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(Real Talk Series 2) Barry Wolfe

Episode #: 018
(Real Talk Series 2) Barry Wolfe

Guest: Barry Wolfe
Topics: Triple net leases, single tenant properties


Chris Ressa 0:02
This is retail retold the story of how that store ended up in your neighborhood. I’m your host, Chris ReSSA. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management.

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Welcome to retail retold. Today we have Barry Wolf. Barry is the senior managing director for Marcus and Millichap where he’s been for 19 years. Before that Barry was a practicing attorney for Aaron rents. And before that he was a practicing attorney at a private practice. And today various focuses on the investment sales market, triple net lease leases and shopping centers across the country. Welcome to the show, Barry.

Barry Wolfe 1:31
Now, Chris, thanks for having me. It’s gonna be awesome. I’m very excited to join you. I’ve been dedicated listener, so it’s awesome to jump in and be on the show with you.

Ressa 1:39
Great, cool. Well, I think your insights are gonna be really insightful for the audience. So want to jump in for a second you work on Triple Net leases. So why don’t you just give a little color for those who might not know what is triple net lease.

Wolfe 2:03
Triple Net leases are generally when you hear that reference, they’re referring to the single tenant properties you see, we all see everywhere we drive around and live unless you’re in maybe in Manhattan, or you drive around you see these QSR operators at Taco Bell McDonald’s, Panera Bread, the drugstores, the banks, the medical clinics. So it’s the single tenant buildings you see all over the country. And most folks don’t realize somebody owns those buildings. It’s not just Panera Bread that owns that building or McDonald’s although because of bad example, because they do own a lot of their real estate. But it’s not nestle the company or the operator, there’s an investor that owns a lot of those properties. And most folks aren’t really aware of that.

Ressa 2:42
Got it. And

in the in the shopping center in the in the commercial real estate world, you’ll often hear the word net lease for a lease that is an inline tenant in a shopping center, right? Is it a gross lease or net lease? Meaning? Does the tenant pay cam taxes or insurance and can be in commentary maintenance? Or is it just one number of gross rent? What is the difference between the the net lease that you hear in a shopping center and the triple net leases that you work on

Wolfe 3:19
the lease document itself is going to be very similar. So there’s that’s not really so much the difference in a shopping center. The true you know, the net lease, it basically means the tenant is paying the can taxes and insurance, where the difference wise is when it’s in a shopping center, the owner of that shopping center is still gonna be responsible to manage the property to upkeep the property to maintain the property. And then they might bill all that back to the tenant for reimbursement. But they’re the only ones doing the work or hot by hiring the people that are doing the work. Whereas the single tenant Net Lease deals the true net leased ones, they’re what we call this mailbox money, they’re passive investments where the tenant maintains the building, if the roof needs to be replaced, that’s a tenant responsibility. Maintaining the parking lot is all a tenant responsibility. So it’s just literally, if it’s a true net lease property on a single tenant side, your only job as a landlord is to collect that rent check every month, go to your bank, go to your mailbox and literally look in your your bank account for an ACH deposit. So there’s just totally passive investments whereas again, on the shopping center side, there’s there’s still work involved in it.

Ressa 4:22
Yeah, that’s that’s great description really appreciate that.

I think the audience you know that those terms get thrown around and I think it’s, it’s good for the descriptor. So you deal with a, a bunch of different investors. And, you know, headline news is, you know, really taken a shot at retail over the past few years. But what is the general consensus of the investment community buying these freestanding triple net At least is have they bought into headline news or is it? Is it still a really robust marketplace?

Wolfe 5:07
It’s both of those. Yeah, it’s a robust marketplace, but investors are cautious. I think we’re seeing that the sectors we’re seeing really attractive to investors are food. Absolutely. These QSR deals the, again, the single tenant fast food operators nationally. I think investors are looking for Internet resistant type tenants. 1015 years ago, drugstores were the absolute gold standard, it was automatic, almost an automatic, if somebody was in a 1031 exchange, they just want to stay secure. They go buy a Walgreens or CVS, we really don’t see that nearly as much anymore thing investors are a little bit concerned, we’re seeing both those brands rolling out smaller units, there may be a little bit exposed as far as Amazon banks, we’re not seeing investors focus on nearly as much because we’ve seen banks downsize by number of units. So it’s caution, but they’re still very keen on retail, but I think they’re looking for Internet resistance type brands and sectors.

