All Forum Posts by: Daniel Salonis

Hey Shri,

In a lot of cases the buy-side fee comes from the listing broker splitting his fee with the buy-side broker. So if the listing-broker negotiated a 4% fee with the seller, he may split with buy-side broker 2% and 2%, or some variation that would equal the 4% fee he's receiving. 

The listing-broker isn't obligated to split his fee at all, however, but most brokers do in order to entice outside brokers to bring buyers to the table. If the listing-broker is not co-broking his fee, the buy-side broker would have to negotiate a fee from his buyer. From my experience in dealing with the larger companies, JLL never co-brokes, CBRE and Cushman Wakefield rarely co-broke and Marcus & Millichap generally does. It's really up to the listing-broker whether or not he wants to.

Typically the larger the deal, the lower % fee the listing-broker is able to negotiate. I'd say properties $1-5mm could get upwards of 6%, $5-10mm maybe around 4%, and once you start getting into more institutional size deals you're looking at 2%, 1% in a lot of cases.

Ultimately there's no black and white way the buy-side fee is handled. Hope this helps 👍.

Daniel Salonis

@Justin Tahilramani luckily for us all the heavy lifting had been done at the property. If that wasn't the case, and our anchor tenants didn't have long-term leases, we wouldn't have been as interested. That Freedom Center (I think that's the name) is also a very nice property.

@Kris Bennett thanks man. We looked at a few apartment deals in the Fayetteville area and weren't sold on the longevity simply because homes are so cheap over there so when you combine affordable housing with favorable va loans we didn't think there was much upside in occupancy rates.

Derek - typically NNN, for a single tenant, means the tenant is going to reimburse the landlord for all expenses associated with operating the property, minus the cost of roof & structure expenses. Are their exceptions? Of course. If it's an Absolute NNN lease that means the tenant is going to pay all expenses directly, roof & structure included, not reimburse the landlord.

In your case since it's a sale leaseback, I would try negotiating with the tenant to have the lease be an Absolute Net Lease since they initially owned the building and understand its working history. That way they're responsible for all repairs, maintenance, expenses, taxes, insurance etc. and will pay all the expenses directly, without having to reimburse you, the landlord.

Investment Info:

Retail property investment in Fayetteville, NC.

Marketfair Shopping Center is a completely redeveloped neighborhood retail center located near the largest military base in the world, Fort Bragg. Having undergone $20 million in capital improvements and renovations, the property benefits from a synergistic mix of fitness, daily-needs and service-oriented tenants including a brand-new Lidl grocery store and Planet Fitness.

What made you interested in investing in this type of deal?

The property is located a stones-throw away from Fort Bragg, one of the largest military bases in the world, and was completely redeveloped in 2018.

How did you find this deal and how did you negotiate it?

This was an off-market transaction which allowed us to make our money on the buy and negotiate a win-win scenario for us and the selling group.

How did you finance this deal?

We worked with Morgan Stanley in securing a 10-year fixed rate deal just above 3% with 3 years of interest-only. We were even offered 10 years of interest-only (for retail!!!), which shows how confident MS was in the long-term stability of this property.

How did you add value to the deal?

Within 30 days of owning the property we executed 2 signed LOIs for a medical user to lease 1,900 sqft and the government to lease 6,000 sqft. These deals alone increase the property's value by almost $2 million and significantly improve our cash flow.

Lessons learned? Challenges?

We bought the property from a large REIT who insures their properties under an umbrella policy. It's important to note because we received push back from several insurers who refused to insure properties with movie theaters, which we didn't anticipate being an issue initially.

We eventually obtained multiple quotes and put great coverage in place, but always ask if the property you're buying is under an umbrella insurance policy.