NNN Invest - 2021 Year In recap

[Joel Owens]

2021 was a great year business wise.

Had lots of great transactions with clients buying NNN properties.

Personally I bought a value add 14k sq ft retail center and a dark auto store to reposition.

Additionally closed on a dark building right next to a new Amazon facility going up and looking at buying a dark bank to close maybe early next year.

I like retail value add as the goal is to stabilize in under 1 year and exit in about 3. Close to full value is realized when tenant signs new primary least term. 

Looking forward to 2022 will be looking to acquire multiple properties or more each month for value add repositioning and stabilization. These properties tend to be in warm belt states where a lot of tenant expansion plans are occurring. The tenants favor pro-business states, friendly employer laws, and low taxes.

I hope everyone had a merry Christmas and has a GREAT New Year's!

[Joel Owens]

Evan a dark building can be a building with tenant vacated with no income or the tenant is still on the hook for remaining primary term of the lease and they are either still paying or not paying ( in default of the lease ).

Ronald as to what I am doing that other owner isn't doing it's nothing about that at all.

To give you an idea:

The 14k sq ft retail building I bought the out of state owner went bankrupt and national bank took it back. Building was good and tenants were good with location at red light corner in good area the bank had no clue what to do with it and was listed with small company so not many people knew about it. I bought it cash for an amazing deal. Minimum has millions of upside to me.

Dark auto building was shut down during covid. Billion dollar parent company in Japan did not want to be a landlord just wanted excess dark property off the books. There were already 3 tenants wanting to lease the building. That one I am going to have about 1 million of upside to me.

3rd property I bought a large REIT owned. Tenant went dark and their protocol because they do so much volume is if it doesn't release up in 3 months time they sell the property. At that time a vacant mall was sitting dark for 2 years across the street. When I bought the property a large industrial developer tore down the mall and is building a massive Amazon distribution facility across the street. When I say across the street it's literally about 15 feet away. Amazon is already going vertical and planning to open around April this year.

That one I think will have millions of upside as well.

I look for properties where the location is NOT the problem but it was a tenant relocating, a business model that moved online, a bad franchisee operator, a brand that was dying off, partnership split, owner is out of state and bought NNN for passive and now has no clue what to do with it since marginal tenant went out.

Those are items I can typically solve. In warm belt state for small to medium box sizes getting leased up in 6 months for great location not typically an issue. Could be up to 1 year max. Corporate investment grade tenants tend to take the longest to make a decision. You could have large franchisee tenant that can move much faster and basis points on the sell might be only 25 higher so getting in quicker is worth it.

On the refi lenders tend to let you get money out quicker when it's superior tenant. When it's smaller tenants you might have to search around longer for the right bank to still do a refi on your timeline.

I can't pay end user type pricing where seller is looking for tenant to buy it or someone to pay up for a nominal return. Some developers do that when buying it's volume and putting the capital to work for them constantly. I do not want my life to be hectic so if I buy 10 to 20 high potential upside deals a year versus a mix of returns but buying 100 that would be optimal for me.

You see lots of syndicators buying anything to make that fee going in. They live off the fees and hope eventually in 7 to 10 years there is a payoff.

I transact as a commercial broker making commissions with clients on stabilized so I only want to typically buy when there is high equity growth on the back end in under a years time.

Some of these syndicators travel all over the country constantly for meetings etc. I go on vacation and travel for family to have fun. I do not want to fly in jets everywhere or constantly be on the move. Bless those that want that it's just not for me.