All Forum Posts by: Neil Cronkrite

Sale leasebacks are exciting because there are so many variables to negotiate. Sometimes I see owners try to justify a higher purchase price or a low cap rate with a higher monthly rental rate. That's a red flag for me, as I have to think about what the property will rent for and sell for if/when the current tenant leaves. Another negotiating point is the lease length. It's a red flag if the seller wants to do a short lease. They should be signaling their commitment to the property by signing a relatively long lease. 

@Jeff M. Would be interested in connecting. We focus on healthcare real estate on NNN leases. Think dental, surgical, urgent care, and other types of office and retail. We are relatively location agnostic.

So much overall doom and gloom about the office market in the media that you'll find some good opportunities. Quite a few small businesses in B and A class spaces who would never consider working from home. Be sure to get a really attractive basis, as it's one of the only asset classes right now that is re-trading at a new basis. There's an argument for "Functional Obsolescence" of small B- to C class office buildings. No amount of cap ex or facelift would confidentially stabilize the property and it's poorly designed for residential conversion. I can picture some of those in my market. 

@Andy Deyto Why did you decide on multifamily? So many unique syndications beyond multifamily like parking lots, retail, medical office, campgrounds. You really have to sift through the dozens of multifamily operators to find the ones who really know how to underwrite properly. 

Think about it this way: if the tenant is so great, why are they really selling? Is it because they can't afford the $800K new roof? If that's the case, why aren't they refinancing with a lender to help fund those amounts? Because interest rates are high and it doesn't cash flow properly after refinancing? That would mean it wouldn't cash flow for you, right? Who is saying a new roof is needed, the PM, the bank, a contractor, etc? I'm view all deals, especially off-market ones, with a healthy level of skepticism. Ask to see the lease before committing to a price. The tenant is nationally recognized, but is the lease corporately guaranteed? Because you don't have the very least I would bring in an experienced NNN partner to make sure you underwrite for things you aren't thinking about.

I'm not actually focused on multifamily. I am niched down in healthcare real estate like medical office, surgical centers, and medical retail centers. Two tactics have been helpful for us. First, we always schedule a 20-30 min call with the broker to explain our thought process. This allows us to make sure the listing broker isn't making assumptions or communicating a creative offer without fully understanding it. Second, the best negotiation tactic is walking away. We looked at an urgent care and dental retail deal in Wisconsin where we were about $150K away from agreeing on a roughly $2.8M purchase price. But one can't argue with DSCR and underestimate tenant buildouts. Tough to let it go and walk away. It wouldn't surprise me if that property is still on the market. The thing about market price is that it only takes 1 person out of 10, 20, 50+ offers to set the "market price." My goal is to be the last syndicator standing, not to be the one closing deals left and right.

@Brock Mogensen Great point, when you provide considerable value to another team, they are more likely to bring you under their wing as a General Partner. 

@James Gee What got you interested in multifamily over other asset classes? What's your experience (in real estate investing or outside work) coming into multifamily investing? 

Curious what there underwriting was going into the purchase. A lot more properties pencil when turnovers are $250 each and vacancy is 98%.