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VASA Fitness in Pheonix, AZ with Josh Simon

Episode #: 046
VASA Fitness in Pheonix, AZ with Josh Simon

Guest: Josh Simon
Topics: Vasa Fitness, leasing deal


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 everyone. Today we have Josh Simon. Josh is the CEO and founder of Simon care. Welcome to the show, Josh.

Josh Simon 1:10
Hey, thanks for having me.

Ressa 1:12
Josh, why don’t you tell everybody a little bit about you and what you do and all that good stuff.

Simon 1:18
Yeah, so I’ve been in real estate now. 16 years?

Ressa 1:21
How long have you been in the real estate business?

Simon 1:25
About that about 17 years? So yeah, so hey, we both kind of started the same time. Now we’re in our second cycle.

I started when I was in college as an intern. And six years later, 10 years ago, this August, I started my own company, Simon’s theory. We’ve developed 180. I think it’s two projects in those 10 years, everything from single tenant net lease to small multi tenant redeveloping big box. We’ve done some medical projects, we’re doing a couple RV and Boat Storage deals. So we’ve ran the gamut. We’ve grown from just myself as the first employee all the way up to we have 40 people now. We have a technology spin off that we’ve you know, invented some, you know, technology that helps run our business. And so it’s been a, it’s been a really fun ride the last 10 years. Wow, that is a fun ride 182 projects, you went from just you to 40 people, that’s some significant growth man. And you’ve developed 182 projects. Do you hold these projects? Now, so most of we’re typically a network kind of a merchant developers or net seller. I, when I started the company, I had 50 grand in my name, we’ve grown that the company with no equity partners, we’ve partnered on a few deals here and there. But for the majority, we’ve had no partners. And because of that, you know, you have to build up, you know, you don’t build the Sears Tower without having a big Foundation. And so we’ve had to build that foundation. And so by doing by selling, we’ve been able to build infrastructure. And then now we pretty much do all of our own equity and a lot of our deals.

Ressa 3:13
That’s amazing, bootstrapping it, man. That’s what the tech guys do, except you didn’t get VC money. You, you bootstrapped it yourself. And you flipped a lot of these 182 projects in order to take on cash and continue to grow the business. How much real estate are you sitting on that you own today?

Simon 3:33
I think we own about 45 different projects in different stages will develop about 40 projects this year, um, in probably eight or nine states. Everything from Dollar generals to on the West Coast O’Reilly’s Starbucks, you know, from the single tenant side seven elevens. And so we have, you know, found you know, timings everything. And we found that like 10 years ago, the triple net market, what really wasn’t what it is today. And what we’ve seen is like generational change, very macro level of where we’ve seen all these baby boomers selling their multi tenant, their two and four unit places, sometimes even bigger, and wanting to go to a coupon clipper and Dollar General. And O’Reilly has, you know, typically in some of those other tenants that are in that, you know, one and a half to three or $4 million price point have become super popular. And even today, in the midst of this pandemic, we have seen great demand on the Dollar General products we’ve seen, you know, the the big buzzword for years in this business was experiential. That word today is essential. And so you’ve seen just how important are essential retailers and if you look at what’s trading in the market, because what’s something worth? Yeah, somebody else will pay and right, so now we’ve seen like a huge demand for drive throughs. And for essential retailers that have been open through this

Ressa 5:09
pandemic. Yeah, that’s that’s great perspective. I think the 1031 markets helped that a lot as well. Right, that has grown over the years and the 1031. Market, I’m sure it’s helped your business. Right.

Simon 5:21
Yeah, it sounds everyone’s a huge part of it. And obviously, every time yeah, there’s the potential for, you know, new elected officials, that always is a concern that we have 1030 ones are, are, are huge. And even now, you know, even with reduced demand, like less people are being able to sell so the 1031 pipeline is going to slow, but you see the opposite effect where supply is not going to be created as much. And so we feel like there’s always this nice balance for the 1031 product.

Ressa 5:55
The word merchant developer, it’s a word that used to hear all the time when you and I first started in the business, you don’t hear that word as much anymore. And but, you know, when you got started, and you only had $50,000? Was it the dirt or the tenants that drove the bus that got you started? I think there’s always people that are interested in that.

