3NDeveloper

September 2021 - STNL building transacts in Wildomar, CA: - Price: $8,400,000 - Cap: 6.20% - Address: 32450 Clinton Keith Rd Constantly growing trade area with affluent demographics. Asset is purchased under a Trust. Implicitly, the Buyer thought they were purchasing a cornerstone coupon-clipper asset. Asset hit the market for sale recently: - Price: $5,900,000 ($342/SF) - Occupancy: 0% These vacant drug stores often hit the market at a high price - desperate sellers attempting to salvage their massive losses. This price, however, felt more aggressive than normal. Looked up the transaction details - asset was acquired 65% LTV ($5,500,000 loan balance). Owner is attempting to walk away with 'just' a 100% loss in equity. Realistically, their losses will be more as they continue carrying the asset - at a minimum: - Mortgage Payments: ~$27,500 (monthly) - Property Taxes: ~$7,500 (monthly) - Insurance: ~$1,000 (monthly) - Maintenance/Other: ~$1,000 (monthly) Total minimum carrying costs: $37,000/month. That's a burning hole in their pocket, and it hurts. The reality is - their losses could have been entirely mitigated by doing a simple calculation before they purchased the property: 'If Rite Aid were to vacate tomorrow, then how much can I rent the space for?' The answer - by all means - would have disqualified the purchase from ever happening. This is a question you need to ask yourself any time you are pursuing a development or investment. Assume the entire property is vacant, and you have to re-lease the building at normal market rates - will you be in a position where you can (at least) breakeven or, better yet, make a substantial profit?

CRE Development can be a tough world. - Developer builds a ground-up retail strip in Lafayette - Endcap drive-thru with a cafe tenant - 2020 construction - Decent aesthetics Developer loses the asset to the lender: - As-is NOI: $12k - Vacancy: 71% - REO Sale Taking a step back - this asset was delivered into one of the best retail leasing markets ever, yet it still failed miserably. CRE Development is a graveyard of failed hopes and dreams. Be wary of those who pound their chest on it being 'easy'.

Congratulations to @renatolorja for setting a new record in the market. Lowest cap rate sale on a STNL Goodwill nationally. It's quite the achievement in the current economic environment. I have said this before, and will say it again: If you want to make real money in CRE, then you need to give Renato a call. (And, no, I was not paid a promotion fee here 😂)

These bot strategies are getting wild. 'Crazy ex-gf vibe' was not in my bingo card for 2025 😅🤣 @elonmusk please fix the spam issue going on. My DMs are clogged with scammers and grifters.

Had to try it too - I guess this is who I am now 😁

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$10,000,000. 20 days to close. I’m hunting for a retail project - mismanaged, messy, and broken. Let's pop our social-media-deal-sourcing cherry together 🥳🥳🥳 Deal Criteria Detailed deal criteria can be seen below, but it's fairly simple: - Mismanaged retail center - Path towards substantial increase in NOI - Retail only - High traffic signalized corners - SoCal focused I am not seeking a 5% discount against FMV. I am seeking a transaction in which immediate liquidity (my cash) is worth more to a Seller than the asset's fully-marketed value. Typical Seller Profile What types of deals fall into this situation? A few factors can contribute: - Financially distressed sellers (loan tied to the asset or personal/health-related distress) - Operationally inept owner (heirs who inherited the asset and severely mismanaged it) - Divided ownership interests (too many owners of an asset with no one taking a leadership role) Dumb sellers do not exist. Distress/mismanagement does. Broker Policy Here is my promise to anyone who presents a deal: - If you are the listing broker, then you will dual rep me as well. - If you are the first to present it to me, then your commission is fully protected; if I have seen the deal before, then I will let you know it has already been pitched. - You will get the disposition listing when the asset is stabilized and ready for sale. If the deal is on the market, please don't pitch it to me unless you have information I don't have (e.g. tenant-in-tow, seller's real pricing expectation, etc.). Misc. Absolute minimum deal size is $5M. Sweet spot is in the $10M - $15M range. Absolute max deal size is $30M. Next Steps Have a deal I need to look at? DM me.

