Philosophy on Investing
History of Results: The National Council of Real Estate Investment Fiduciaries (NCREIF), private market commercial real estate returned an average of 8.4% over the 10-year period from 2000 to 2010 (details). This strong performance was achieved even during the early years of the worst recession. Of course don’t forget past performance is not a guarantee of future results.
Lower Volatility: Typically private real estate has lower volatility relative to equities and bonds. Volatility is one type of risk, so by mitigating this risk and still maintaining relatively high returns the result is a compelling risk-adjusted return in real estate.
Diversification: Typically private real estate is less correlated to stocks and bonds therefore has historically been a great hedge against market cycle changes in other parts of the economy.
Tax-deferment: There are the basic tax benefits of depreciation and interest deductions against real estate income available. However there are also exciting and more advanced tax benefits to real estate such as 1031 tax exchanges and the potential of investing in real estate through your tax-deferred accounts such as an IRA.
“Real Assets”/Tangible: Unlike stocks and bonds an investment in real property is backed by a physical thing ie “bricks and mortar”. This means that it takes much more than just fear to devalue real estate whereas fear can decimate the value of other investments overnight.
Nothing herein should be regarded as investment advice or as a recommendation regarding any particular investment or course of action. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn.
Target Markets & Risk Profile
Target Markets: That exhibit compelling fundamentals, including population/university enrollment growth, job growth and a supply/demand imbalance.
Strategy and Risk Profile: Mascia has the expertise to execute deals across the risk spectrum; however, most transactions typically generate stable, in-place cashflow, but have a value-add component. The strategy can range from a light value-add, characterized by cosmetic upgrades, management or financing inefficiencies, to deep value-add which requires a comprehensive physical upgrade and complete property rebranding.
What We Look For in a Property
Properties Must Have
Excellent Visibility which means:
- Building must be parallel to a major road (not perpendicular to the road)
- Limited outparcels blocking visibility
- Easily seen from the roadway ideally on a flat land parcel
- Ability for large pylon and building signage
Excellent Property Access which means:
- Direct access to the main roadway, not an interior road or ring road
- Ideally able to access from both directions of the major road
- Must have excellent parking 5 spaces per 1,000SF or more
Excellent Quality of Market which means:
- Population must be at least 50,000+ within 5 miles
- Ideal is 100,000+ within 5 miles & 50,000+ within 3 miles
- Must have positive population growth over last 15 years on average
- Must have AMI of at least $75,000 ideally $100,000+
Excellent Location Within the Market which means:
- It should not be at the end of the retail/medical area where tenant quality declines
- Ideally directly in the middle or near the middle of the main retail/medical area
- Must be a corner or a have a traffic light
- High traffic count of 20,000+ VPD
- Lots of other retailers or medical facilities in the area
Other Criteria We Consider
Size of investment
- $1-$20mm with most acquisitions being $7-$10mm.
Size of Center
- Ideally no big box space and no tenants over 20,000 SF
Per Square Foot Price
- Not Considered – is a price of $400/SF or higher
- Good – is a price less than $250/SF
- Excellent – is a price less than $150/SF
Occupancy / Vacancy Goals
- Good – Less than 10% vacancy
- Excellent – Approximately 10-15% vacancy
- Must be less than 40% vacancy
- Ideally below market, acceptable to be at market, center where all rents are above market will not be considered
- Multiple employers in the region, cannot be tied to a single source of employment like automotive, oil/gas, retail etc.
Ideally near a university or hospital nearby
- Original construction or renovation less than 10 years old is preferred with brick being preferred over EIFS
- Ideally shadow anchored by other medical/hospital, grocery, Target/Walmart, or other major traffic driver