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Have you ever considered owning a Walmart or a Sam’s Club or a Home Depot? Maybe you already own such a “big box” retail store- in which case you know first hand the Quality, Quantity and Durability of the cash flow payments. For the rest of us, such a big box retail acquisition is out of reach because of the acquisition price. Or is it? What if you could own just a piece of such a large retail store?
Today I attended a presentation on just such a strategy. It was hosted by Rich Arzaga, CFP, CCIM of Cornerstone Wealth Management and sponsored by RINA Accountancy Corporation Walnut Creek office. Rich had three Real Estate Investment Trust presenters discuss their business strategies in Retail, Industrial and Multifamily investing. These are non traded and non public investment offerings and are not available to the general public. There are risks like any other real estate investment, but then again you already know that.
During the presentations, it became obvious to me as an investor that the strategy all three presenters implement are attainable and achievable because there are fewer players at their level. For example, how many individuals can acquire a $7 million dollar asset without financing? I know a few, but that’s my business! Individually, I could not do so. Additionally, these investment funds are investing in multiple properties of the same type. The Retail presenter shared that their existing fund has invested $5 Billion dollars in 680 different properties… all big box retail with LONG leases with NATIONAL CREDIT TENANTS. That means they don’t worry about whether or not their tenant can make the lease payments because that risk is minimized. Also, the leases are written for a period of ten years or more and increases in the lease are agreed upon up front. If that wasn’t enough, the tenants are responsible for the maintenance of the building they occupy. So the owners of the buildings, these investment funds, have zero responsibility at the property level. Their responsibility is the distribution of cash earnings and future all cash acquisitions of more big box retail.
The second presenter was an Industrial expert and his story dovetailed the Retail story. As you can imagine, your local Home Depot, Kohl’s, Walmart, Costco, etc. cannot keep all of its inventory under one roof-thus the need for warehousing. Similarly, the Industrial story is supportive of the Retail story with the types of tenants who store goods in their warehouses. All National credit tenants with long term leases where the tenant is responsible for building maintenance… starting to see the trend?
The last presenter was an opportunity fund in multifamily. This fund seeks out distressed apartments all over the country finding opportunities to renovate, rehab and add value back into their investment. Unlike the previous two presenters, apartment dwellers are not long term lease signers. As such, this REIT uses this advantage to fix up a distressed asset, rent it to capacity and turn around and sell the asset. There was mention of double digit returns, but that’s all I will say.
Email or call with your comments or questions. I am happy to make introductions if you would like to learn more about these opportunities. You can reach me via email Pete@CommercialMasterMinds.com or (925) 719-3569. To learn more about my background and company services, visit Commercial MasterMinds
Continued Success, Pete