How are investors affording to buy 4% CAP properties
I see several listings with good tenants for less than 4% CAP Rate. How is anyone making any money off of them? In many cases, the leases are long term which means there is no prospect of rent going up in line with the inflation - if you think of the property as a fixed coupon bond (or a bond with 2% annual increments), its price should have come down significantly when the interest rates started going up - but I don't see that happening. Going back to the question - how the hell anyone affording the 4% CAP properties? I have a 10 year fixed loan at 3.125% (monthly payments are around 5% as a percentage of loan) so I am having a hard time to make positive cash flow even at such low interest rate. How is everyone doing this?
[{"id": "i5wmdgx", "text": "Usually these assets are in excellent physical condition/location, they have annual bumps or 5-year bumps, and they\u2019re bought free and clear.", "replies": [{"id": "i5y3hx1", "text": "But bought free and clear does not change the cap rate.", "replies": [{"id": "i5yvzr7", "text": "True, but they don\u2019t have to worry about cash flow covering debt service.", "replies": [{"id": "i6286zr", "text": "But that would be the same if you bought at a 10 cap.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i5wme16", "text": "My lot has a 10 year lease that includes 3% rent increase every year.", "replies": [], "depth": 1}, {"id": "i5wmpuy", "text": "Leverage, and some people don\u2019t see real estate as an aggressive return asset as compared to others. Plus, real estate has a large amount of tax benefits that play a large factor in its attractiveness", "replies": [{"id": "i5wupq5", "text": "Yep. Cheap debt + 1031s = cap rates pounded down.", "replies": [{"id": "i60dqwh", "text": "Those dynamics will also lead to investors buying at an 8% cap for a property that last sold at a 12% cap.", "replies": [{"id": "i65mhwh", "text": "So true. This morning I got an offer for a property at 7% CAP that I paid 11% CAP last year (deal was signed in Nov 2020 closed in Mar 2021). The broker who brought the offer promised to bring it closer to 6% CAP but the 7% is their start. I am gonna pass.", "replies": [{"id": "i65sl22", "text": "K, how does your broker have control of cap rates?", "replies": [{"id": "i66lhco", "text": "I didn\u2019t list the property - I told one of those cold calling brokers that I will entertain an offer under 6% cap (and only at or under and I\u2019m not interested otherwise) and he still brought the one with 7% saying if I reject, he will go to the buyer (who is an REIT) and try to get the price increased to make it 6% cap. Makes sense?", "replies": [{"id": "i66rvie", "text": "&gt; Makes sense?\n\nWell if you bought at an 11% cap rate and say the NOI was $100,000 a year ago then you paid about $910,000.  $910,000=$100,000/11%  If you want to sell at a 6% cap then you are looking at a $1,667,000 sales price.  That would be pretty incredible for a market to get that hot in just one year.  If the 7% offer is legit I would figure out what made the market so hot and try to guess if it could cool just as quick.  If so I'd grab that 7% offer in a heart beat.", "replies": [{"id": "i67h5ds", "text": "There are two factors contributing to it. One is, the seller wanted out and he had two failed transaction in mid 2020 so he got a bit desperate. The original cap was 8% but I managed to bring it down to 11% because the mall next door was going dead. \n\nThe market turned around last year - there\u2019s more activity at the mall, and tenant posted the best year in five years (surpassed precovid). Profits are up significantly (almost 4 times the best profit they had in five years). \n\nThe reason I\u2019m not as warm to the deal is, I\u2019m not able to find as competitive deals to invest myself. I know the tenant is going to stay for another ten years easily and then run out of options. If inflation goes up the same way, I can get higher income. Given my age (I\u2019m 50), I\u2019m looking more for income rather than networth build so this meets the objective. My residential portfolio in Bay Area provides the growth in NW that I want. Hope this makes sense.", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "i5ydvrv", "text": "Lol where the fuck are you finding sub +125 spreads please tell me I want your lender", "replies": [], "depth": 2}, {"id": "i5yikoa", "text": "Spot on. I work with a high net worth all cash investor who has basically maxed out his long term investments, hit his personal comfortable investment in the stock market, and is looking for another mode of investment. We don\u2019t have any 4% CAP rentals, but as long as it\u2019s a good deal (buying off market, so far from friends/acquaintances) and has long term renters in place, it\u2019s worthwhile to hold for 10-20 or even 30 years.", "replies": [], "depth": 2}, {"id": "i5ylc9f", "text": "This is the right answer.", "replies": [], "depth": 2}, {"id": "i61o9gt", "text": "Exactly.  \n\nI'm under contract for a property at just over 4% but its a large parcel (2 acre) in a solid market, great location etc etc with 14 yrs left on primary term, investment grade tenant.\n\nFor me, its my bond allocation.  The rest of my RE holdings  is in either riskier or higher cap CRE and over half my NW in equities.\n\nIts a bond wrapped in a real estate package for me.  Wealth preservation", "replies": [], "depth": 2}], "depth": 1}, {"id": "i5wnvdi", "text": "Foreign money that's being parked in the US. It's not about returns but capital preservation. Same reason Russians bought Trump condos.", "replies": [{"id": "i5wpeo4", "text": "So true. In Dec 2020, I bought a Buffalo Wild Wings restaurant building at 11% cap from a Russian investor who had a dozen STNL properties and was liquidating them on a fire sale. Luckily I sold a rental property (residential) and was able to do a 1031 with no contingencies for the seller. Best investment ever. I\u2019m getting off market offers for 6% cap but I\u2019m not considering selling because the store did extremely well last year and I hope it continues to do so. Still has 4 years on the lease. \n\nAbout the Russian investor - he just wanted the property to be gone. My original LOI was for 8% cap but I managed to convinced the broker to reduce the price to 11% after learning that two previous contracts fell through escrow because financing was very difficult in 2020. My offer without any contingencies for that Russian investor probably seemed like a good deal. I don\u2019t think any normal investor would\u2019ve sold it at 11% cap.", "replies": [{"id": "i5wu43e", "text": "Well done homie", "replies": [], "depth": 3}, {"id": "i5wvhkj", "text": "What does something like Buffalo Wild Wings cost?  As an aside my best friend was an expert at finding the raw land, preselling to CVS, Wendy\u2019s etc, building it with 20 year NNN presigned. roi was huge and now 30 years later he owns like 20 buildings outright.  He was lucky guy. His dad was the commercial \u201cfind the land\u201d guy for A Major fast food chain. One of his dads friends who did this stuff took him on as his only trainee / partner ever and right after college. He got trained by this guy for like 10 years and deals he did he was a partner with the guy with the guys money and financing. Then he had the training, the banks etc so he was then on his own.  Not sure why I mention this but these deals were very lucrative and he wasn\u2019t really needing a ton of cash so it was high leverage.  The rest of us need cash etc just to buy a 4% Cap Rate", "replies": [{"id": "i5x6jv8", "text": "Any day, development is the best side of the real estate business and being close to the tenant\u2019s side only furthers one\u2019s financial progress.\n\nLook at an example - you can buy a 5000sft lot on a corner in an upcoming neighborhood for probably a million. Spend another 600k to build a Starbucks location. Lease it to Starbucks for 150k a year. Sell it at 3.5% to 4% cap - that is, 3.8m to 4.8M price. Walk away with two millions. Or hold it and borrow 65%LTV - that\u2019s more than total cost. Basically you own the property, rent pays mortgage and some, and your original investment is long paid back. No wonder your friend has 20 properties. I\u2019m surprised he didn\u2019t have more.", "replies": [{"id": "i5ycx8b", "text": "He has had more. He is always selling, 1031 exchanging etc.  But yea basically he owns the building free and clear after 20 and the tenant paid the mortgage off.