A.CRE Consulting Podcast: Ron Rohde on Scaling Up, NNN Leases, IOS, and Capital Strategies
Welcome to the first episode of the A.CRE Consulting Podcast! This new podcast is all about sharing expert insights, strategies, and real-world experiences in commercial real estate. We’ll be talking to industry leaders, investors, and professionals to help you navigate the CRE landscape. To kick things off, we’re sitting down with Ron Rohde, a long-time friend of A.CRE and an experienced real estate attorney. Ron has been with us since the early days and brings deep expertise in industrial and triple net leasing.
In this episode, we talk to Ron about his journey from managing single-family rentals to becoming a key player in industrial real estate. He shares how he transitioned to more stable, long-term investments and offers tips for navigating the commercial real estate market. We also dive into the rise of industrial outdoor storage and how social media has helped him connect with top minds in the field. There’s a lot to unpack, so let’s get into it!
Ron Rohde, Michael, and Alex talk Scaling Up, NNN Leases, IOS, and Capital Strategies
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Episode Transcript
[00:00:00]
Michael Belasco:
All right. Well, welcome to our kickoff episode of our yet to be named adventures in CRE consulting podcast. We’re really excited today because we have a close friend of the company, I would say, and Ron Rohde. Ron’s been around ACRE since the very early days. I think Ron, you and Spencer met. At, what was it? The, it was the Cornell real estate council of Dallas. Right.
Ron Rohde:
That’s right. Yeah, that’s how we met him. Josh, probably like 2015, 2016.
Michael Belasco:
Yup. And that’s when ACI launched. Ron’s been pretty much family here for, you know, since the beginning and Ron, you can find Ron all over our website, he contributes a lot of legal commentary and really useful templates in that space.
[00:01:02]
So we’re excited to have him here. So to kick off, Ron, I’m going to just go through a brief. Intro on you and then we’ll kick it over to you to fill in any color and then we’ll get underway. It’s going to be a really exciting episode here today. So, Ron Rohde, a seasoned real estate attorney specialized in investment acquisitions, dispositions, and triple net leasing. What distinguishes Ron is his unique role as both a legal expert and a successful industrial triple net investor. He has represented over a billion dollars in real estate transactions across diverse property classes, including multifamily, industrial real estate and retail. As a principal, he currently owns a robust portfolio comprising of over 120,000 square feet of industrial triple net. With 15 acres of outdoor storage, whether you’re new to investing or part of an established group with hundreds of units, Ron Rohde offers valuable insights to help you via his YouTube channel and Twitter.
[00:02:01]
Which, you know, I frequent occasionally, and I love, I love the content you have Ron. So that’s, that’s an intro. Maybe you can kick us off, give us a little more details about your background. Lead us up to today. You have a lot of exciting things going on and then we’ll just take this conversation as it goes.
Ron Rohde:
Yeah. Well, I appreciate the intro. It’s definitely, you know, more generous than it should be. I think I’m just doing what I can on a daily today basis, but, you know, that covers all the highlights. I’ve always worked in real estate. My background, my parents were in real estate, more on the residential side, but they did like a lot of note lending, note investments, and, Seller financing, those sort of things. And it just was natural to me. I thought, you know, as you make money, you put it in the 401k, you put some savings and then you buy a rental house and just do that. And I think what, what really resonates with a lot of people is it’s a common journey to,
[00:03:00]
Start adding long term single family rentals onesie twosies, you know, buying them one or two a year, which is what I did for, for a long time. And then I had six, I had six house properties. And you know, even with the property manager, it was still a lot of questions. There’s still a lot of decision making that property managers don’t do for the owner. And so I transitioned and I wanted to get into commercial. For larger equity slugs for longer lease periods, trying to deal with the business instead of, you know, in irrational individual, who has feelings as well as, you know, for me, I think it was a little bit of higher quality assets.
So I was owning back at the time, like, you know, 150 to 250k houses, which are like, they’re okay, but they weren’t like nice. And again, back then these types of tenants weren’t super. They always just wanted a phone call. They would just call in something gets lost in translation, yada, yada.
[00:04:00]
And so I wanted a business people, I wanted to have that interaction. So that led me to analyze various commercial real estate classes, really looked at, I looked at office funny enough, you know, my, my parents owned office buildings way back and it was very funny because they said, You know, we all know offices in trouble and a lot of people are not touching it for any price, right?