Simon 6:19
Yeah, no, that’s a great question. I think, look, if you have a great piece of dirt, right, location, location, location, is what we’re always taught. But I think the most important thing in our business is relationships, and having the access and knowing the tenants and where they want to go, I think is the most important thing when I started, you know, it’s, you know, when you start, it’s not like you find your first development deal on day one, you might get lucky, it took almost 12 months, I think about 10 months from my first couple of deals to finally get closed. But just because you close doesn’t mean you made really any money unless you you know, might take a small development fee. But really, you make money when you sell. And so for that first year, I was doing anything to make money, I was helping out a Cricket Wireless franchisee in Phoenix and, you know, doing 1200 square foot, you know, $10 a foot leases and you know, just trying to make ends meet however, I could that initial time. But what I realized is it’s all the relationships, the relationships with the brokers, the tenants, the you know, the market movers in your market.

Ressa 7:29
Most people have a break. At some point they get like a the people call it the big break. Did you get like a big break at some point that like got you like over the hump? Was there are a deal a package of deals that kind of got you to the point where like, you aren’t having to make cricket deals to pay the rent? Yeah, I would say,

Simon 7:53
for us, there was a couple. So one is in a relationship, but I would say like, Yeah, so one is getting enough help. Um, if you want to be successful, you can’t do it on your own. Right. And so I think when I, you know, we hired our first, you know, couple employees, that was a break in itself, because it really freed me up to focus on bigger picture things. You know, I didn’t need to go down and you know, mail checks, write checks, do all those things, I could focus on the bigger picture and finding new deals. On the second thing I would say is, you know, 2010, rough time to start a company, banks aren’t loaning, and if they are, excuse me lending and if they are lending their lead lending to their very best customers. And so I step into the picture, and it’s very hard. My first deal was a hard money loan deal. You know, I think it was like 13% interest on the whole thing. And so what I was able to figure out is, and back then this wasn’t as popular. And now you’ve seen a lot of these triple net, you know, our single tenant net lease, kind of fun that offer the preferred equity, which is your equity investment. So let’s say you need a $2 million loan, the bank will give you 1,000,006, you need that $400,000. And typically, in the past that 400 grand, you would go raise it with a high network, maybe Country Club money, and you would have to give them a piece of the upside. Well, we kind of created a mechanism where we would pay you know, I think it was low double digits to start with, and maybe a point but we would pay that for the for the equity and no upside. So now the deals became vastly more profitable. And you’ve really seen a whole market like all of these groups will basically fund 100% of cost on credit, single tenant Net Lease deals up till maybe the pre pandemic I haven’t checked in to see if they’re still doing those deals. So that what I would say is our bid was a was a big break putting that

Ressa 9:51
together. And are you a an equity source for the for other developers today? Hey, in that world, you know, we, traditionally, we haven’t

Simon 10:04
been but we’ve done multiple deals where guys have teed up those deals, and we’ve come in with the, you know, balance sheet to get a bigger loan with some of the equity, being able to raise the equity because of our track record. Um, you know, I’m kind of a control freak. And I like to be in a spot of control. And like, we built a full infrastructure we have, you know, we don’t build our own stuff, we have a construction management, development, marketing, you know, finance, we have a machine where it really makes sense for like, maybe a broker has a deal they want to put together but they don’t know the first thing to do, and they’re looking to partner up, we bring all the, you know, infrastructure and horsepower to see a successful project come to fruition.

Ressa 10:54
And for the listeners out there, and you talked about those, those funds that were raised, call it pre pandemic, for the triple net lease properties, are these private funds? Are they local banks, give the listeners some context of who these groups are that finance something at 100% of cost?

Simon 11:15
Yeah, you know, I think some of them are banks with like, you know, kind of a different bucket of capital they use, some of them are private funds, and then they go borrow on it, you know, and then they, you know, but they’re gonna charge you, let’s just say, you know, 9%, on your whole project, and they might take five points on the back, where, you know, we’ve done enough of the projects where for us, if we didn’t get, you know, we’re in the fours now on a lot of our construction, lending, and sometimes even lower, and then our equity. We will pay 10%. And so that blended rate is what, five and a half, six, yeah, when we look at it on the capital stack, and so for us, it just doesn’t make sense. So, you know, we always are open to hearing offers, but it just for us, it doesn’t make sense. But if I was starting over again, I mean, yeah, that’s a huge opportunity for somebody to get started and not have to give up a big piece of the pie to somebody.