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "i5yl0p4", "text": "Great job and congrats. Quick question, 1 year later. In looking at your 12 mo total NOI that you received did you meet or exceed that 11% return on your investment at the end of 2021?", "replies": [{"id": "i5ylr2l", "text": "It was an absolute Net lease which means the tenant is responsible for everything. I simply get a direct deposit on the 1st of every month. Simple. So, the return on investment is the same as I entered since nothing changed from my end. \n\nI considered borrowing money against the property and a local bank was willing to lend me at 65% LTV (on the potential 150% of purchase price as apprised value - essentially I will be withdrawing my original investment back). But I was having a hard time finding good (what I consider) good investments for my risk tolerance so I am still looking.", "replies": [{"id": "i5ym0t4", "text": "Brilliant. That one is good. Congrats again.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i5wo3ck", "text": "Pretty broad question Let's start with what types of property, quality, location and business plan. \n\nThe risk on a STNL BofA with a 10 year+ lease is different than a mid 80's suburban apartment building with below market rents. The bond/cap rate connection relates more to one than the other, yet business plans like the apartment example are trading at a 4 handle in most places currently.\n\nIn terms of value add deals, people are buying into the potential upside by paying a premium to sellers..in the hopes of raising rents to a stabilized cap rate of 6-7% within a year or two. About 75% of apartment deals have been done with bridge debt, accirding to one MF broker specialist, off loading some of the costs of capital for CapEx dollars from high cost equity to low cost debt.\n\nBuying a STNL with a 4% perennial coupon may or may not be a good strategy..probably best for 1031 dollars that don't need to match debt on their upleg but need to park money for a while.", "replies": [{"id": "i5wp67q", "text": "You do not want to increase your cap rate.", "replies": [{"id": "i5x7hbt", "text": "On purchase price", "replies": [{"id": "i5xebvd", "text": "Cap rates are a valuation metric.  It is not current NOI divided by some past purchase price.  That would be a meaningless number.", "replies": [{"id": "i5xhhz2", "text": "Yes, but I think that's what he was getting at", "replies": [{"id": "i5xjs1m", "text": "And it is inaccurate and makes no sense.  The whole value of cap rates is they tell you what an investor paid for NOI at the time of purchase.", "replies": [{"id": "i5ygr8w", "text": "Tell him.  \n\nCheers", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "i5xf978", "text": "They meant yield, as in it would effectively be a 6-7% at the new income and price they paid.", "replies": [{"id": "i5xm4ub", "text": "Yeah, I'm not into second guessing what some novice figures.", "replies": [{"id": "i5xmxp0", "text": "Novice? The point he made is pretty clear to anyone with CRE experience. You\u2019re just being pedantic for the sake of it.", "replies": [{"id": "i5xsyzg", "text": "&gt;in the hopes of raising rents to a stabilized **cap rate of 6-7%** within a year or two\n\nThis is his statement.", "replies": [{"id": "i5xyv2a", "text": "Ok..\"6-7% stabilized yield on purchase price in year one or two\". How's that professor?", "replies": [{"id": "i5y15td", "text": "100% more accurate.  I'll give you bonus points if you show the math.  It should be helpful for the people learning here.", "replies": [{"id": "i5y29cw", "text": "That's your job Prof..show how it's done.", "replies": [{"id": "i5y584u", "text": "You claim to know the material.  I don't waste time second guessing novices or reteaching them before I know if they are bluffing.   If you know it, show it.  I'll correct you if you're incorrect.  That seems fair.", "replies": [{"id": "i5y7ygh", "text": "There's no use going round and round with you with your one sided definition of cap rates. You've been stuck on that definition for years so there really isn't a point engaging with you. Hopefully Hawaii is nice this time year.", "replies": [{"id": "i5ycw50", "text": "You mean the correct definition?  I'm not influenced by internet trolls and scammers that want to reinvent cap rate.  My definition works, yours is confusing and incorrect.  \n\nSadly you always bail when you are trapped in a corner.", "replies": [], "depth": 12}, {"id": "i5zlle8", "text": "So true, I recognize this guy. I used to think he\u2019s a troll. It\u2019s actually concerning how much time he has spent discussing cap rates and still doesn\u2019t actually understand them.", "replies": [{"id": "i60edaf", "text": "Learn me.  