Not even land minus demo value because it’s too much work. But they said, well, as long as the businesses are making money, they’re going to pay rent. They actually like won’t pay their house payment, but if their business needs an office, they’ll always pay rent. And it really resonated, I think, with people at the time.
And it was logical, probably for a good 2030 40 years. That logic held and obviously with COVID and everything kind of changed. So I looked at office, looked at multifamily, you know, I, maybe I would have made more money, getting in that syndicator game and just flipping some of these units.
[00:05:00]
But I settled on industrial, primarily for longer leases.
I wanted triple net. That was a big thing away from multifamily was that risk, you know, I was, it was an implicit bet every year that I said, I can bet what my insurance maintenance repairs and property taxes are going to be better than, than you. And I felt was a little bit asymmetric risk there. And I’m, I’m not a very risk loving person, despite what Other lawyers and bankers may, may think.
And so I want a triple net, which as we know, for a five year lease term, you have your base rent, presumably a fixed debt, your return, the downside is capped is there’s a floor because if property tax is double, you know, the tenant is just going to pay it and. Presumably they’re going to keep paying you your base rent, but your upside is also limited.
You don’t, if the rents double, that tenant has the benefit of the lease and they’re just going to keep paying that, that current lease rate.
[00:06:00]
But I was okay with that. You know, I wanted to put some money to work and just kind of set it and forget it. And with these single tenant, industrial real estate assets, they really don’t bother you.
I mean, short of something catastrophic, they don’t, you know, they pay the rent. They, if they have parking issues, they handle it. If they have a interior punch a hole in the wall, they fix it. And so, yeah, that, that’s kind of my journey. I love industrial real estate now, and I’ve really kind of. Learned a lot more from the social media side by connecting with people and YouTube and I, and I’m a big consumer of YouTube as well as posting content. You learn a lot from Twitter. You get to engage with really high level people and they can tweet something and you tweet something and you know, they respond to you. And I think there’s no other platform where maybe not a billionaire, but I can get people worth a hundred million dollars tweeting about something. And then they, they respond to me, Ron roadie in Dallas with some, you know, silly question or different insight.
[00:07:00]
They will engage. And so, I mean, I’ve texted with like a Zenith, you know, Alex Olshansky, he’s a guy that I quote met on Twitter. But we’re in the DMS and talking. And I think in the old days, even before email, that’s not possible.
You don’t have access to these heads of 100 million. You know, well, they’re bigger, but like billion dollar funds. You don’t have access to them. Unless you’re in the same country club, unless you’re friends of friends, or you share a lawyer or an accountant that can do an intro, you There’s just no access to the heads of a billion dollar real estate fund.
Michael Belasco:
And social media is, yeah, media has leveled the playing field in a lot of respects where the Ron Rohde of yesterday can meet with these top minds simply through tweeting, right? Which I find fascinating. I want to go back to something, which is part of your journey, which is these single family rentals, right?
[00:08:00]
It’s emotional high. High management involvement, right? More volatility with you, with, you know, every year you got to sign a new lease, small deal sizes, right? So much more of a headache. To moving up to larger commercial deals and these longer term, almost coupon clipping type of project, there’s still stuff going on. It’s not exactly a bond, but it is a lot more stable and a lot less of a headache.
So the trick, and I think what a lot of people realize in pathways such as yours, which is true entrepreneurial, right? You started from like the bare bones, which is a single family rental and moved on up. And you spoke a little bit about it, but how, what’s your general sentiment? Like is light, like if you are at one investment, that single family rental compared to one, just in terms of returns, right?
[00:09:00]
You said your returns are capped, but what you don’t usually get in single family rentals is on the capital structuring side, right? There’s. A 250,000 home. It’s probably you, maybe your family, right? You get into the larger deals. Yes, there’s coupons, but if this thing outperforms, there’s additional upside opportunity for a GP, right?
With less headache involved. So can you speak to that a little bit? And just that transition in the high intensity, more stable, higher return, because you’re leveraging other people’s capital a little bit. I’d love to hear your, your commentary on that.
Ron Rohde:
For sure. So I think that’s a great. Vein to go down because I think people listening to this, if they’re undecided or unsure about how to proceed, I think the step that you have to do an internal self reflection is what is my unique contribution? What is my value add to the deal? It, you know, and there are a lot of investors that have capital. I would say capital is. People often fixate on what they don’t have.
