The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
For those looking to really excel in the world of commercial property investing, one should consider focusing on a single property type even if they diversify their portfolio based on location. With a single property type, like warehouses for instance, it’s easier to understand the nuance of the property type and craft an exit strategy when the time comes to part with the property. Selling a lot of 20 warehouse properties is much more attractive to buyers than selling a mix of varied property types.
Richard Wilson: And my final question here, if somebody wanted to really excel in the world of commercial property investing what principles should they work by in this industry?
Robert Borris: To really excel, create a portfolio of like properties, and the reason I say that there are numerous reasons. As I said before, previously, and that is you need to understand the exit and if you have a portfolio of these properties and you can sell to an institution 25 warehouse properties totaling 5 million square feet, that’s a very attractive thing. But the other things, the other benefits of that are numerous. Number one you can fine tune your team, and your acquisition team, because you’ve done it previously numerous times, you get to know the nuances of dealing with these properties, and what I’ve seen every successful real estate entity has with consistently is they focused on one type of property and they understand the nuance. That’s really, that’s kind of a hidden benefit really. They know how to structure leases, they know how to deal with problems, you know. For example, I’ll give you a good example, and that is when things get bad and you have tenants that are going to want to, that are going to go bankrupt you want to negotiate them out of your deal, you want to negotiate their lease out before they go bankrupt. Because otherwise you have a tenant in possession with no rent coming in. But that’s the kind of nuance I’m kind of talking about…
Robert: And also financing issues. There’s all kinds of reasons to do that. And if you notice Wall Street is becoming more and more like that, that’s for the same reason. They, these big retes and all that, they’re not diversified property types. They’re all single property types. Diverse by geography, maybe, but not by property type.