Ressa 12:12
Yeah, totally. If the upsides there, at the end, right, if the upsides there, if cap rates don’t move against you, is and so your deals today, typically getting a construction loan to and and, you know, financing out of that later.

Simon 12:36
As far as is it? Has it been? What’s it been? Like?

Ressa 12:38
No, is that is that what a typical deal looks like from a structure perspective, you take, you know, you buy the property, then you go get construction financing, you

Simon 12:46
tie it up, you get construction financing, you build it rent starts coming in, you get out of that and sell it? Yeah, correct. So typically, you know, on the stuff we look to sell, we’re in and out in seven, eight months. So it’s a pretty quick turn, we’d look to close and start construction within a week or two of closing. And so we structure all of our loans, usually, you know, 12 months to 18 month construction, with a mini perm, just in case anything you know, should go wrong or the market, it’s not a good time to sell. Got it?

Ressa 13:19
Is that how you end up you know, at any one time holding, the amount of assets you hold, even though they’re all for sale?

Simon 13:27
Exactly, you know, most of their stuff, we will start marketing for sale, you know, as soon as slab is born, because then you get a good idea. You know, I always like to say siteworks, the most dangerous part of construction. Once you get to the point, you’ve poured a slab more than likely about 90% of your change orders are gone unless you make changes along the way. And so once we have slab we feel pretty comfortable. We know when we’ll be completed on the project. And so we’ll take those to market at that time.

Ressa 13:55
Got it? Yeah, that makes sense. And today, you know, you’re the CEO of a 40 person, as you call it, machine. So what how much of your job is real estate versus running a business?

Simon 14:16
Or what do I want it to be? Right? There you go. Um, you know, I I’m very blessed. We have a great team. We the People component is huge. I really love our team, people components, not as much of my favorite. I like to make deals. I like to fix people’s problems. And that’s what I really enjoy. So a lot of it is like strategy. Hey operations, most entrepreneurs, you know, you have the visionary and the integrator. I don’t know if you’re familiar with that. Sure. And so a lot of guys can’t do both the majority can’t and I struggle with being an integrator, but I understand how things should be put together and so I spend more time than I like, I think, look, the most valuable thing you can do as a CEO as or as a dealmaker is get in front and get out and meet, you know, Rob right now know, meet face to face with your clients, you know, and be out there and supportive. So, why don’t you tell everybody

Ressa 15:20
the visionary versus the integrator, and what the difference is?

Simon 15:24
So a visionary is the idea, guy, Hey, this is what I’m gonna I can, you know, I’m guessing you’re a visionary?

Ressa 15:31
Well, I, you know, and I put it a different way on social media the other day, which was, Are you the person who likes to execute? Or are you the person who likes to create the plan behind the scenes, and, you know, in, and same with you, in your business, when you started, I think early on in your career, except for the real crazy visionaries, the Mark Zuckerberg of the world, and even so they’re still executing on some. You’re you find yourself executing more in order to climb today? You know, I oversee a large, you know, large team for departments in our company, which is there a given time 60 or so people, so I’m less doing? And, you know, I still have a lot of the tenant facing things like you do as well. But I have, you know, it’s more strategy, and it’s more. For me, definitely people manage more strategy working on plans, and where are we going next? There is obviously, you know, and through the pandemic, I’ve been in a lot of deal making and doing and executing, there’s no doubt about that. But traditionally, especially in my role, the the more that’s not scalable, right, the more I am, you know, out of that, the better I can be at helping move the company to the next phase with the other members of our executive management team. So,

Simon 17:01
yeah, and integration is either enjoy it or not, right? Like, one of our big goals this year is to do PNPs, processing procedures for everything, right. So hey, this is the things that we need to fix. But I’m not the one to type all that up and figure it out, because I don’t really enjoy that part. So part of it, just figuring out what you really like to do? Totally,

Ressa 17:23
that’s definitely you know, that’s, I wouldn’t call that’s my strength, either by any stretch of the imagination. And the so when you say, you know, the real estate side of it, are you are you out finding dirt more than you are talking to tenants? What are you doing more?

