A thread on learning in CRE investment management-
First some context:
We sit in a unique spot spot in the industry where we're bigger than mom n pop operator's, but not quite an institution. Given we're usually around ~$500mm in AUM we're regularly straddling the institutional
world and "friend's and family" / "country club" money. We've done deals where JV'd with recognizable wall street or PE names and also passed the hat around the country club. As such I've been fortunate to gain perspective from both "sides of the aisle" and I think there's a lot
to be learned from each group.
The best in these groups tend to be innovative & clever in their approach. The way I've seen some of these guys set up automated prospecting approach to find off-market deals and create alpha is pretty mind blowing.
Constantly hear how retail is dead. The convo needs to be bifurcated by malls, power centers, grocery anchored centers, and single tenant. I'm in agreement we're largely over malled and that some will continue to suffer.
A data guy at heart some ways that I dig deeper.
Let's start by looking at Brixmor, a leader in grocery anchored retail with 70% of their portfolio being grocery anchored.
-3Q20 net effective rent for NEW leases near all time highs
-92% collection (2% being deferrals) and 97% of tenancy open
-91.2% leased compared with 92.4%
What's to follow is absolutely not investment advice, but a look into how I allocate our personal assets today and likely into the future. This is highly unconventional, but works for us.
At a high level we're between 30-40% of our invested assets in an algorthymetically traded
portfolio that I manage. The remainder is in commercial real estate. I say invested capital b/c I'm somewhat of a "fiscal prepper" and keep about 1.5+ years worth of living expenses in cash at all times.
The algo portfolio trades primarily futures these days and is built on
multiple durations to scale in and out of positions (mainly hourly and daily). The goal here is to really create high prop trading like returns and re-balance them into cash flowing assets annually. Psychology I view this a bit like a VC / swing for the fences bucket. I focus on
In an effort to bring more transparency to CRE, a deal from the trenches:
We bought a half leased medical office building for 55/sf (~1/4th replacement cost) in a prestigious suburb of a declining MSA. Normally we want growth tailwinds but this suburb had been growing and is a
frequent “best places to live” with great schools.
Why’d we buy-
-Able to structure long term sale leaseback from seller (hospital system)
-Huge lot, building had excess land and a great exterior
-Priced as if building was 48k sf when we knew it was 54k sf.
-Re-parceled land and sold out parcel paying down debt & reducing our basis ~10%
-remodeled lobby to modernize building
-attracted two tenants, one of which full floor user bringing us to 95% occupancy via huge ti package we budgeted in on the front end
1/n) Below is tweet storm of my journey into public market investing/trading, how I learned, and a thank you to those who have helped (direct & indirect) along the way:
It was 3 years ago just before Easter we were on our way to Amsterdam for 10 days (it was a work trip for my
2/n) wife, I invited myself). During the days while she had work and I was working remote, I began my quest to learn about public market investing. Reason is, majority of net worth at the time had been tied up in Commercial Real Estate (co-investing in our investments for my “day
3/n) job”). I felt valuations were beginning to get frothy and wanted diversification/liquidity for the next real estate cycle. Enter reading Security Analysis. Value intuitively made sense. This led me to @PrestonPysh@stig_brodersen , which led me to @Greenbackd work in Deep