CBRE Podcast: Why multifamily investors should consider retail properties
[{"id": "efmsmo9", "text": "That sounds like a terrible idea ", "replies": [{"id": "efmswwh", "text": "Lol!", "replies": [], "depth": 2}, {"id": "efngbet", "text": "Why is it a terrible idea?", "replies": [{"id": "efnhlsy", "text": "Competition?", "replies": [], "depth": 3}, {"id": "efofged", "text": "His argument is retarded - \u201cit\u2019s mailbox management if you buy NNN\u201d. This guy is suggesting that you buy NNN stuff on 15-20 year leases and just clip. That\u2019s great until / unless there is a hiccup, and when that happens, you as a multi owner will have no idea what to do, and further, will need to come out of pocket a ton of money for TI/LC to backfill. He addresses this at the end with some nonsense about how the owner will be able to backfill the space in the long run. \n\nI work for a hedge fund that does some CMBS investing; through this I\u2019ve been responsible for crushing thru a gazillion NNN properties that have ended up in servicing. When the lease is at the end and like CVS or whoever doesn\u2019t want it anymore you are totally and irrevocably fucked - no credit tenant wants to backfill a purpose built NNN box so you\u2019re left either leasing it to like Bill\u2019s Sport for 5 years and selling it on a 15% cap or selling it on an auction platform and praying you can break $45 PSF on the sale of a vacant box. \n\nAlso retail right now is total flight to quality - only retail worth owning is institutional grade and you as joe blow apartment owner aren\u2019t able to compete on the buy / aren\u2019t able to self manage. ", "replies": [{"id": "efog2jk", "text": "Thanks for the thorough response buddy. That all makes sense. ", "replies": [], "depth": 4}, {"id": "efoxpcs", "text": "Aren\u2019t yields on multifamily higher than NNN leases anyway? That\u2019s comparing apples to oranges. \n\nPlus NNNs typically attract longer term holders", "replies": [{"id": "efoz1fi", "text": "Depends 100% on credit of the NNN tenant and term of the lease. Like a 20 year lease to CVS on new construction should trade inside of a multi family allday. You make money on NNN by playing credit arbitrage - ie borrow at 2.25 buy at 4. \n\nRenewals on NNN are interesting too, tenants will tell you they\u2019ll lease for x years at y rate, discount it using their cost of capital then tell you to cut them a check for the discounted cash flow. They use it as a corporate financing mechanism. ", "replies": [], "depth": 5}, {"id": "efoz902", "text": "Oh also there\u2019s like 0 liquidity on NNN box sales once you\u2019re inside the 7 year mark on term out. ", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "efmtzmd", "text": "Save ", "replies": [], "depth": 1}, {"id": "efn609e", "text": "?? This is a terrible idea ", "replies": [], "depth": 1}, {"id": "efoz6gv", "text": "CBRE is much larger in the retail sector than in the apartment sector.\n\nConsider the source.", "replies": [], "depth": 1}]