We invest in two types of real estate in the retail sector…
Located in High Density, Urban Settings with Low Vacancy Rates
Typically ranging from 1,000 square feet and up, these retail spaces are located in densely populated urban neighborhoods and are situated on the street level as part of a larger condominiums or apartment buildings. We seek retail condominiums in areas that have high demand from the tenants that provide the goods and services to the “built in” resident and neighborhood population. The rise of urbanization and increased density in major, and mid-major cities plays a significant role in this strategy.
- Low to no management responsibilities and low expenses
- Built-in Customer Base due to surrounding resident and neighborhood population
- No roof and little or no general maintenance responsibilities
- Typically NNN or NN leases (Tenant pays all or most expenses)
- Built in Lease escalations
Located Nearby Universities and Colleges
These retail properties are located in and around universities and colleges with student populations of approximately 15,000 and above. Universities are vibrant economic centers and historically promote growth in the surrounding area. Populations near universities often have a higher per-capita income, and students and faculty provide a “built in” customer base that retail tenants covet. Remember your college town? Has it changed?
- Retail properties of these types are unlikely to be disrupted by the internet
- Provides good and services to built in customer base of students and faculty
- Typically Triple Net Leases (Tenant pays all expenses)
- Growth Trajectory usually present and indefinite
- Built in Lease escalations
in Retail Condos and University Surrounding Retail
We have all heard the words “risk is commensurate to return.” A simple and important concept, yet often times investors chase the promise of a higher return while not fully recognizing the risk in doing so.
Our real estate investment strategy embraces the undeniable and too often ignored relationship between risk and return, seeking property types that provide a higher probability of performance, a lower probability of capital loss, and returns proportionate to the level of risk being taken.
One way to lower your risk in real estate is to invest in properties where management responsibilities are either low or simply don’t exist. Apartment investing for example, is very desirable, but management responsibilities are numerous, costly, and often inconsistent. Office buildings and single-family renovations are also highly management intensive, high expense, real estate investments These expenses can erode or destroy your investment return.
On the other hand, retail condominiums have almost no maintenance responsibilities, (there’s no roof!) and any maintenance required, such as painting the building, fixing a pipe, or sweeping the sidewalk, is handled by the manager of the building in which the condo is located.
Guessing Is Not Investing
Another potential disadvantage to investing in properties with a greater amount of operating costs and responsibilities, is correctly estimating expenses. The more management intensive, the more expense items you have to estimate before investing. How much will the roof cost to repair if it leaks? How many air condition units will fail this summer? Will the new tenant request an expensive new build-out? These expenses are often times the reason a real estate investment underperforms.
The retail condominiums we acquire are often secured by leases which require the tenant to pay all expenses related to the property. These are known as Triple Net Leases and include expenses such as utilities and property taxes. Yes, taxes! With Triple Net leases, the guesswork on expenses is gone, and your risk reduced. You can learn more about Triple Net here.*
* Not all CRA investments are TripleNet investments. All investors must read the offering memorandum PRIOR to investing in any offering.