Ressa 6:06
You know, our banks and drugstores still trading?

Wolfe 6:09
Oh, yeah, absolutely. They’re still trading, not the volume. They were again till 1520 years ago, I wouldn’t call them the gold standard. As far as security as far as you know, somebody is looking for and comes to me and says, Look, we want absolute security want the safest investment. I don’t think those type of guys are looking at us talk to investors, or looking at drugstores and banks anymore. Not nearly as much though, I guess now shifted to let me go buy a Taco Bell, let me buy a Panera let me buy food or something that is just absolutely internet resistant. The other still trading but not not nearly at the numbers, they used to be part of that they’re not opening nearly as many units as they used to be both thanks. And drugstores are, the pace of expansion has slowed dramatically. And banks in general, they’re, they’re closing more than they’re opening nowadays.

Ressa 6:56
And when you’re looking at, let’s call it mailbox money, you’re really buying into its its real property, but you’re buying into the credit worthiness of the signature on that lease. You know, banks and drugstores are still extremely credit worthy entities. And so a lot of these QSR and food uses are franchise driven. And so you mentioned security. When you’re thinking security. Are you thinking in? How reliable it and durable is the cash flow stream? Or is it how certain are you that the tenant will stay open? No one wants a dark store. But if you have 20 years of Bank of America on the lease, do you think today that’s still better than, you know, a food franchisee that’s got 15 locations?

Wolfe 7:52
It depends on the investor. If a lot of times we might be working with somebody who is you know, they’re they’re the later stages in life, maybe they’re in the mid 70s ad roll and they just want what they’re looking for what what’s most important to somebody like that maybe the credit of the tenant as you said I’m if I’m in my mid 70s, or 80s. And I just want to know I’ve got an absolute cash flow for the next 20 years. So a bank at a high rent number that may be perfect for me because that’s for the balance of my life. I’ve got absolutely no for the most part guaranteed security for the that Brent’s going to be coming in. I’m not maybe as worried about the next tenant or replacing that tenant in 20 years, I’ll let my estate deal with that, for a lot of invest other investors if you’re younger or an earlier stages of life. I agree with what you said, I think the location they credit worthiness, the ability to backfill, I think those are all critical. I refer to as the four legs of the table is the way I’ve evaluated property. It’s frankly, I encourage investors to look at a deal which are looking at the credit of the tenant, the unit level economics, the real estate fundamentals of that particular site and the terms of the lease, like you referred to, I use a lot more involved to a deal than just the credit of the tenant. And I think it’s important to evaluate all those we see investors buying deals that are great credit, like $1 General, that’s a fantastic operator, but maybe the real estate’s not so fantastic in these small towns, very tertiary markets. And if they leave in 15 years, what do you do? So I think it’s important to look at all of those aspects. Together. It’s it’s individual to individual which of those are most important, but I think it’s a mistake to just focus on one aspect and ignore everything else.

Ressa 9:32
Totally, then it’s good perspective. I like the four legs of the table analogy you have there, those are those four fundamentals.

So who are the investors say you mentioned the seven year old person, you know, the when you look in the integrated shopping center world or the other parts of commercial real estate like an integrated office Building or industrial park, those are typically companies, obviously, there’s still local passive investors. But in general, those feel like today the people are companies, and they might be small or big companies, they might be local or national, but their companies, who are the investors have these triple net lease properties, are they companies, are they you mentioned the seven year old guy in Florida retired, who’s buying these, it’s pretty broad.

