uncorrelated assets. For example: real estate, gold, stocks, and a couple of other things. – Lock your rates for 10 to 12 years, and get 30 year loans. You should have at least six to 12 months worth of operating expenses as a backup. – If you are a syndicator, you should always have cash calls in your paperwork. – Underwrite your deals based on historical rent and historical cap rates (rates similar to when we were in a recession back in 2008). What have I learned about the economy and government: Here I encourage you to do your own research to learn more about these topics: – The federal government hasn’t been audited. Has anyone thought about that before? – Pension funds are America’s greatest retirement crisis in history. State pension funds are not governed. – Fidelity Investments has $7 trillion under management, $2 trillion of that is in 401k’s, and their fees are $40 billion per year. – Inflation is a form of taxation. The Fed is committed to increase inflation by 2% every year. – The money we deposit in the bank is not ours anymore. The bank now owes us that money, this was passed very quietly under the Obama administration. – The number one asset in a government bank is student debt. It’s the only thing that you cannot remove in a bankruptcy. – If you want to revoke your citizenship here in the US, you owe the government three times your income. and if you owe $50,000 in taxes or more, they may revoke your passport. – At a $100,000 income, if you pay 40% taxes, and if you put your remaining money ($60,000) at a 12% return, it will take you 5.5 years to get that money back to $100,000! The next Summit will be from June 11th -20th, 2020. Sign up for the Summit at Sea here: https://realestateguysradio.com/summit/ Make sure to mention Steffany Boldrini to get $100 credit in the ship, which can be very useful for internet usage. --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Today we interview Adam Carswell, a Director with Concordia Realty and a Business Development Manager with Asym Capital. He focuses on retail, mobile home parks and self storage.  You can read the full interview here:  https://montecarlorei.com/retail-investing-strategy-why-be-optimistic-about-retail/ What is your business model? Why do you guys invest in the properties that you invest in? What is your strategy? My business partners at each firm go about things in different ways. Starting with Asym Capital, Hunter Thompson (the host of the Cashflow Connections Real Estate Podcast) focuses more on the syndication side of things, we look to partner with experienced operators, and as you can see with our track record, we really take our due diligence with operators and sponsors seriously. The level of due diligence that we do, not only on the asset or the deal that we're going into, but on our sponsor at underwriting is literally what I would call next level. And that's one thing that I've been fortunate to be in an environment like that, with someone who is this diligent. Transitioning to Concordia Realty and Michael flight, we are retail focused, shopping center focused, and we look for opportunities to add value to shopping centers anywhere across the US. We normally will stay away from primary markets, but we do like secondary and tertiary markets. We like for our shopping centers to have a grocery store as an anchor, and at least one, and sometimes two discount stores in the plaza as well. So that could be a Family Dollar, Dollar Tree, Dollar General, etc. Drugstores are always good too: CVS, Walgreens. If we see a shopping center that fits that mold and is less than a hundred dollars per square foot, we will take a closer look at it, put it through our financial model, make assumptions and see if it will be a good fit for us and our investors.  Can you share with us why are you optimistic about retail nowadays? The first reason is that Amazon invested $13.7 billion into brick and mortar. That's a lot of money! And a company like Amazon has a lot of data that they have access to, and the amount of information that they have access to is also next level. There are very few people that can make a move like that. Sears is also doing a few things in retail. The second reason is when you look at life in general, and you look at trends, and you look at things that people gravitate towards, retail has had its moment of super success and it's had its moments of no success. Kind of like what we're going through right now, but it's all cyclical. Retail has been around since the Roman Agora. It just evolves and takes a new shape and a new form. You had the general store in the 1900's, and then you had Sears catalog, which killed that general store. But then Sears did brick and mortar after the catalog with all their department stores. Amazon is like the new catalog that came out and kind of killed the brick and mortar movement. But again, it's, it's just very cyclical. Right now is the perfect time to start at least researching and learning as much as you can about retail real estate because it is going to make a comeback nationally, and it's not going anywhere. It's just going to evolve. Contact Adam Carswell here: carswell.io adam@carswell.com  iTunes: https://podcasts.apple.com/us/podcast/dream-chasers/id1441685534 Spotify: https://open.spotify.com/show/0fqzz3iJS2uARrz4N6dlmN?si=1Yjisi-JSRK_1vRyU34JWA --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Today we’re interviewing James Chung, he is the Executive Managing Director and Managing Principal for the Western US for Cushman & Wakefield's Retail platform. He has been with the company for 15 years and has worked with over 30 national tenants and over 9 million sf of retail across the Bay Area in Silicon Valley. Some of his clients are: AT&T, Chase Bank, Adidas, In&Out Burger, and Sur La Table. Read the full interview here: https://montecarlorei.com/lease-negotiation-points-for-national-tenants-lois-what-happens-when-a-tenant-goes-dark-part-2-of-2/ In terms of leasing retail space to a national tenant, what makes a national tenant want to lease a particular space? Every tenant has a different purpose, and each tenant also has a different requirement for the optimal environment for which they can thrive on, and we are often involved in developing a strategy for them in our market. For example, some tenants only want to lease in grocery anchored shopping centers, and they only want to look at a Safeway or Whole Foods anchored center (or the like caliber). Or we could be working with a 100,000 sf box tenant who needs a certain amount of land, they need access to major freeways, and they need the demographic to be above a certain threshold within a 1 – 3 – 5 mile radius ring area. Or we could be working with food tenants who just want to be on downtown, street front environments where they want to be part of a community, there is a lot of foot traffic, and they don’t want to be in a shopping center. In order to help them position themselves in the market it depends so much on the tenant and their process. We also provide analytics on anywhere from psychographic, to demographics, to data on their competitors and sales volume, so there’s a lot of information that goes into the analysis of an opportunity and while one person’s success or failure won’t dictate the success or failure of the tenant at hand, it at least gives a certain starting point of who has done what in a particular market. The appetite for growth is so unique to each tenant that it depends on their requirements, some people are positioning for public events, some are repositioning the market, some people are closing stores, and only want to combine units, so each requirement is truly unique, which makes our job unique. James likes the work he does with a lot of household names that we see, and being able to walk in the stores, shop at them, and eat at them after completing the process. The deal cycles may take a few months to a few years and it’s fascinating when he sees the body of work in the form of storefronts, or a restaurant as a living organism since it creates jobs, it is feeding people, or simply seeing people buying clothes, it’s very rewarding to him and some of the reasons that it attracted him to retail. Once we’re past the LOI Are they going to try to renegotiate the price when the lawyers get involved? Typically no, it is assumed that the business items have been agreed upon, and at that point you’re only negotiating the legal language. What are some deal-breakers for national tenants that we as investors should be aware of? It depends on how bad they want the site. For example, for a lot of landlords, termination clauses are deal breakers, that means early kick out language and things like that, but ultimately everything is negotiable, so the deal breakers will be dictated by the opportunity and the players at the table, unfortunately there is no standard there. Contact James Chung here: http://www.cushmanwakefield.com/en/people/james-chung --- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support