In The News

A Lesson in Commercial Real Estate Investing

I first heard this quote while watching what is now one of my favorite movies of all time, A Bronx Tale.

“Believe none of what you hear and only half of what you see.”

Born and raised in New Jersey, it’s only natural that Italian-American crime movies rank high for me.

I love this quote because it’s relatable to just about every facet of life, especially real estate investing.

Here’s a prime example of what I’m talking about on a deal we were recently under contract for.

We recently negotiated to buy a retail center in Virginia that’s anchored by Food Lion and Burlington Coat Factory; two great national retail tenants.

We were told by the broker selling the property that Burlington was very interested in downsizing their space from 73,000 sqft to 30,000 sqft, and in doing so would increase their rent from $4.25/foot to $9.00/foot.

He knew this because he had a “great relationship” with the head of real estate for Burlington and recently discussed this exact scenario.

This is a dream opportunity for investors like us.

Not only would Burlington remain at the center long-term, but we’d get back 43,000 sqft which we could re-tenant, providing us with a ton of upside from the new rents we would collect once we leased the space out Burlington would give back.

Only problem?

We spoke with the broker’s “great relationship” at Burlington and got somewhat of a different story.

Burlington – “I wish I had better news for you guys but we’ve already classified this store as a re-location.”

I’m sorry… what?

What we learned throughout the conversation was that it had been several years since Burlington discussed downsizing at this property, and since then they’ve learned downsizing a store is a helluva lot more difficult than simply building a new one.

I’m pulling back the curtain for you on this story because it’s a great example of three crucial lessons when you’re buying any type of real estate:

1. Never lose site of the fact that the listing broker was hired by the seller to sell his/her property. Period.

2. Make it a point to conduct tenant interviews. We’ve learned a sh*t ton about properties we were buying by simply speaking with the tenants.

3. Believe none of what you hear and only half of what you see. Not just in real estate investing, but in life.

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