Wolfe 10:32
I mean, you do have these compound, you have REITs, Real Estate Investment Trusts that are very active and own tremendous amounts of single tenant net leased properties that you can go buy shares of on the stock exchange, do you suddenly have that, so the institutional market, and then he has also these large companies owns shopping centers, they on net lease properties as part of those shopping centers. I know DLC, I mean, you have, as a company, I’ll have a lot of Net Lease properties as Outparcels to your shopping centers. But then separate from that you do have this component, as I mentioned at the outset, that people don’t really aren’t as attuned to this, these other individuals, they’re people that they may be, at one time owned an apartment building, or maybe they owned a shopping center, they sold that and now they transitioned into these net leased properties that are more passive income, they’re less management intensive, they still own real estate, maybe they bought as a part of a 1031 exchange or not. And now they’re able to collect that income and go enjoy their life sitting on a beach or traveling and live. And it’s amazing. I mean, we’ve got a lot of investors we work with, they sold an apartment building, they transition to these Net Lease properties, they look at it like, holy cow, I’m making as much money as I did when I was fixing toilets and replacing light bulbs in my apartment building in New York. And now I’m sitting on a beach sipping a cocktail, though, well, that’s passive income isn’t necessarily lower income assets, we see a lot of those folks that are just transitioning into the next phase of life that dependent you know, maybe somebody who’s younger or older, it’s kind of depends on what state they got, they got tired of the management intensity that is involved in owning multi tenant properties.

Ressa 12:06
Really interesting that, you know, a lot of people, you know, wouldn’t think that owning an apartment building is the same or potentially less yields than a freestanding retail property. But it’s fascinating that you could go from fixing toilets, just, as you say, sitting on a beach.

Wolfe 12:29
Yeah, somewhat depends where you are, geographically, if you’re coming out in New York, or California, your yields are obviously gonna be far lower than if you if you’ve got that apartment building in the middle, you know, in Oklahoma or some other markets where you are in kind of yield driven markets, the kind of things where you’re coming out of but a lot of folks we’re working with are coming out of Manhattan out in New York, where the yields have been historically, very low. And, you know, they transition and net lease property. And, again, they look at it’s like, right, yeah, I’m making similar money as I made, and I’m doing nothing

Ressa 12:57
amazing. Feels like the marketplace for triple net lease right now is really strong. Was that is that fair? feels hot? Yeah, I think

Wolfe 13:08
yeah, it is. It’s strong, we’re seeing a lot of deal flow, a lot of trades velocity. But we I don’t equate it to hot as in like a bubble of any sort. I mean, buyers are investing in these largely very significant portion or all cash or very modest leverage. So I don’t think it’s a bubble. I see. But yeah, we are seeing a lot of investors that are transitioning out of these, you know, again, management intensive properties into the net lease properties, again, just trying to simplify their life, I think it’s become a little bit more mainstream, whereas 2030 years ago, it’s not too many people even knew these existed as an investment option. It’s really gone mainstream gets more coverage, at least in the trade publications, and more people realize they’re an option than they did 30 years ago.

Ressa 13:57
And a lot of these investors are with the commercial real estate market refers to even even the companies are, quote, unquote, and I’m using air quotes 1031 investors.

That feels like that is a catalyst today. Is that the 1031? Is that a catalyst today?

Wolfe 14:21
Oh, absolutely. Yeah. I mean, if they tend there, there was a little bit of talk before the last presidential election, there was some impetus or some push from some folks that maybe we do away with a 1031 exchange, or we significantly author it, if that ever happened. I mean, that would have a significant impact in the velocity of Net Lease deals. Yeah, very tremendous portion is somewhere between about 40 to 45%. of Net Lease trays are part of a 1031 exchange, I think of deals we’ve done the last couple of years and honestly, it’s closer to probably 70 to 75%. So yeah, it’s absolutely a very large impetus to the velocity and the net lease market.

Ressa 15:01
So for those who don’t know, can you explain what a 1031 exchange is and what these 1031 buyers are?