I know you can't and know you won't embarrass yourself trying.  Geez.", "replies": [], "depth": 13}], "depth": 12}], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i5wq42u", "text": "Cap rates measure value not return.  A 4% cap rate means your NOI is worth $25=$1/4%.  If you have 3% annual step ups then $100,000 NOI will increase if you can hold expenses.  $75,000=$3000/4%.   One year value increase of $75.000.", "replies": [{"id": "i5wqiol", "text": "Can you explain more clearly. I don\u2019t understand how 3% annual increase will increase the property value by 75%?", "replies": [{"id": "i5wwl05", "text": "The value did not go up 75%.  The value went up $75.000.  The formula is V=i/r.  If the NOI was $100,000 and increased by $3,000 then the VALUE went up $75,000=$3.000/4%.\n\nIs that clear", "replies": [{"id": "i5x6se8", "text": "Ah yes. So the property value went up from 2.5 million to 2.575 million. Nice but not a huge decision factor. The 4% cap is the decision factor for me. That number is simply unworkable for me.", "replies": [{"id": "i5xdu2w", "text": "Then you are not an investor in a 4% or lower cap rate market.  Go buy in Podunk at a 10% cap rate and that same $3,000 increase in NOI is only worth $30,000=$3,000/10%.  That number is simply unworkable to buyers in a 4 cap market.", "replies": [{"id": "i5xf899", "text": "If you see the original question I had, you will see that I was interested in know who or how one affords a 4% cap properties. Instead of adding value to the conversation by answering the question, you are explaining why a 4% cap property will increase in value by 3% when a 3% rent escalation comes into effect. Not exactly a value adding comment. On top of that, you are ridiculing me as a 10% cap investor - again, not seeing a point in there. I take no shame in scouting for 10% cap properties. I got money in the bank and I have all the time I need. I managed to buy 2 properties with more than 10% cap rate in two years time. I am hopeful I can do it again in the next two years.", "replies": [{"id": "i5xpiyk", "text": "I showed you mathematically how a buyer at 4% can make money by increasing NOI and value.  Geez, I even showed you how each increase in NOI is worth $25 VS only $10 at your preferred 10% cap rate..  That is 2.5 time better but you for some reason don't like the number 4 and prefer 10.  I can sell you at a 10% cap rate ALL DAY LONG.\n\nIf you feel foolish only getting $10 that is on you not me!  Why are you so defensive?  Some people make money buying residential properties at $50 a sf and some at $2,000.  I can show you how buying at $2,000 a sf can be much more profitable than the $50 a sf.", "replies": [{"id": "i5yawhx", "text": "Ok, now I think I get some of what you are saying. You are suggesting buying a low cap premium property, figure out a way to improve the NOI (or have rent escalation kick in) which allows the value to go up and then liquidate if needed (or at least have the value appreciate). On low cap properties the improvements are better pronounced in appreciation than the higher cap ones. Got it. Thank you.", "replies": [{"id": "i5yjtyn", "text": "Glad to help.", "replies": [{"id": "ihvxaja", "text": "I know this is an old thread but do you mind answering a question? Like for a 4 cap would your goal be to refinance when NOI increases thereby increasing your value? Because to me at a low cap rate you\u2019re pressed to get the same cap rate you entered at or lower at the time of sale because you\u2019re not generating much of a return through cash flow.", "replies": [{"id": "ihx3i8i", "text": "You would refinance or sell to get the equity.  Cash flow is not profit.  I'll take an extra $100,000 in todays money in trade for NOI being reduced by a few hundred a month.", "replies": [{"id": "ihxbkh4", "text": "Gotcha. Just seems like you really need to be sure what a buyer would be willing to pay for a property with the cap rate being so low because the value you\u2019re really counting on the proceeds from the disposition versus positive cash flow from owning the property.", "replies": [{"id": "ihxg9tq", "text": "Sure if you don't have deep pockets cash flow is a major concern.  If you are OK with lack of cashflow but realize your cash flow is going to mortgage pay down then you may see that your lack of cash flow is countered with equity gain.