71950 Highway 111, Rancho Mirage, CA - Acquired in 2013 for $6,000,000 - REO Sale - Union Bank was occupying 7,096 SF - NOI at time of purchase: $360,000 ($4.25/SF) - Incredible location This deal sounded, by all means, like it should have been a great deal: - REO Sale - Investment Grade tenant I guess not. Union Bank vacated in +- Q3 2023. Brokers are marketing this for $2.15/SF + NNN. If they achieve their rent (maybe, maybe not), then the asset will generate $183,100/year. What's their cost to achieve this? If they're lucky - not too much. If they need to rework the facade, then it'll a lot more. We're going to assume a 2-tenant lineup, which is their best case scenario given the building's layout. Let's assume the re-tenanting requires the absolute bare minimum: - Demolition of previous improvements - New roof - HVAC & ducting - Rezoning/retrofitting sprinkler system - Dedicated utilities, meters, and fees - Demising walls - Misc. Landlord workletter items (e.g. signage) - Architect, MEP engineer, and City fees - Tenant Improvement Allowances - Commissions - Building-related costs + architect/engineers/fees: ~$365,000 - TIAs will cost ~$30/SF: $213,000 - Commissions will cost between $55,000 - $95,000 (depending on lease term); let's assume $75,000 - Property Taxes (2 years since vacant): $181,500 - Insurance (estimated for 2 years): $20,000 Re-tenanting costs: $854,500. Keep 2 things in mind: - We're completing excluding cost of funds - The true costs will easily exceed this figure if any type of facade work is mandated by tenants - Owner acquired the building for $6,000,000 - Re-tenanting costs are $854,500 - All-in basis: $6,854,500 Owner is trying to generate $183,100 on this asset now. This translates into a 2.67% cashflow return. 3-Month TBills will pay you 4.4% to literally do nothing and collect your interest. What is the asset worth today? Objectively speaking - it is a good location, and I can see this trading for a 5.5% cap rate once stabilized. Gross Value = $183,100 / 5.5% cap = $3,329,090 Less Sales Commissions (4%): ($133,163) Net Value: $3,196,000 The owner lost only $3,658,600. Nice 🥳🥳🥳 This is one of many, many examples. Bank deals are among the most common ways 1031 buyers still get their retirement savings obliterated. Don't get tricked into paying a 4.5% cap rate for one. Just walk away. You're better off paying your capital gains tax. **************************************** If the owner of the property ever reads this post: I think it is worth your time to: - Create a project vision - Prepare renderings/elevations and a floor plan for a 3-5 unit mix - Hire a boutique retail leasing team to curate a lineup of nationals to pay $4/SF+ This is one of those situations where you can invest a few thousand dollars (elevations/renderings) to test if you can reduce your losses by a few million dollars. Wish you the best of luck. ****************************************

This is simply a brutal loss. - Rite Aid acquired in 2021 - $8,000,000 purchase price - $6,000,000 down payment (25% LTV) It's obvious the person who acquired this was risk adverse: - Great market overall (decent intersection) - Co-tenant to a Trader Joe's - Low leverage acquisition (held under a Family Trust) - 11 years of term remaining (at the time of acquisition) This asset is, by far, the current owner's largest CRE holding. Their only other asset owned is a small industrial building they acquired for $1.6M. They want 'all-in' on the Rite Aid purchase. Within 2.5 years of their acquisition, Rite Aid closes down, and the asset is placed on the market for lease (December 2023). It's still vacant. They're asking $6.5M, but what's it really worth today? It's only worth what you can do with it, and you'll need to dance around a few issues: 1) Use Restrictions - placed by Trader Joe's (grocery), Home Goods (owned by TJ Maxx, which I would bet has an extensive list of restrictions) 2) Square Footage - 21k SF is in an awful 'gray area' of GLA, in which it's too big for many (who max at 12k / 15k SF, and too few for others (who need a minimum of 25k / 30k SF) 3) Parking Limitations - Trader Joe's gobbles up tons of parking during peak hours, which will compete with many of the best operators. You will lose many prospective tenants due to this issue alone. 4) Facade Improvements - the building will require, at an absolute bare minimum, substantial enhancement of its storefront (min. 70'+ of glass) 5) CapEx - new roof, install ~84 tonnes of new HVAC, potential power upgrade, potential new installation of a truck well, asbestos removal (building was built before 1977) 6) TIAs / Commissions - TIAs will run you between $20/SF - $40/SF, and commissions will add another ~$10/SF 7) Misc. Landlord workletter items If you're lucky, then you're looking at $75/SF in costs to re-tenant the building. Realistically, the budgeted figure should be $90 - $110/SF. Can you do better? Sure Should you underwrite below this range? No Now that we know our costs (excl. cost of carry), how much revenue can it generate? The challenge with these anchor/jr anchor assets is that they will either lease or they won't. Either you find a tenant quickly, or you'll be waiting for years, and it's extremely difficult to know which bucket you'll fall into unless you have pre-existing relationships with tenants. Let's assume we can find a tenant. I wouldn't estimate more than $18/SF in rent for the site. NOI = 21,440 SF x $18/SF rent = $385,920/year. Let's assume it's a decent tenant, and you can sell it for a 6% cap rate: $6,432,000. Selling commissions will run you +-4% ($257,280), so you'll gross $6,174,720. Re-tenanting costs will run you +- $100/SF ($2,144,000), which nets you $4,030,000. What does this $4M figure mean? It means if you acquire the site today for $4M, and exclude all your carrying and misc. costs, then you'll break-even. Congratulations - you now run a non-profit charity 🥳🥳🥳 Realistically, you'll need to acquire this site for ~$2M if you want to make a reasonable (market) rate of return. On paper, you'll make +-$2M profit, but you really don't know if you'll be sitting on this for 1.5 years or 4-5 years. You also don't know if you'll be forced to demise the building because you simply cannot find a single-tenant operator, which will make your costs (and hold period) balloon. Yes - I know $2M is $93/SF on the purchase price. A Developer with a tenant-in-tow can pay more (they have a tighter range on negotiated rent, total costs, and a reduced holding period). An Owner-User can (and will) pay more than $2M. As a spec investment, however, this is a starting point of how I would approach it. Even if there was a deal at $2M, I would still approach it eyes-wide-open. Maybe the rents land at $21/SF or $24/SF Maybe the retenanting costs land at $60/SF It's not worth playing in the game of 'maybes'. It is not your job to make a Seller rich (or whole). From how I see this situation - the current owner has an asset worth $2M to a speculative (disciplined) investor, and maybe $4M-$5M to an owner-user. Regardless, their $6M equity is worth - at best - $3M now, and - at worst - $0.