Simon 17:46
You know, I’d say most of its talking to tenants, talking to brokers, you know, we are not a group that ties up dirt and goes fishing. That’s never been our, our, we like to execute. And so we’d like to be able to go to, you know, a seller or broker representing a seller and say, here’s our track record, we have a plan here. And so that’s usually what we like to do. And we try to get it figured out like, hey, in the first 30 or 60 days, we probably know if we’re going to close because we either have some tenant approvals, or maybe there’s been a bunch of tenant interest when it’s brought to us. And so got it. I liked doing that a lot more than you know, trying to figure out, hey, who could be right for this big site. And sometimes we pay more because of that, because there is that teed up interest. But we’re a volume shop, we’re meant to do volumes. Last year, we did 65 escrows, which is a ton for one company, especially when you’re trading on your own account. Yeah, definitely. When you’re trading on your own account,

Ressa 18:52
that’s a lot. What is the strategy today? You know, pre pandemic, what was the strategy, obviously, at a PNP goal, but what was like the real estate business growth strategy? At your volume shop? How do you you know, get to more deals was it? Was it new markets? Was it something to do with sellers? Was it more tenants? Was it any of that? And Mike, you know, totally off?

Simon 19:14
No, no, I mean, it’s always, like you want to grow your tenant base, always right? Because things are ever changing. We’ve been very blessed to have great tenants. We also don’t want to ever take on more, more than we can handle. And so the flywheel concepts, you know, which I’m sure a lot of people know that I’ve listened to, you know, some of those business books and everything, but we’ve got a flywheel that’s running really smooth. We can, you know, insert a bigger deal and the team can handle it. And you know, before the pandemic we were really thinking hey, do we go out and you know, do a fund and raise money to go buy centers and take advantage of that. Obviously, the pandemic threw that all out the window because you know, lenders don’t want to lend on multi tenant retail because the regulator’s are coming down. And so you know, the the high net worth folks, you know, they don’t see the value in multi tenant today, I tend to disagree, I think there’s gonna be a once in a lifetime opportunity, if you’re in retail, obviously there’s you have to kind of divide retail up into a couple of buckets. One is your mall power center lifestyle, those projects, I think were the most affected by the pandemic, and then you kind of go to your, your smaller strips, your grocery anchored, and then you know, you’re kind of you’re free standing, you know, restaurants with drive throughs, obviously, you know, pull sit down is different. And so I think, you know, there’s going to be a lot of opportunity in the CMBS market with you know, REO eventually. And then also with lenders, I think they’ll definitely be opportunity. And so kind of where we see pivoting is, look, we were our builder, that’s who we are, we develop stuff. And so I would say that we’ll look for opportunities where there’s probably hair on a deal where you know, it really take somebody creative and a problem solver and you know, look to buy some of those assets. But at the same time, we started to diversify more, we’re looking at other product types, we’re just finished a two storey medical facility, multi tenant, 32,000 square feet, we’ve got three RV and boat storage, which is basically a parking lot with covered parking that are in development. And, you know, we think having the the ability to know other uses is an important tool as we look to redevelop shopping centers that might be economically obsolete.

Ressa 21:42
That’s awesome insight. How did you end up having the what I’ll call relationships to do the medical or do the RV? Was that broker relationships with that tenant relationships? How did you get into new uses?

Simon 22:02
Yeah, so the medical one came from a broker that we worked on a retail deal that we were unsuccessful, very early on, and trying to get a rezone, but the broker enjoyed working with us so much that he had got this project, there’s a few tenants that have been interested, a lot of its timing, we’re just right timing. And we’re able to come in and execute. You know, some of the other product types, I think it’s just building your networks, networks are so important, right? You know, everyone talks about, you know, you are who you surround yourself with. I couldn’t agree with that more. I’d say one of the biggest things for my success is, you know, people are like, who’s your mentor? You know, I say, Well, I have dozens of them. Obviously, I have some mentors that, you know, are different in each segment of my life. Our we have in house counsel, for example. And he and I have worked together since almost I started in the business, we worked at my last company together. And then he joined me and we hired him and my current company. And so he’s a mentor. And so I think just having those networks and being able to reach out to people is just it’s so important. And it gives that opportunity. And then people need to trust that you are going to do what you say you’re going to do. And it’s amazing to me how hard that concept can be for some people.

Ressa 23:25
Yeah. Great points. sage advice there, Josh. I really appreciate it. Well, I can talk all day about your business and how you’ve scaled it up. I think it’s a fascinating story.

And, you know, there’s, there’s not a, you know, the merchant developer, the, you know, of the 90s is different today. Especially, there’s a lot less integrated multi tenant shopping centers being built than there were in those days. So the merchant developers definitely different today.