[00:10:00]
And when you’re starting off, you’re like, Oh, you know, we’ve got a 1.5 million equity raise. How are we going to find that? And as you know, and I think people that have seen a lot of deals, money is not the shortfall there, at least again, last couple of years, there’s been tons of money chasing.
If you have a good deal and you present it well, and you have enough time to get that money,
Equity is not, there is no shortage of equity for good deals. However, the flip side is you have to be an expert enough to say this is a good deal and also recognize it has to like genuinely be a good deal. Objectively be in that top 5%, top 10 percent of deals. And then you have to acquire it and recognize it and then push it out to enough network that gives you enough time to get that equity in. But that’s what I think if you’re just listening. If you’re not an expert in some single asset class of commercial real estate, if you don’t have the full equity slug at your disposal, you know, where you just do one wire and it’s yours.
[00:11:00]
What are you contributing? And I mean it just candidly. I think that you can develop the skills and I think you can become an expert. Nobody, nobody is born an expert in CRE and it’s not innate. I don’t think there’s any natural. And so what it means is everybody learned how to analyze a market. Everybody learned about construction types and what type of building has a good market. Good layout. What’s a good utility function. You can find this data largely online or start, I don’t say calling brokers, but, but doing things just on county assessor records of like, what are, what are the 17 parcels that are between 10 and 15 acres in this Dallas sub market, and you can be the expert.
And what I’m saying is if you don’t know for sure that you’re the expert but you can develop that skill.
[00:12:00]
Expertise is a perception of the capital that you are targeting. And what I mean by that is to some, and I’ve experienced this directly, and there’s a couple of things I want to add to this. Retail investors, for example, if you enter a new space or a new asset type, you may know a lot, but maybe you haven’t operated it. If you’re raising to, and you may very well be fully capable of executing, right? Although you’ve never done it to, but, but, and let me add one more piece, but you have commercial real estate experience, maybe not directly in that asset to the doctors and dentists of the world. You are perceived as a true commercial real estate expert, right?
And that money at first may be easier to target because of the, the, the frame in which they view you. Now, if you are to go into a new asset class, you have-happened to me-
[00:13:00]
sS I’m giving you a little bit, I’m revealing the curtain a little bit. Cause I entered the RV park space. Okay. And I didn’t have any experience in owning and managing RV parks.
And by the way, RV. It’s a more management intensive. It’s not the triple net lease stuff, which we’ll get back to in a moment. And I recognized immediately, you know, between the team, I mean, there’s almost a hundred years of commercial real estate development management expertise, but what was missing was the RV park expertise, right? And we went out early to raise some capital. Early one was our first, this is our flagship deal. And we hit walls and a little surprising, right? Because the capital I was going to was very sophisticated capital who said, who’s the, who’s the RV park expert on the team. Whereas if you went to friends and family money, that question might not come up.
You’re the real estate expert, you know, and luckily we had to fit. So we had to build our team out, right? We found an RV park management and development expert has been in the space for a decade, right?
[00:14:00]
Hard to find. It was sort of serendipitous that we found him, but that helped the capital raise. Tenfold.
So the sophisticated money was, was, and also more risk averse, right? This isn’t like, hey, I’m a dentist with 50,000 extra bucks. Mike or Ron go take this money to go play with. Right. And it’s not a big deal. I really hope you make money, but like, if I lose it, I’m not going to go where the sophisticated minds like I’m investing on behalf of other people. And I would rather take a type two error rather than a type one error. And the type two error is I should have invested in the deal and I didn’t. And you can have endless type twos rather than the type one error, which is I invested in the deal and it screwed up and everybody’s very risk averse to that.
So if you are starting out to, I guess, two takeaways, one is. If you’re going out to develop or manage multifamily and you don’t have a multifamily like management guy on the team find him or you have a foolproof plan.
[00:15:00]
You understand it. You believe you can take it on go to the money that’s not directly related to commercial real estate because they will Trust in you more and I’m not this is not like Fooling people like you obviously got to be legit and know what you’re doing, right?
And have the resources, but that’s sort of expertise is, is, is a perception and you need to understand your target markets as you’re going out to raise money. So, so I want to edit that, that piece in Ron.
Ron Rohde:
No, I think that’s a really great way to explain the multifamily or the self storage syndicator boom of the last five years because I think historically when you Are targeting the slightly less sophisticated capital source. Your total raise is small, or it’s just at least limited. And so in order to access higher levels of capital, you have to increase your sophistication or else you hit a wall, you hit a natural ceiling of, Hey, how can I raise 10 million bucks of equity?
