All Forum Posts by: Michael Flight

Hi Ross, Thanks for posting this!

Bitcoin is going mainstream.  With the Coinbase IPO today the company is now worth more than Goldman Sachs, who called "not an asset class" last year.

Bigger Pockets needs a BLOCKCHAIN FORUM and not just a Bitcoin forum.  Blockchain the underlying technology of Bitcoin is going to change the financial system.  Blockchain would cover Tokenization, Smart Contracts, Security Tokens and other topics.  

In the next few years real estate investors will be raising money, tokenizing properties and tracking title on blockchains.

Additionally, you can now issue tokens of your property to the blockchain and deposit those tokens with a "DeFi" company like BlockFi and borrow or lend against the equity in the token.

We are launching a Net Lease Security Token fund as a 506D offering which will be fully tradable after a 1 year lock-up and investors will be able to invest with Ethereum or USDC stable coin and also invest with Dollars and receive ETH or USDC for distributions and return of capital.  

So many cool things are coming and Bitcoin is paving the way.

Love the forward thinking!  You can take the rent as a USDC stable coin or Bitcoin, Ethereum and convert to USDC.  Also, many ATMs all over the world now dispense cash in local currency from Bitcoin wallets.  Blockchain is the rails of the future financial system.  The other cool thing is Security Tokens where you can syndicate a deal and issue tradable tokens.  Can be Reg D or Reg A.  

The US Dollar has been deflated 93% since 1920.  Why wouldn't you short the $ by borrowing as much as possible and then get paid back in an appreciating asset?

The Sacramento Kings just offered a Bitcoin option to their players> 

https://www.coindesk.com/sacra... 

Try BlockFi.  They have many innovative solutions.  We just arranged an agreement with them where investors can deposit their security tokens and earn additional interest and cash flow.  Really exciting times coming!  Blockchain is the new financial system.

Great post Joel.  Total online retail is still only about 12-14% of total retail sales.  Plus with the US Supreme Court Wayfair vs. South Datkota decision online retailers will need to collect sales taxes if they reach a certain number of transactions or sales volumes.  It will cost more money for them to implement the sales collecting  and tracking software.  

You are completely correct that retailers will need multichannel sales strategies however as in the case with Kroger they need to spend more money upgrading their physical stores and the customer experience.

It is looking like a record year for retailers.  I can tell you from being at one of our shopping centers this morning that we have a parking problem today with most of the lot filled and our tenants cranking out sales for Christmas.

Thanks for your valuable insights.  

Listing sites like CREXI and Loopnet will sometimes have that information.  Also, county or city traffic departments have that information.  Sometimes the economic development department or Chamber of Commerce will be helpful with traffic counts, demographics and local area spending power.

Hi Patrick, the costs vary widely from area to area.  I don't have hard numbers for you on site costs because they are dependent if the municipality will require on-site water detention and utility tap fees.  In non-union states warm shell costs (building walls, roof, concrete floors, HVAC units on roof and utilities stubbed in to spaces) it runs $60.00 to $130 per square foot.  A white box (drop ceiling, lay-in lights, restrooms) will probably run another $35-$55 psf.  On top of that you may need to pay for tenant improvements which would be $10.00 psf on the low end for a local retailer to $50-$60 psf for a desired restaurant tenant.  I am doing a deal now with Old Navy and they want a warm shell plus their specified store entrance and $40 psf tenant allowance.  They will build the store interior.  These numbers are hard costs and do not include site engineering or architectural costs.

Commercial real estate investment (office or retail) can jumping in at the deep end of the pool. If you have some experience as a tenant (either for office space or with a store) it is a little easier to get started. Most commercial real estate investments require additional capital from lower leverage levels (65%-75% LTV) to more expenses building out a tenant space. You also need to be aware of macro economic trends created by the internet which is reducing both the need for office space (WeWork and other co-locating spaces) retail space (Amazon, etc.). With all that said, commercial can be an excellent, stable investment if the property is well located. You may have relationships with a tenant or tenants which would create value if you bought a property and could fill it quickly. Also, the need for high cube distribution space is growing rapidly in many markets.

Hello Arturo,  shopping centers are very unlike other real estate investments in that you should also know a little bit about retailing as well as the real estate part of the business.  Shopping centers/retail real estate can be a great way to build wealth.  

Retail real estate provides for investment stability with leases of 5, 10 and even 20 years. The income is consistent (theoretically) and known for longer periods of time. Since the rent is guaranteed by publically traded or financially strong national and regional retailers you have a higher expectation of the rent being paid at the beginning of the month, each and every month of the lease. You won’t have the opportunity to take advantage of major swings in rental rates because they are locked in however some leases adjust at 1 or 5 or 10 year intervals according to the Consumer Price Index (CPI) or some have a percentage rent clause

Most retail leases are also triple net (NNN) meaning the tenant pays in addition to rent the real estate taxes, building and liability insurance and maintenance of the parking lot, sidewalks, landscaping and other items that would be considered "common areas" or areas utilized by customers. With NNN leases the tenant also typically pays for all their own utilities and maintains the interior of their premises plus regular scheduled maintenance (not replacement) of HVAC systems. A rare form of net lease is called the Absolute Net lease in which the tenant pays all the foregoing items, plus the costs of maintaining and replacing the building including roof, walls, HVAC systems and structural components.

When leasing a shopping center you need to have a group of tenants that are complimentary to each other by bringing in traffic (sometimes called foot traffic). The equation is more visits = more sales/longer visits = more sales. For example, a mainstay of shopping centers is the grocery store, supermarket and/or pharmacy. All people need to eat and most people need to go to the grocery store at least one time per week. That drives traffic to the shopping center which then creates the opportunity for other ancillary stores and services like dress shop, women’s shoes, dry cleaners, coffee shop, etc. 

A few major negative aspects of retail real estate investments are 1.) Require a certain level of experience and relationships with retailers/retail broker representatives 2.) Require major capital if you need to replace a tenant (comissions, costs to white box and tenant improvement costs). 3.) Changing retail landscape with internet and retailer bankruptcies. 4.) Lower leverage than multi family (typically 60%-75% LTV.

With all that said, retail real estate is an excellent asset class to create consistent returns and build up wealth.  Almost everyone needs to buy something at some point in time.

Hi Farah, The most important way to lease retail is a sign on the store window and if the municipality allows a 4' x 8' project leasing sign. You can also attend an International Council of Shopping Centers event where retailers go to expand their store count and developers can fill spaces with quality tenants.  You can also go to the local Chamber of Commerce and the local economic development organization sponsored by the municipality or county.  Another great way to attract tenants is to incentivize  your current tenants by giving them a discount on rent for a month or two for each fully executed and delivered lease signed at the property.  Your other retailers want to see the space filled because it means more traffic for their store.  And they know the benefits of locating at the shopping center as much or more than you do.  I wish you the best with your shopping center investors.