\n\nIn a 10 cap market there is a reason investors are only paying $10 but in a 4 cap they pay $25.  And it is usually because the cash flow is risky or capex expenses are so high they claw back some or ALL of the cash flow.", "replies": [{"id": "ihxjosu", "text": "Yeah that makes sense. But thank you for all the explanations. Really never understood why any firm would buy lower than a 4 cap for anything other than capital preservation or speculation about redevelopment but I\u2019m understanding now that small increases in NOI lead to big increases in value at low cap rates and also why some investors are adamant about refinancing (to take advantage of the new equity by the higher valuation versus just getting a lower interest rate.", "replies": [], "depth": 14}], "depth": 13}], "depth": 12}], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "i5wvos7", "text": "Doesn\u2019t cap rate not include appreciation also ?", "replies": [{"id": "i5wwx4s", "text": "Yes but the appreciation is measured by either the compression of cap rate, or increase in NOI or some combination of both.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i5ws0bx", "text": "If there is significantly below market in place rent you can see some crazy low cap rates. We just looked at an industrial deal in LA with 2.5 years left of term that traded at a 1.76% because the in place rent was more than 50% below market.\n\nEDIT: This was a multi-story warehouse purchased by a data center developer for future redevelopment.", "replies": [{"id": "i5wvisj", "text": "1.76% cap? Holy smokes\u2026..", "replies": [{"id": "i5xxfm3", "text": "Cap rate doesn't mean anything if it's not market rent or the property isn't the highest and best use.  1/2 of LA industrial would trade sub 2 right now, and no buyers are doing the analysis on a cap rate analysis.", "replies": [], "depth": 3}], "depth": 2}, {"id": "i5x5a4w", "text": "That\u2019s wild because a 50% increase only puts you at mid 2 caps anyways so I\u2019m not sure how that one penciled out.", "replies": [{"id": "i5x5rjc", "text": "Redevelopment play", "replies": [{"id": "i5x6qok", "text": "That\u2019s what I figured. Thanks.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i5wtf9e", "text": "Debt and growth.", "replies": [], "depth": 1}, {"id": "i5x0t9b", "text": "Commercial real estate has a whole different set of objectives for REITs, Corporations, etc. Many may be bought outright with cash, others may not be concerned about huge cash flows and are looking for the tax write offs associated with the property. Also, many long term leases usually have the escalation clauses/riders that say the lease will increase by x% every 2, 3, 5, or 10yrs depending. There are myriad reasons why people don\u2019t mind low cap rate.", "replies": [], "depth": 1}, {"id": "i5x78qk", "text": "There are tons of ways to make money in real estate other than cash flow. If you are a large investor whose simply looking to beat inflation, a 4% cap can be the best option", "replies": [{"id": "i5xff3p", "text": "Agreed. I also heard about cost segregation studies that allow the investor to write off a large portion of the purchase price in depreciation which means, the investor can avoid paying taxes in the current year. That can easily bump up the rate of return to 6% or even more even if it\u2019s sold at 4% cap rate.", "replies": [{"id": "i5xsfkz", "text": "This is true, but doesn\u2019t apply to the average investor. This type of write off (captions al bonus depreciation) costs upwards of 5 figures. You need a multi million portfolio to make it worth while", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i5xksb0", "text": "4% vs T bills at 2.85%\n\nJust because other investors have different goals doesn\u2019t mean they are bad.", "replies": [], "depth": 1}, {"id": "i5xn21t", "text": "Prices are indeed coming down.