[00:16:00]
I can’t do it from friends and family. So I’ve got to go to some family offices. I’ve got to go to some wealthy, high net worth people’s people that know what they’re doing. And so you were unable to raise. So it was really, I think, a sign of sophistication and that validation from higher up people. But the syndicator boom, maybe it’s the internet level, the playing field, social media, because, and I’ll, I’ll do this too, like I used to rag on syndicators and Chad Griffiths and I, he’s a, he’s a YouTuber and broker. We would rag on syndicators all the time because they say really dumb things or things without any context or nuance. And they, but they’re laughing all the way to the bank. Cause they’re like, Ron, I just raised 25 million in equity to buy a 70 million multifamily. And I made 3 million in fees personally.
So that’s what changed. I think in that, in that last boom was people were able to access.
[00:17:00]
Less sophisticated capital, but in aggregate numbers that previously were only available to the family offices or funds. And that sort of thing, you know, requiring deep partnerships. And so people that knew a lot about the asset class and were sophisticated, were looking down on people and like, Oh, you guys don’t really don’t know what you’re talking about.
And you make assumptions that are wild 7 percent rent increases annually for five. Yeah, sure. And they say that’s never happened. That, you know, you can’t make that as an assumption in your model. But then they would go out and they would be successful on a $25 million raise, and the other guy’s struggling to raise five or raise 10, you know, a fraction of it. And it’s like, who, who’s laughing now? And I think you really hit the nail on the head, which is that, that raising source. Well, it is less sophisticated and it’s a different marketing to, to convince them. I think, you know, the, the people that I would recommend is maybe slightly above the friends and family, you know?
[00:18:00]
Because I, I do think better LPs. Make you better as a, as a sponsor, because I get some questions that I’m like, Oh, I didn’t really think about that. Or I don’t know that number off the top of my head. I should really understand how that impacts the returns. And you know, it might not be a big deal, like ultimate impact, but the point is they can open your eyes.
And if you’re just talking to the dentists of the world and they just want to know, oh, industrial real estate, cool, cool, industrial, and they say, could Amazon lease this? And I’m like, yeah, you know, they want a 29,000 square foot built. Like, no, Amazon is not going to lease this building, but if you think it might. Sure.
Michael Belasco:
And even the nose, like if you’re out there trying to raise capital, like if you get in front of people to know, because those conversations are, like you said, I’m just reiterating the point are incredibly valuable. Just to back up the guys with the 7 percent assumptions are laughing to the
[00:18:55]
above the friends and family, you know, bank, but the higher probability of that coming back to bite them is extremely high, by the way, especially as things turn right.
And God forbid, they got some variable rate. At least, you know, obviously. Rates are coming down. Not enough though, to their underwriting standards. So we’ll see how that all plays out in the long run. But yeah, some people it’s just, you’ll look at them and you’ll, you’ll hear the things coming out of their mouth and we’re not their target market, but somehow it worked, so anyway.
Ron Rohde:
I don’t even think that you should let that distract you. I think you should still target who your people are, but it’s very much an internal confidence that you are the expert, you know, within people within your field and that’s all that matters. But if you raise your money from. That’s okay. Just don’t get caught up in looking at other people and how much they raise or trying to think I need to go institutional to be able to buy this deal. It’s like, no, you can raise from the unsophisticated.
[00:20:00]
Just make sure you hold yourself to a higher standard and continually learn and continually try to get better. Cause we’re all, we are all just learning.
Michael Belasco:
Yeah, and you know, obviously doctors and dentists just to call it out or not unsophisticated just in the space They don’t have the time put in that many of us probably do, I want to switch back because I want to get into this topic. There’s a lot to talk about But I really want to get into this conversation around triple net.
I know you have a niche segment But triple net leases broadly are interesting in and of themselves. You know, it simplifies your sort of risk assessment a little bit in how you’re looking at deals and I, you know, and I have experience in, in single tenant net lease because of my previous life at Stablewood, which was, you know, we acquired tons of, you know, triple net and all types of STNL deals. And the big focus was, you know, everything lives in the lease, right? That is where all your 99 percent of every piece of your risk lies in that lease.