Wolfe 15:08
Yeah, 1031 Exchange, it’s a, it’s a part of the tax code gives you the opportunity to sell a piece of investment property. It’s not your residential property, but an investment property. And you’re then able to purchase what’s called like kind property, which is another type another investment property doesn’t have to be the same type of product property, you still don’t have to go from multifamily to multifamily. And you’re able to defer your taxes. There’s, you know, there’s time windows, you have to meet those regulations. But essentially, you’re able to take if you had a $2 million gain and that apartment building is sold, you’re able to go buy another piece of investment property and defer the capital gains until you eventually sell that property and don’t go and don’t do a 1031 exchange, the ultimate gotcha, you’re able to beat the government is you just keep doing that until you pass till you die. And then the estate gets stepped up basis, and you never pay the taxes. You as the owner don’t get a whole lot of benefit, because you passed away. But from an estate standpoint, that’s the ultimate just keep, keep doing 1031 upon 1031 until the ownership, the the owner actually passes away, the estate gets stepped up basis, then taxes are gone. So it’s essentially a way to defer legally defer capital gains taxes.

Ressa 16:18
Can we talk about the math for a minute on the 1031? Just to give people perspective, a roundabout example not holding us to? You know, the specifics, but let’s assume you bought a building for $5 million. And then you said you had a $2 million gain? How much do you now have to invest in the next property is it is it that the total $7 million to five in the two is it just the original five isn’t the two, in order to qualify for a 1031,

Wolfe 16:53
we’ve got to cover the overall sale price. So if you bought for you sold for 7 million, you now need to go buy a property for 7 million to cover everything. Yeah, if you don’t buy something that quite covers it all, you can pay taxes on just the portion that was not a part of the purchase price. There’s also a component if you had dead on the property sold, you need to cover have equal or quote you’ll have equivalent or greater and the amount of debt, there’s some different aspects of it. But essentially, you’re looking to buy something equivalent or larger price than you sold the property for. And if you don’t, then you pay taxes on the on the difference. So you don’t have to cover it all you can pay taxes on a small portion.

Ressa 17:34
Why does it feel that today? There’s so many more 1031 buyers than there were a decade or 20 years ago.

Wolfe 17:44
You’ve got all you’ve got more I think investing in real estate is kind of gone mainstream as quickly as compared to 20 years ago. Again, you go 2030 years ago, you didn’t have a lot of individual investors that were buying commercial real estate, it was more groups like you guys, I mean, like the DLCs like the assignments, the large REITs that were owning real estate, it wasn’t as much the individual. So I think investing has gone mainstream, through the individuals, the doctors, the lawyers, professional professionals. So that’s all they do for their living as own real estate. And as part of that is when they sell they they do these exchanges, I guess, I guess the main reason?

Ressa 18:21
And is the overall the Nationals the volume of trades. Was it up in 2019 versus 18. Do you expect it to be flat higher this year than it was last year?

Wolfe 18:35
I think it’ll be pretty close the court? Yes. 18 and 19. We’re pretty close, pretty similar to each other. And we’re it’s a all time highs. I mean, velocity has been really strong. I mean, we’ve reached levels, we thought back in Oh 40506 We would never say velocity levels and commercial real estate like we saw in that timeframe before leading into the great recession. And we blown way past those numbers, we now see the volume and activity level way well and surpassing those numbers. The court for this year is we got a presidential election year, I don’t know that we’ll see quite the velocity, because why central we’ll see is come September, October, November, depending on how the election is trending. You can see a lot of times in an election year where folks just kind of step to the sidelines and say, let me just wait and see what happens to the elections. They may not sell their property, they may just kind of go stagnant and kind of go into tortoise shell of sorts, where they say like I mean, let me just let me revisit what I want to do after the election. So this year, I think we may see a slowdown again, depending on the Democrats have somebody that looks like they have a viable candidate, it turns into a real race. If that happens, I think things could slow down in the fall and therefore velocity overall I think that certainly be lower than it was last year.

Ressa 19:52
And you mentioned the people who are potentially waiting to see what happens in the law. auction, going back to the original point of is it you know, a company or is it an individual investor? What? What do you think the the percentage at a guess you know, I don’t know, we don’t know and no one probably knows what percentage, at least of your deals are individual investors that the retiree in Pasadena versus, you know, Realty income, who’s a REIT,

Wolfe 20:29
my business, it’s 90 plus percent the individual. Some of that is developers and family funds. But it’s almost it’s largely private parties as an industry, we’ve seen the shift as well, where it’s now become the predominant buyer, the predominant party is the private party investor, let’s see, when you start to get to $20 million, and larger, it does turn much more into institutional. But you know, one to $20 million, I get data is approximately about 75% are private party investors and not not the institutional buyer. But again, as you get to the larger price points, it turns much more into institutional.

