The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
While it might feel safe, and feel easy, to follow the crowd, the reality is that these popular decisions aren’t always the best ones in commercial real estate investing. Rather than following the crowd, follow the data and crunch numbers to determine what the right investment decisions really may be for you. That’s not to say one cannot get involved at all with these popular asset classes, but it’s best to stick wit what you really know in your hyper-focused specialized areas.
Richard Wilson: How do you deal with that inside of your family office? I know part of your answer might be “Well, if you have the goods to add value to something, then it has to be based on that legitimate process of adding value.” But how much does that disrupt or make you hesitate when you see an opportunity and you’re like well, it’s everybody else in every investor club or business club I go to is obsessed with industrial all of the sudden; should I put on the brakes here a little bit or just check myself to make sure I’m not just being swayed by, you know, Wall Street Journal articles, you know?
Ben Marks: Completely. I know, and I think it’s a great question, and I – the answer I believe is that it’s sort of easy to follow the crowd, it feels good and it feels safe. I learned the hard way that over time things that feel really good, and safe, and popular don’t always end very well. And again, the difference between feeling and crunching the numbers and looking at the data can sometimes lead to different conclusions. And so having said that I think, I think the toughest part on going into another asset class, and the only way we’ve done it is we’re really not going in and doing stuff on spec. So, for example, the industrial asset class which we expanded into in the last couple years the only types of deals we’re even considering is a sale lease back where we have an operating partner already who is best in class or has a track record that they’re really great at what they do, and we’re solving some kind of operational problem either liquidity, which is a common problem post-covid, they own the building and they want to do $2 million of improvements and we’ll lease it to them at a 7 or an 8 cap, but the can reinvest that capital into their operating business at a 20-30% return. So things like that that really are a win-win where we’re really not taking development or speculative risk those are the only kinds of deals we’ll execute on new asset classes for the reasons that you alluded to. We’re not arrogant enough to think that 20 years in multi-family makes us experts in industrial. We know it doesn’t, and pretending like it does usually leads to some real bad results.
Richard: Right, okay.
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