Today we are talking about a deal we recently raised for, mostly so you can understand some of the things that happen behind the scenes and why we decided to have this be our first syndication for 2025.

Read this episode here: https://tinyurl.com/2km2c2k9

Why did it pass our test besides the fact that these partners have a great track record and having exited 4 deals with them?

1. Low vacancy. There is a shortage of small bay industrial in the Phoenix market, people have been building large bay industrial. For the small tenants that need a smaller space, the available inventory is very low.

2. Leases expiring and below market. A lot of the tenants had their lease expiring during our ownership, and the vast majority is below market, one of the largest tenants in the property with the biggest rent upside, already decided to not renew. We underwrote them not renewing a year from now, and they are significantly below market.

3. IG Leases. All of the tenants except one are on industrial gross (IG) leases. We are converting all of the tenants to NNN leases. This will also increase the bottom line for our investors.

4. Prohibited cost to build. Besides the market having very low vacancy, the vast majority of tenants being between 30 to 70% below market, and the leases expiring in the next 24 months, small bay industrial is cost prohibited to build. It costs more to build than the rents that you’re going to get. We are purchasing the property at a significant discount to replacement cost. The property was built in 1999 and it looks really good.

5. Location. The property has freeway visibility and is right next to the freeway exit.

6. Market. Phoenix is a phenomenal market. It has a 16% population growth since 2010, a job growth of 45 to 50% since 2010. The personal income tax is very low at 2.5%. They’re exploding in terms of plants, campuses, and jobs being created in the area. There is a $65 billion chip plant being created next to the property. There is a $20 billion Intel expansion. These are all creating jobs, which is always a great sign of a phenomenal market to be in.

Final Thoughts

The raise took a little bit longer than what we thought it was going to take. We did not finish the entire raise and still have a couple million to go, however, we did manage to close on the property and the couple million that we have to go is mainly for reserves, so that still needs to be finalized.

Commercial Real Estate Tips Learned Recently:

Turn expense into income: e.g., rent dumpster out.

You can open a Senior Living home in any state if one tenant has a disability due to the ADA / Fair Housing Act.

Always over-raise in case investors don’t send funds.

If a deal blows up, attorney often refunds fees (to keep you as a client).

When you refinance, you don’t pay taxes. This means you can cash out of a property, or get a line of credit, and buy another property without paying taxes on that down payment. Make sure you are comfortable with the LTV’s when you cash out.

Interest rates are always negotiable, you can get ~0.25% interest rate break if you open a checking/savings with lender.

When developing a property from the ground up, always assume that the piece of land has all of these: endangered species, wetlands, easements, utility issues, trees – until proven otherwise. This means you need to get all of these reports and surveys done (amongst many other things)) before purchasing a piece of land for development.

Join our investor club here: https://montecarlorei.com/investors/

With regards to SEC exemptions and compliance, what are some of the common mistakes that syndicators make? What are potential consequences if the SEC finds out you paid a GP to raise capital? How would you structure a deal for the GP's and LP's to hold real estate forever and get infinite cashflow? What are some of the legal challenges and opportunities in real estate investing today? Jonathan Tavares, Managing Partner of Premier Law Group shares his knowledge

Also some great news for raising funds: an investor can now be considered accredited if they invest 200k or more in the offering!

Jonathan Tavares

(508) 212-1193

jonathan@plglp.com

www.premierlawgroup.net

Join our investor club here: https://montecarlorei.com/investors/

What are the pros and cons of office, retail, and industrial? What should your real estate agent do for you as a buyer? How to get over fear in real estate investing? Trinity (Trent) Herrera, commercial director and real estate consultant of Black Tie Real Estate, shares his insights.

Read the entire episode here: https://tinyurl.com/4dzzaart

The pros and cons of office

Professionals need an office, so it's a staple in downtown areas. A stabilized office can fetch a premium. Some of the most expensive and impressive buildings in the world are office buildings. The cons are that we have a lot of office vacancies, and we have more work-from-home opportunities post-COVID, which completely turned the office upside down in some cities, counties, and towns. We have many cities with a lot of impending office vacancies. However, as another pro, I'm hearing about a lot of discussion about multifamily conversions and turning these office buildings into high-quality multifamily units, which also serve a need. The singular scariest thing about offices as products is being left responsible for the building. If it's 30% vacant or more, that's the single most frightening thing.

The pros and cons of retail

The cons we're talking about here are the opportunities. What scares us are often the opportunities. While the scariest part of an office could be holding the bag, paying the property taxes on a building that's assessed for what it's worth is a little frightening. But when you lease it, when you hold and plan correctly, you have a good team, and you have it for 10 cents on the dollar because it's been vacant, it's a whole different story.

If you want to be extremely safe, you'll put your money in a savings account. If you want a slightly higher risk, you put in a retail triple-net tenant that will give you the mailbox money, but it's at 5%. It goes for everything.

The pros and cons of industrial

The biggest pro for me is that there has been a recent focus on the domestic industry. We have a lot of local infrastructure being built around US-based industries, such as manufacturing, warehousing, new Amazon distribution, data centers, and OpenAI Stargate. A lot of money is being invested in it. There is this sentiment that each country should be able to manufacture its products, and I think we're sensing that now. Hopefully, we continue to see this trend.

Americans love buying things. The same reason that retail works is why the industrial works. So much industry is built around shipping products, getting them from A to B, warehousing for Amazon, etc. Even if people stop going to the retail store, Amazon is always going to need warehouses. There will be many companies providing other forms of distribution and accessory services to Amazon. As long as Americans love buying stuff online or in person, the industry will likely remain strong.

And then there's opportunity. There are a lot of small towns, especially here in Texas, that have 100 to 300,000 people, where you can buy quality industrial for 30 dollars a foot. If you can tolerate a hold and lease it up in a year or two, those deals can be had all day, and there are lots of more stabilized national credit tenant deals to be had. There are all sorts of things that can be found with a propensity for appreciation.

Trent Herrera

trinity@blacktie-re.com

Join our investor club here: https://montecarlorei.com/investors/