Ressa 21:07
Interesting, 75%, zero to 20 million. Wow. That’s

Wolfe 21:15
a lot of these private parties. Some of them are family funds, but again, are ultimately just individuals. What do you think that was in 2000? To 2000? Hey, I think 2000 2002 would have been fairly similar. I think it was more institutional, and it’s more in particularly go back to like 1990. And earlier in particular, typically 10 to $20 million, or two and $10 million. Plus, I think it would have probably been flipped, I think it would have been probably 75% institutional or 50% institutional. They think it’s become much more mainstream, where you do have individuals that really has changed. And maybe the Internet has something to do with that, where we just have a lot more access to information. Whereas 30 years ago, you know, a doctor or lawyer, they might have invested in real estate here and there and dabbled a little bit. But I think it’s changed a lot. And you know, guys like Robert Kiyosaki and others that have written about commercial real estate again, the internet, we’re able to read about investing in real estate, there’s just a lot more information there probably was 30 years ago.

Ressa 22:20
Sure. Good perspective a little bit ago, you mentioned all cash buyers, one of the big draws to real estate is that you can use leverage to your advantage. You’re saying in this world, in this triple net lease world, there’s a lot of cash buyers, is there any leverage used? You said the word modest leverage and why is there less leverage used,

Wolfe 22:48
when part where the deals are training, if you’re buying a deal at a five cap, so a 5% return on a Panera or Taco Bell, whatever it might be entities, Net Lease type deals, to get dead on those is really challenging quickly to get much more than 5060, maybe 65%, it just flips where you become negative leverage. There’s not a whole lot of benefit at that point, if you’re able to buy at a dev and a 10 cap, where maybe it’s more multi tenant retail or other types of products, where the higher yield and leverage definitely becomes more in play. But yeah, the single tenant deals where they yields are lower, we just don’t see nearly as much and you know, with with a debt involved, I mean, we do see some certainly, but it’s much more modest.

Ressa 23:31
Can you give everyone a little color, use the word negative leverage, what’s negative leverage,

Wolfe 23:40
it just you’re covering debt service mean to an extreme, you may not even be covering debt service. So your your prints your payments on the debt, they’re actually exceeding the cash flow, and lenders never gonna let that happen. Risk starts to become where essentially the return from the debt versus the cap rate, they’re flipped. It’s almost like an inverted yield curve of sorts, where it’s just you lose the benefit of the leverage of the cap rates too low, even with interest rates as low as they are. Well, it’s becoming a more attractive as rates. I mean, I talked with folks recently, I mean, they’re getting three low threes on interest rates, it says smart to come up more viable if you’re in the low to mid fives. It’s not as attractive.

Ressa 24:20
Understood, yeah. You don’t want the cost of borrowing to be higher than the cash flow that you bring. Exactly.

And so how does the stock market affect your investment class?

Wolfe 24:38
That’s interesting. I mean, we keep an eye on it. I think the more as the stock market runs up, and investors maybe start to get moved a little bit. They’re concerned maybe it’s a little late to jump into the stock market or the stock market gets volatile. I mean, we’re like folks see commercial real estate in general and certainly, you know, these Net Lease deals, but even just commercial real estate in general is kind of basic. care may be a little bit more boring, they’re not as volatile. As the stock market gets more, more volatile looking, a lot of times folks will say, lead to just stay secure investments, then real estate is one of those. So I think a volatile stock market is is really good for what we do in commercial real estate. As far as buyers just kind of coming into it. That’s probably the biggest impetus, I think, you know, I

Ressa 25:25
think there’s always this question is there a large difference in buying and will use a large company buying stock in McDonald’s versus buying a triple net lease freestanding McDonald’s?