\n\nAm a capital markets analyst at a big 4.", "replies": [{"id": "i5xob6r", "text": "What does a capital markets analyst do at a real estate company? Pardon my ignorance, I am relatively new to the CRE markets.", "replies": [{"id": "i5xon7s", "text": "Basically everything related to financial DD, I do. I analyse leases, model market leases, model the whole building and come up with a value to present to the seller.", "replies": [{"id": "i5ybr8s", "text": "Ah ok. That\u2019s the work I kind of like doing. I have an CFA (and a CPA) from before I jumped into tech. How do I get started into this kind of work? I\u2019m considering retirement from my day job (chased tech long enough but it doesn\u2019t excite me anymore) and this would be something I like to pursue - if not for money, for the thrill of running numbers and building financial models.", "replies": [{"id": "i5yjjd1", "text": "doing my CFA atm too. Lvl 3. Planning to do CAIA after. Look at the big 4, esp JLL and CBRE. I'd start there", "replies": [{"id": "i5yjsvx", "text": "I am absolutely clueless with the companies - if you can't tell already. When you say Big 4, who do you mean? JLL, CBRE, who else?", "replies": [{"id": "i5yl43i", "text": "Colliers and Cushman Wakefield", "replies": [{"id": "i5yltz5", "text": "thanks.", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i5xrxle", "text": "From my experience in the industry it seems most of the buyers for those low cap properties tend to be institutional investors or very high net worth individuals needing a safe haven for capital. Right now those low caps are still better than CD\u2019s, much less volatile than stocks and have some potential tax benefits.", "replies": [], "depth": 1}, {"id": "i5xwcfr", "text": "Cash buyers", "replies": [], "depth": 1}, {"id": "i5xzcdb", "text": "Rent growth in future years. Each deal is case by case, and yearly escalations vary by property. Also, shorter term leases allow for a bump in rent growth once the lease expires.  It\u2019s all still risk, but calculated risk.  Plus, the sale cap rate is based on current year NOI so you have to look deeper at the underwriting.", "replies": [], "depth": 1}, {"id": "i5y1x88", "text": "A lot of 1031s looking for somewhere to park money. \n\nSay you bought an apt complex in 2015 for $1m @ $200k down, you sold it last year for $3m, you 1031 into commercial at $5m. \n\nSo your investment feels like only $200k down, you have a loan for $2.5m, but you are making 4% on $5m. The calculus comes down to whether rolling the 1031 over saves more taxes than the improved returns you would get on parking your $2.5m elsewhere. Likely it does, no one wants to pay back all that imaginary depreciation.", "replies": [], "depth": 1}, {"id": "i5y6bad", "text": "Two words... capital preservation.", "replies": [], "depth": 1}, {"id": "i5ylyzc", "text": "Raise rents \ud83d\udcb0\ud83d\ude0e", "replies": [{"id": "i5yqtti", "text": "It may be possible with multi-family but STNL market - you are tied to the lease. In fact, the longer the lease, the higher the price (or lower the cap) which makes little sense in an inflationary market because if inflation stays near 7% for the next 15 years, imagine getting a 2% raise in rent every year - that is negative 5% real return on your investment.", "replies": [{"id": "i5yr35z", "text": "Yeah STNL is tough if there\u2019s a ton of term. Hopefully you have fair market options but I doubt that too. Not very common these days .", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i5z0umv", "text": "They are betting on rent growth and hedging against inflation buying stuff with negative leverage.", "replies": [{"id": "i5zt0gg", "text": "That is speculating, not investing.", "replies": [], "depth": 2}], "depth": 1}, {"id": "i5zftsk", "text": "Such a property is usually not bought with leverage. It is seen as a safe investment. Bonds have similar returns.", "replies": [], "depth": 1}, {"id": "i626fb9", "text": "Sadly it seems u/pokemeister92 slunk off in defeat.  No worries, I believe he has multiple accounts to upvote his incorrect information.  RIP u/pokemeister92", "replies": [{"id": "i64tj9t", "text": "Chill with the spam tagging", "replies": [{"id": "i65le4l", "text": "&gt;spam tagging\n\n?", "replies": [{"id": "i65movo", "text": "See how you keep tagging people multiple times?  Stop doing that.", "replies": [{"id": "i65s8xx", "text": "Nope!  I was just responding to your post to me.", "replies": [{"id": "i65u97z", "text": "Keep it up and we will just ban you.  It's that simple.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i66370r", "text": "They might not have debt and paying all cash; maybe from a 1031 exchange. The property might have a value-add component where they feel they are able to increase the NOI, thus increasing the value. There isn't much risk if there is no debt.", "replies": [], "depth": 1}]