Simon 23:57
Well, I don’t do the technology side. I just one point to make is like, our business has been, you know, high tech, for a lot of us has been like a spreadsheet, yeah, and Dropbox. And now there are tools that run companies, you know, we’ve got a tool called deal for CRE that we, that we use that as DocuSign and box integration and you know, where the pandemic when people had to go work from home like it hurt a lot of people. It didn’t slow us down at all. scheduled dates, bid, signing documents, amendments, everything is online. And so it made it so easy for us to work remote. And, you know, I think that’s a challenge for a lot of people today is like embracing new technologies and creating new intentions. And this pandemic has brought down those breakdowns which require you to have new intentions. What, what,

Ressa 24:58
what project management software do you use for your development deals.

Simon 25:02
It’s called deal floors. Si R E deal for CRA.

Speaker 1 25:06
Okay. We use Procore Yeah, yeah. That construction? Yeah, the construction. Yeah, the construction one, you mentioned your volume shop doing 65 deals last year, the deals, how many were you projected to do this year

Simon 25:23

  1. So that was 65 purchases and sales total sales. Sorry,

Ressa 25:27
about this year,

Simon 25:29
we’ll do 40 And probably 70, escrows this year, wow, we’ll head over deal 200 This year, and it was a climb, like, the first year we, you know, we did like two deals, and then it was four and then every year have doubled. And then we’ve stayed at that, you know, 25 to 35 over the last few years, kind of building the infrastructure. Every time you double in size, you have growing pains. Yeah. And so we just kind of hit that next, you know, growth we’re, we’re like we talked about earlier, we need processes and procedures now, you know, we have a director of human resources now we’re before I did everything and obviously that’s not that’s just not possible and

Ressa 26:13
we can talk about that offline all day because I know a lot about all that that stuff for sure, man and the you know, you mentioned your volume play and if you’re going to be doing like Dollar General deals and deals like that, you have to be a volume play because it’s you can miss really easily on one of those one bad you know, one bad change order and site work and you have you have a problem on the back end. And that brings me to a You know, the part of the show that people love which is the story behind the deal. And you have an interesting story about Vasa fitness in what what town? Phoenix my home? Yes, the whole story, man, because from a development perspective is always interesting, Josh. Yeah, so

Simon 27:05
we, a year ago, we had looked at this it was a burn down Safeway center, Safeway had caught fire burned down. Part of you know, the total center was Safeway, let’s just call I think it’s 100 was 150 or 660,000 feet. Safeway burned down in elected not to rebuild. So, the owner, it’s a leasehold was owned by a special servicer, and there was a ground lease and the ground lease, part of the actual rent on the ground lease was a percentage of rents derived from the from the leasehold, and when Safeway left, what happened in the rest of the center. Everyone left everyone like that, right. And so it became pretty bad. It was down, you know, I mean, occupancy, I think was, you know, sub 2013 Even and so occupancy. We came in and the the asset was getting ready to be marketed for sale. The leasehold was but the problem with the leasehold is who wants a leasehold? Unless you’re in Manhattan. Usually you don’t want to leasehold so why don’t you tell everybody what that is Josh? So a leasehold is you don’t own the land, you hold the lease. And so basically you have the rights to that land by paying a lease payment similar to just being a tenant, except you’re the land is you know, you have all the land. And then and then and then you’re able to, to, to rent out buildings on the land. Yeah. And what’s great for somebody that owns the fee simple dirt underneath and is collecting the rent is at at some point that lease runs out. A lot of these leases go for, what 99 years, years. And so what’s great is eventually you get if you get all that back and you own those buildings at the end of the lease, should you not extend. So the guy that own that owned the land underneath, it was a farm back in like the 70s. You know, and this is in central Phoenix right off of, you know, right in the middle of town basically. And they owned it. They did this ground lease to the and then somebody built a shopping center to ask for now you have who wants to have make a leasehold payment when you have a vacant shopping center. And so you had to convince a special servicer to give you enough time which you know they want you to close right away. And this special servicer had you know they were getting their insurance proceeds only if they rebuild that building, which they don’t have a tenant for or if they sell it. So they needed to transact and then the fee simple owner just an older gentleman he also wanted to transact and then the so we knew about this but then we knew there was a vos of fitness the Vasa fitness is a fantastic operator. They have clubs in Utah, Colorado. Auto Arizona, they’re opening up in the Midwest. And so their 60,000 square foot gym value oriented, really great facility. They had interest in this site, and we knew that they were going to be that they had interest in the site. And so we were able to and this is the juggling act, get the leasehold, you get the special servicers piece under contract that fee simple. And we were able to put to get a Vasa fitness deal completed during our due diligence, which was pretty short, which is pretty amazing. And then on top of that, though, because we didn’t want to bring in any equity partners to take this whole project down. When you think about it, the development is, you know, 15 to $20 million. When it’s all said and done, we wanted to take off some risk. And so we did a simultaneous closing where we sold off a legal description of the Vasa fitness, to a REIT. And so we were able to reduce our risk and get much lower loan on the rest of it. And it also gave us you know, implied equity because when we do the appraisal and the way all the pieces worked out. So it’s been a it’s been a fun project, we’re actually selling a good chunk of the shopping center, I think next week or the week after to a school. And so it’s pretty exciting to see how that’s come all around