Wolfe 25:40
Yeah, I mean, in that example, I’m in the stock and McDonald’s, you’re betting on the company that they’re going to sell more hamburgers, this quarter versus last quarter, the stock and the profits are going to continue to increase. So you’re really focused strictly on the operational side, literally quarter to quarter, that’s very short term. Whereas if you’re buying the real estate, you’re taking a 1520 year view, you still need the company to do well. Because if they, if all of a sudden McDonald’s for 10 year period hit the run, where they’re just doing terribly, then they’re gonna start closing locations. So the viability of your piece of real estate may decline as far as having the tenant, it’s a different type of you, you’re taking up more of a 1520 year view on the company, that they’re gonna continue to do well, and therefore they’re going to stay in that piece of real estate, they’re not going to go bankrupt, or also they can terminate the lease. It’s tied together. But it’s, I’d say stock markets very short term, just literally in the operations. Whereas owning the real estate, you’re taking a much more long term view, it’s probably the view that like a warren buffett takes when he buys a stock, but he’s taken a 15 to 20 year view, but most of us don’t invest in the stock market like Warren Buffett does. Sure. I wish I did. And don’t have the we don’t have the results to show for it either. So,

Ressa 26:54
sir, why he’s a wizard, you, you mentioned, leverage in your world is not used a ton. It’s, you know, there’s modest leverage use sometimes. But one of the things I see you do on social media, you talk a lot about and you follow the Fed and interest rates, and what’s the Fed doing? So why are you focused on that? Why is that important to you?

Wolfe 27:18
Because interest rates either go up or go down, they do have an impact, not in lockstep. They do have interest and impact on cap rates, and what kind of yield is an investor going to look for? So there’s a tie to that. So we certainly keep an eye on it. If we ever got to the point, someday, again, where you could go by money market fund or a CD that yields five 6% FDIC insured 100% today? Yeah, then at that point, you’re no longer no one’s gonna buy a taco bell at a 5% yield, because any piece of real estate carries some degree of risk. In that regard, we follow it. It’s just thing where interest rates, what kind of what are the alternative investments somebody can get? Recognizing that real estate is not risk free? So what can what kind of yield? Can you get on a totally risk free? Again, maybe FDIC insured type investment? And yeah, there has to be a buffer there. If you can get a 3% return, safe and secure, you’re not going to go buy a piece of real estate at 3%. That’s one reason we we do look at it, and again, from a financing standpoint as well, because there are investors that do finance, but I think even more so is just what are the alternative investments that are out there? And what what do those yield?

Ressa 28:30
They’re all other facets to real estate, though. You have appreciation, you have tax benefits and all that stuff. So

Wolfe 28:36
absolutely. Yeah. And that’s part of it. I mean, certainly. So if it’s similar, someone could buy the piece of real estate. But if it again, if you can go buy a CD at 5%, you’re certainly even given the tax benefits and appreciation potential, you’re probably not buying a taco bell at a five cap. But now you make some great, you make a great point. Absolutely. They’re tremendous benefit.

Ressa 28:56
Awesome. Well, you know, that’s a good overview of what’s going on the little some of the basics and fundamentals about the marketplace that you operate in. Today, what are you seeing as the the biggest challenge facing sellers?

Wolfe 29:14
I guess if you’re not unless you’re a merchant developer, which are these guys that just develop the single tenant properties with the absolute intention of selling them. And just moving on to the next deal? I think the biggest challenge is where do you invest the proceeds? I mean, if you’re just an investor and you sell your apartment building or shopping center, or any type of investment property, great, I made a profit but now what do I do? I was getting cash flow and was sheltered by the tax benefits. Like you said, Now, where do I take that $2 million profit and what do I do with it? And it’s just so difficult to find a good opportunity. I think that’s probably the biggest challenge from a seller right now is just where do what do I do if I sell

Ressa 29:54
and and what about from what’s the biggest challenge of buyers? I

Wolfe 30:00
Finding the deals similar, it’s kind of similar. What I talked about as a seller is finding that finding those opportunities, finding the deals, depending on the yield you’re chasing, if you’re looking for a good value add shopping center or a great even single tenant net lease property with a strong secure tenant with a solid return on a good location. Those are those are tough to find. I mean, they’re out there. And that’s what we do for a living is find those sorts of opportunities. But that’s it from a buyer standpoint, that’s the biggest challenge is finding, finding deals with parameters that fit whatever your individual criteria are, and that that’s different for everybody.