[00:21:00]
And when you are looking at a deal and we had a framework, we always looked for certain target. Risk concepts and, you know, things in the lease. When you look at a lease, what are the first things you look at for our audience when you’re trying to suss out whether this is going to make sense?
What are some of the most important things that you look for?
Ron Rohde:
Yeah, so, so like on a deal we have under contract, I get the lease over. It’s usually going to be non searchable, non OCR PDF, which can be a little, well, I’ll convert it over. It really makes a difference. You know, we’ll re refer back to at least multiple, multiple times because questions will come up.
And if you have that searchable OCR, it can, it can be a lifesaver. What, what I would say I look for. Are really beyond just the base term.
So beyond base rent, beyond renewals, right.
[00:22:00]
A first refusal adjacency, you know, whatever. I think it’s, it’s the maintenance obligations and kind of the scope creep, that’s, that’s probably the biggest area because people will advertise it as roof and exterior, right.
That’s pretty common. But then it’s also common that common plumbing. will be a landlord obligation or also below ground. So once the plumbing collects and then it goes underground, And it gets delivery to the, the city or the, the collection. That can be a landlord obligation too. So then we start talking about like, exterior envelope, but does that include doors and windows? I really don’t like maintaining those, but then I, I do the, I find that the damage, for example, comes from loading. It comes from somebody who’s not the tenant and the tenant passes it off and saying, well, like we did not do that.
[00:23:00]
We did not back our truck and they’ll give you the name of some supply or some trucking company and be like, here, this is the guy that did it. But you have to maintain it. So we have to fix it in the short term. And so I would say I don’t like maintaining those types of items as part of the exterior envelope. And also I think it leads to more disputes, you know, roof leaks, or a window leak.
Michael Belasco:
Yeah.
Ron Rohde:
If it’s a roof leak, it’s landlord’s responsibility. If it’s a window leak, it’s tenants. It just. Those are the things I look for. And I look for the language to see if it’s been tweaked and if it’s been customized for carve outs versus quote blanket intent. And I think that again, we usually interpret ambiguities in our favor, as a landlord with the assumption that we typically, or we’d never buy. We’re not buying credit tenants. I think the best tenant we have is like a multi-billion only.
[00:24:00]
We’ve got a couple billion dollar companies that give you audited financials, but they’re not publicly traded and they don’t have their debt, you know, scored or ranked, rated, they don’t have rated debt.
So, so they don’t have really have a risk assessment. I don’t know what, what do you call it? Like a regional, super regional.
Michael Belasco:
You sure? Yeah.
Ron Rohde:
They’re not a credit tenant in the sense that I don’t feel like I don’t feel outgunned if I’m going against UPS on some dispute and they’re like laying down money for litigation. That doesn’t, that doesn’t make, give me confidence, but to follow up, you know, that’s what we look for. I want to look for the maintenance because that directly tracks back to dollars and those are dollars you maybe don’t get back if it’s reimbursable. Fine. I kind of am a lot more flexible on work.
I’m willing to do work to improve or maintain a tenant landlord relationship, but I don’t want to spend money out of pocket. Okay. I absolutely do not.
[00:25:00]
Ron Rohde:
You know, maybe common plumbing, I don’t, I don’t want to do anything. I don’t want to maintain dock doors. I don’t want to maintain man doors, windows, you know, HVAC, I don’t want to maintain, which you may.
Michael Belasco:
So to put a bow on it. So really there’s like the two things, which are basically it’s, it’s work and money. So leakage and expense caps, right? Like you may have a triple net lease, but there may be an expense cap, you know, and then all of a sudden what you just call, you know, we have leakage, right?
You’re paying what you thought with triple net. If operates, but if some expense line item goes above whatever that cap is, and all of a sudden the landlords, Got to pay that. Right. And then, you know, to your point, like operating expenses, which every lease is unique, right. And there’s no lease that’s identical.
Ron Rohde:
There’s no such thing as a standard lease. The best thing you can get is like some of the big shops like Brookfield and Prologis will have their form and they’re pretty effective at shoving it down the throats of their tenants, but it’s not identical.
[00:26:00]
Michael Belasco:
And then you go like on the tenant side. I remember, you know, we had some, you know, major credit rated tenants and it was like that lease. Was not in your favor as an owner and just because they were you’d swallow it.
Ron Rohde:
I did a lot of work for Amazon as a tenant and they have their form and that’s, that’s like in the LOI it’s on tenants paper and, and you know, that the landlords are not used to that and they don’t, they don’t like it. They kind of bristle.