Ressa 31:23
a school. Yeah, charter school. So they is it going to be a free standing charter school. It’s going to be there.

Simon 31:31
Yeah, so the part of the shopping center is like a 30,000 square foot plus her mind is weighing that is fully vacant. And so they’re going to remodel it and open up next fall on that. And then we’ve signed it temporary lease, we actually have a former 12,000 square foot school on the other side of the center, we’re not selling so they’re able to utilize that for the next year until they’re able to move into

Ressa 31:53
their new facility. Wow, there’s a lot there. So there’s a lot. That’s amazing story, though. And so you still own it today. You still own pieces of it today. Correct. And so backing up for a second to the beginning. So you mentioned the special service or own the leasehold. So obviously they foreclosed on somebody. Correct. So there was an owner who had the leasehold he had he put in Safeway or whomever it was, he got foreclosed on, then this burns down and now safe. And now the special servicers in a pickle. And the owner of the land is at risk of not getting payments, because there’s no there’s no tenants in the center. And you go in and you make these deals. And then with the special servicer Vasa and the owner, the farmer who owns the land, you then try to de risk yourself. And so you have this large shopping center. And typically, you’re buying things smaller and building smaller, like pieces of land for Dollar General. So this is a bigger deal than you typically might buy and redevelop. But you had a tenant in hand and Vasa fitness. And you end up parceling off pieces of the center getting new legal descriptions. Is that right?

Simon 33:15
Yeah. So the whole center was just 115 acre piece to Outparcels different lots. And so we had to do a plat. But luckily Arizona you can sell a piece of property on the legal description. So we were able to simultaneously close on a legal and sell the Vasa piece and you know, like what could we have? Obviously, today is a little different, but you’re excluding the pandemic and what it might do to cap rates on certain tenants. Like we could have probably sold it for 2550 basis points better than what we did. However, you know, we felt like hey, Rhett de risking was more important and nobody ever went broke making a profit.

Ressa 33:59
There you go. Good point. I love that did on the you said a REIT bought the vasa. I, you know, educate me on vasa. What kind of Capri is to Vasa fitness is trade at

Simon 34:12
you know, I haven’t looked at what the open market is now. But like pre pandemic, I think they were in like in the low 70s. And our cap rate was it was north of that by a decent amount. But we felt comfortable because we’re like, hey, this will de risk us from that standpoint. And look, we don’t want to put that guarantee out on this project right now. And we were able to reduce our exposure significantly.

Ressa 34:39
And you were and there was still was there still a spread to what you could build to and the capper you sold it at you said there was a profit.

Simon 34:48
Yeah, essentially. Yeah, there was. It’s really what we did is we kind of the profit really was in the sense of the rest of the center or basis, lower. Understood. So we were able to get that or financing and you know, all those things came together. So

Ressa 35:04
awesome. Now you have to return it and redevelop the rest of the center is the Vasa fitness freestanding. You said it’s a legal description.

Simon 35:12
Yeah, it’s freestanding. So the other thing you have to do is there was shops building that was attached. And the issue you’ll find out in a lot of cities is if you try to parcel something, what the issue you have is setbacks and lot lines and fire rating. And so we had to knock down about I think it’s six or 8000 feet of shops to make sure that there was enough distance for the rest of the property so we could get a legal parcel

Ressa 35:39
approved. Awesome. I love this. My my director of marketing said one time said, you know, sometimes you might go into a little too much inside baseball, but for me, I nerd out on deals like this. So I, the and so the Vasa that’s a true triple net lease.