Ressa 30:36
You say that’s a challenge. But in the same vein earlier, you said that velocities up and there’s a lot more deals out there to buy?

Wolfe 30:43
You know, there are I mean, there are deals out there, but I you know, finding the right deal. Depends on how cost. Yeah, depends on how cautious you are. I mean, some buyers, frankly, I see buyers buying deals that I look at and kind of shake my head out a little bit. I think it depends how careful you are. I mean, you guys know where you see a deal flow you’re seeing probably dozens of deals come across your desk every single day. Yeah, it’s just whittling that down to the handful you want to even really consider so there’s absolutely there’s deals out there. It’s just out careful login how carefully the analyze them.

Ressa 31:16
Yeah, we would say the right deal for

Wolfe 31:18
sure. Exactly.

Ressa 31:20
Well, that’s a great overview. A little inside baseball, you know, we talked a lot about some of the fundamentals for those who are and consider themselves, triple net lease wizards, any, any, you’re in it every single day, all day, any whether it’s the future now, any little bits of intel about the triple net lease market that even people who are in it might not know that you know is going on or any insights you might have for some of the more intune listeners out there.

Wolfe 32:01
Interesting question. I just really seeing what’s what’s happening in the industry looking at where things trending as it relates to retail in general. I mean, something I’m keeping an eye on personally real closely, are ghost kitchens that are virtual kitchens. I mean, we’ve traded so many restaurant deals, I’m still extremely bullish on the restaurant sector. But I blanket something that has some potential to impact the industry as a whole. I mean, we’re in the very early stages using a day and with a baseball terminology, we’re probably in the first half of the first inning as it relates to, again, virtual kitchens and deliver a and those components of the restaurant sector. But I think there’s those are things to certainly watch closely and be following and see how does that evolve even, I think delivery will potentially take off when all of a sudden autonomous vehicles are legalized, where you could have pod cars that are no persons in the car. So economically, it becomes more viable for delivery. So I think just how does that all evolve in the next three to five years and beyond?

Ressa 33:08
Very cool. Ghost kitchens. Yep.

Wolfe 33:13
is interesting. I mean, I think we’re gonna see a lot of those in the next five and five or so years.

Ressa 33:19
So the follow up to that, I guess, is what is the impact the very wolf prediction of the impact of ghost kitchens, and autonomous vehicles, on triple net lease properties?

Wolfe 33:30
I think location could become even more important. As far as you know, we’re talking delivery, obviously need to be near large population centers, I think that becomes very important. Same with Ghost kitchens. I mean, if you’re, for a ghost kitchen to work, it’s gonna have to be near large population centers, I think looking at the real estate is going to continue to be important. And moreover, you know, just as critical, so that’s where and I honestly, I see. So that’s a mistake. I see a lot of investors making I mean, they’re focused on the credit of the tenant, much more so than maybe the quality of the real estate and the underlying fundamentals. And to me, you get back to the old adage, what’s what’s important about real estate, location, location, location, if you’ve got a great piece of real estate with a replaceable rent number? I’m not terribly worried about my tenants. So I think that’s, that’s probably right. I’d be focusing on personally to a degree.

Ressa 34:24
It’s good insight that you say that right to most, that seems so simple, but this investor pool historically has been so focused on the credit because whether it’s in Spokane, Washington or Fort Lauderdale, Florida, if you had McDonald’s on the lease, you have the credit of McDonald’s and you’re gonna get the rent, no matter what location it’s in. So

Wolfe 34:49
I was even talking with somebody in investor the couple of weeks ago, he had bought a Dairy Queen in a really tertiary market. I think some What are your thoughts he visited the property They may say, Well, my broker told me it’s a Dairy Queen, you got a 15 year lease, you don’t even need to visit the property. Don’t worry about that. And I just fell fell on my chair. I got a tremendous mistake. Because again, I think it’s important to look at the quality of the real estate because ultimately, that’s, that’s what you got. I mean, typically as things are evolving and changing. But the best investors I know, the question they ask themselves is, who’s my next tenant? And if I’m planning to hold for 1015 30 years generational perhaps, eventually, you’re gonna have to replace that tenant no matter who it is, in reality, it’s I want to know, who’s my next tenant? Who can I put in there as my rent replaceable? There’s so many aspects to a deal, and it’s way beyond just what’s the credit of the tenant look like?