Michael Belasco:
Yeah.
Ron Rohde:
It’s a learning process.
Michael Belasco:
In the last piece of this conversation, I want to shift back to what you’re up to. I know you have some other things going on. Tell us the whole, give us the whole macro view of what you’re up to, what you’re shooting for, what asset classes are interesting you right now. And, yeah, let’s get into that.
[00:27:00]
Ron Rohde:
2018 really pivoted to industrial real estate, but it was more of your traditional full coverage, smaller lot size. But the last four deals that we’ve bought have been. which is industrial outdoor storage. Whoever coined that name, good job. It really stuck instead of, you know, yard space, that sort of thing. And I’m, I’ve really been drawn to it because it’s really, I think a combination of things that I like to do now, as well as positioning myself for the future. So we’re buying with partners equity. So we’re a little, we, we have more risk parameters. And this was something too, I went to the iOS conference. Everybody was there. This was out in Long Beach a couple of weeks ago. Zenith, Triton, Real Term, BND. I mean, top 10 equity guys, nine out of 10 were there. So it was, it was very good. But what I realized is they have all these partnerships with TPG, Angelo Gordon, JP Morgan.
[00:28:00]
They have huge equity amounts, but their buy box is incredibly strict. They do not have ability to take on risk outside of like leasing risk. That’s, that’s almost the only, that’s like the main area where they compete on is lease up risk. And so that helped clarify what I was doing, which is, you know, buying these low coverage yards, low coverage, industrial infill locations.
So we want to be population centers inside the loops. Of DFW. So DF, Dallas, Fort worth, we all have these loop roads, but just buying up more of these assets that I think I’m called generational. You’re never going to have a chance for me to buy four or five, six acres of infill land in industrial real estate, you know, probably in our life.
I think the pricing is just going to continue to rise and we’re going to be able to develop on them. We’re, we’re looking at, we’re doing some development. Thank you. On some of our pure yard or we have extra land that the tenants aren’t using.
[00:29:00]
So we’re negotiating to, to build that out.
Michael Belasco:
So do you see these as like covered land plays potentially, or are you investing it for the investment purpose? It’s not that, but there’s an opportunity.
Ron Rohde:
So I would have said, yes, that’s, that’s definitely one of our exits. And that’s another reason why I like it is you got multiple exit with iOS. It’s a covered land play, sell to a developer. You can sell it on a cap rate. I mean, these guys are buying and they can sell to an owner user. Or you can sell for redevelopment, you know, it’s, it’s because it’s low coverage, you have a lot of exit options and that’s what I like.
You’re not forced into say like a cap rate exit that if the economy’s crap, your, your cap rates expansion, you know, hits your exit.
Michael Belasco:
And let me, sorry, let me ask you one more question. I just want to go back real quick and sorry to interject, but you, I’m curious, cause I’ve like, how are you, how are these other groups defining risk in the space? Is it purely location?
[00:30:00]
Like what, what is risk in iOS that would give you the advantage to go on where these other groups aren’t? Like, how are they defining that risk? What is that?
Ron Rohde:
So it sounds very superficial and I’m sure those guys will hear me, but it’s like, they don’t really like to buy ugly properties. They want it to look white boxed, even if it doesn’t require that much work. I mean, I’m talking like literally paint, clean up the yard, put some cut in and put some new concrete. They, and again, I don’t want to speak too much, but like, it’s that kind of stuff where if you show them a picture of a rusted building and overgrown weeds, they’re kind of like a tenant won’t lease that. And that’s, that’s something that’s a little bit too far them. Cause I know I was under contract to sell a couple of sites and the work required was just, they were like, Oh, it’s a little too much.
And I said, you guys are value add. They’re like, we don’t want to do that. And I said, wow.
[00:31:00]
But then they’re buying and they’re closing on vacant sites right now that you look at that same photo, the building is the same year, same metal construction, clear span, nothing to write home about paved, graveled yard, whatever, but it looks, the fence is shiny. You know, no potholes, painted exterior. And then they say, ah, yeah, you know, a tenant it’s moving ready.
Michael Belasco:
It’s class A IOS.