Simon 36:03
Yeah, true triple net lease. Got it.

Ressa 36:08
And you sold that, but are you still building it or did the the REIT takeover.

Simon 36:13
So the way that deal was structured is we have a completion guarantee. So we have to kind of see, make sure it is fully completed and turned over to the tenant and built per spec. And so it’s under construction right now, I think, took a while to get permits, but we’re under construction now. Don’t expect to be done at the end of the year. And so

Ressa 36:35
is completion guarantee in this deal? Include rent starting.

Simon 36:42
I know, it’s just you got to build it.

Ressa 36:44
Get the CFO got it. Awesome. That’s great. That’s really derisking because you control everything.

Simon 36:51
Yeah. And you know, we had specific claws that we could take over if there was any issue or the tenant, you know, like let’s say they weren’t doing what they were supposed to, you know, I think so much of it goes back to my OCD Enos of control and making sure you put in I mean, think about the stuff you were doing a year ago. I’m like how, how it would have changed the way you made deals today. Right? Look at every lease, I don’t know what loi is you’re negotiating for new deals right now that don’t include some kind of pandemic language where there’s a rent payback or you know, what have you like pretty much everything the world has been turned upside down and I think you know, nobody could have thought of this but you know, you can you can do a good job of, of thinking about hey, if this did happen, how can what can I do to control my destiny you know, my destiny.

Ressa 37:42
So for everyone out there, Vasa fitness is going to end up in this center in Phoenix or freestanding in Phoenix, in q1 of 2021. And it all started from a guy getting foreclosed on unfortunately, a special serve a fire happening, a special service are now needing to get out and a farmer needing to get out and then Simon cre came in and brought in Vasa fitness that right now

Simon 38:12
make it sound so easy.

Ressa 38:15
That’s great. The that’s it’s really good and the REIT that bought it, is it one of the triple net lease REITs out there in the world, one of the public REITs that owns a triple net lease, yeah, right. For those who don’t know, there are real estate investment trusts that focus on just buying triple net lease properties. And they typically try to buy them at a few basis points above what they might trade in the marketplace. So that was probably a good opportunity for them. You were able to de risk yourself and they were able to buy at a cap rate that they might like to buy at so probably works for everyone. Kudos. If I get to Phoenix in 2021 I’m gonna go check out that that deal for sure. That’s really cool. Thanks. So

Simon 39:06
we could do some bench.

Ressa 39:07
There you go. Awesome. Well, cool story, man. The last part of our show is called retail wisdom.

And I asked everyone three questions. Tell me when you’re ready. Let’s do it. Your best piece of commercial real estate advice for everyone out there?

Simon 39:28
I said it earlier do what you say you’re gonna do. Simple as that

Ressa 39:33
simple. Great advice though. All right, next one number two extinct retailer you wish would come back from the dead.

Simon 39:41
So I’m a little like kind of just bearish on this. You know, pessimistic like if they’re dead, they’re dead. Why they should be dead. The one I’ll say that I miss is Marshall Field’s that was absorbed into you know, Macy’s or whatever. And I just missed from a Chicago Miss Chicago boy and So I missed we used to go there growing up.

Ressa 40:02
Awesome. You’re the first guest to say Marshall Field’s

Simon 40:05
probably the last

Ressa 40:09
last question. So I am and I said this on a previous show I am getting ready my wife and I purchased a family portrait photo session from a for photography from a photographer for my mother in law for Mother’s Day in May. And it’s going to be on the beach, and my wife has to make sure I look presentable and so she’s picked out some beach clothes. The shirt that I will be wearing is a Tommy Bahama Costa Capri short sleeve linen shirt in blue. What does that retail for on Tommy Bahamas website? Josh

Simon 40:51
139 99 While you’re pretty close,

Ressa 40:54
but not on $115 But thank you for playing. Well, listen, man, it’s been. It’s been awesome. I really appreciate the time. This is great. Awesome, Scott, and thanks for coming on.

Simon 41:07
You’re having me good seeing you and let me know if you have any anything.

Ressa 41:12
Yeah, you too. Thank you for listening to retail told. If you want to share a story about a retail real estate deal that you were a part of on our show. Please reach out to us at retail retail at DLC 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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