Ressa 35:43
Awesome. Well, that’s been, it’s been really fascinating. I think you gave a perspective that the listeners on this show don’t get a lot of because we haven’t had any triple net lease experts on so thanks for coming on. Oh, no, thanks for having me. The last the last part of the show, if you’re an avid listener, like you say, we call retail wisdom.

So I’m going to ask you three questions. And you just fire back on on these questions.

Wolfe 36:19
Awesome. I’ve been waiting for this, this is gonna be fun.

Ressa 36:23
All right. Best piece of commercial real estate advice.

Wolfe 36:28
I think what we’ve just been talking about, I think it’s evaluate as I called it, that four legs of the table and not just focus on strictly the credit of the tenant, I think it’s focused on the quality of the real estate, the unit level economics, the terms of the lease, the, again, the you know, the tenant, but I think it’s focused on all aspects of a deal and not just one component of it.

Ressa 36:51
Awesome. I think sage advice. Next, next question, extinct retailer, you wish you’d come back from the dead?

Wolfe 37:02
That’s funny. This is a good one. I actually, I remember this from my childhood. I was gonna say Service Merchandise, but I heard that on one of your recent episodes, they were almost like the precursor to e commerce. I remember their catalog and the conveyor belt they were so cutting edge back in the 70s 80s. You know, the end of the maybe they were the 90s are gone by then I’m gonna have to go because somebody else used Service Merchandise. There’s a record and video company where I grew up in Atlanta, kind of in Georgia and Florida called turtles record. You probably never heard of it. I don’t know it turtles. Yeah, it’s turtles records. And what was really cool about them is that gift cards were gold coin. If you Google it, you’ll see. In fact, I actually looked before this call on eBay to see what they were selling for if you can even find them. So there were gold coins. And the big thing I remember as a kid at a bar mitzvah Obama’s or just birthday gifts, it was kind of a tradition to get these you know, $10 gift certificate was this gold coin and I wish I’d kept on they were really very cool. So I’m gonna go with turtle records. I mean, I know and even a big musical guy or music guy, there’s just a cool store that I don’t know was even viable anymore in reality, so I don’t know they could come back from the dead was a it’s kind of the back in the day sort of thing. It was it was a neat company.

Ressa 38:18
Did you find one of these on eBay? What did they sell for these?

Wolfe 38:21
The only fine actually I found one but it already sold it was a toy sold for 22 bucks. I have no clue how much was on the gift certificate. It’s not even relevant. It’s sold for 22 bucks and there’s actually one of their signs I saw on eBay for sale for like $1,500 just like a small diner. There’s so why, if you’re in the south, they were kind of based in the Southeast Georgia Florida in particular. If you grew up back in the 70s and 80s You know who they were if you didn’t then never heard of them

Ressa 38:50
all right, last question. Barry. So my dad came over recently any he left me to vests like you know vest I’m wearing it. Now you can see there were Izod vests. So on coals website, what is the IZOD vest I’m wearing retail for uncle’s website right now.

Wolfe 39:16
So I don’t have a 15% off coupon. I’m gonna go with 2999

Ressa 39:25
So you’re close. So I’ll give it to you on Kohl’s the original price was $65 the clearance price 26. And right now there’s a 20% off if you type in you save 20 And you can get it for $20.80.

Wolfe 39:42
Coupon free coupon price

Ressa 39:46
above price for sure. Well, Barry, thanks for the insights today. It’s been great speaking with you. Keep up what you’re doing on social media. I know everyone loves all your insights on what’s going on in the market. So thank you have a great weekend, man. Thanks, Chris. Thank you for listening to retail retold. If you want to share stories out of retail real estate deal that you were part of on our show. Please reach out to us at retail retold idlc This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you’re a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode

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