Ron Rohde:
It’s subtle, but yeah, that’s what I feel is there is the difference. And so we’re able to put equity risks of guys, we know contractors, we can paint this, we can lease this, we can, we can hold it as well if we need to. But we’re willing to take, I guess, lease up risk plus the value add downtime. And that’s what’s a little, I think a little bit bridge too far for a lot of those big shops. Especially if they’re buying maybe like a smaller deal.
Michael Belasco:
It’s already a risky asset class in their minds.
[00:32:00]
It’s like going a step further. Maybe. And maybe I have, I have not been in this space at all. So that would be my assumption based on what you’re saying.
Alex Moroz Williams:
And Ron, do you see an opportunity to, you know, do these quick little fixes like paint, clean up the yard and the fencing and then potentially sell it to some of these larger groups at a premium?
Ron Rohde:
Yeah, for sure. For sure. I don’t particularly want to do that. I don’t want to sell less than 12 months because again, my capital and we’re more tax sensitive too. So we wouldn’t really position for a flip. And because of that, I think we would rather buy, fix, lease, let the tenant go in for, you know, six months and then sell.
We want to hold for a year cause we’re not 1031. And we have different ownership groups per asset. So yeah, I think for that reason, we kind of take it off the table just cause you know, it’s, it’s only maybe a few hundred grand, 800 grand.
[00:33:00]
Maybe that’d be a nice pop 500 grand. So when you have taxes, short term, you know, ordinary income, it sucks.
It’s, it’s pretty big chunk, what 30?
Michael Belasco:
Bumping over that 12 month hurdle is a-
Ron Rohde:
Yeah. But I want to come back to one of your questions. You said like the exit, you know, I, I took a trip to Europe and my wife went to, my wife and I went to Netherlands this year. And of course, like we drive around, we’re bicycling through the industrial real estate and what they have is fully fenced. Paved, very small yards. That they store outdoor materials. They have like raw iron, raw steel and gravel, but it’s all on a paved yard. And it was really interesting to me that this would be considered low coverage industrial real estate that never developed. It never became anything other than gravel storage, because it’s a need that kind of exists perpetually.
[00:34:00]
And I think what that also could be a longer term vision is like, Hey, if you have a good site. It could potentially be mulch storage forever if it’s a paved site, because that’s what the cities and municipalities are doing. And that’s kind of My next thing was, you know, the zoning is so critical. There’s the cities, but once you fully pave fully fence, opaque screening, the cities really leave you alone, but the cost is still way less than building it in a building, right? You’re still not enclosed warehouse pricing at, you know, eight bucks a foot or something where we can lease for like two bucks a foot, no matter how much we spend on concrete, the warehouse is going to be concrete plus vertical.
Michael Belasco:
Yes. Poets. It’s just the yield on what you’re investing, right? Whether it’s a warehouse and that well,
Ron Rohde:
Yeah, but I don’t know. Sometimes I think it does have legs to become its own standalone asset class perpetually.
[00:35:00]
If no gravel storage is allowed, then, you know, cause I look to Europe in some ways as having the density problems for a longer period of time versus what the U S is experiencing, at least in Texas, where we have population growth, these problems are new because it used to be that they would just let you store materials on.
Michael Belasco:
And also in Europe, you may not know, like who owns that while it may be, you know, raw iron or gravel or whatever it is, the, the owner of that might be not a real estate investor, but somebody with another business. And regardless of what the highest and best uses from a real estate perspective, It’s irrelevant to that owner in that space too. So anyway, well, Ron, we’re hitting, hitting our, our time. There’s so much more. I’d love to talk with you about, we’re definitely going to have you back here. Is this conversation is always great every time we get together, but, thank you so much for coming and joining us on our, on our kickoff episode.
[00:36:00]
I couldn’t think of anyone better to have on. So we really appreciate it. Any last final comments, words of wisdom, anything you want to convey or share anything you want to promote, we’ll give you the last minute or so.
Ron Rohde:
Yeah, I was like, just check out my YouTube channel. If you’re interested in kind of the industrial or industrial outdoor storage, legal side of things. But otherwise just keep making offers, you know, throughout the last two years, we kept putting out offers. Even though there was no traction because you don’t know when you’re past the bottom until it’s in the rear view mirror and yeah, I think, I think it’s really critical now.
I’m like, like I said, we’re under contract on three deals that just. On paper it looked better with those rate cuts. It was not, it was not priced in.
Michael Belasco:
Great. Good on you. All right. And we’re going to post all the links to your, your YouTube and all your social media as you guys. If you’re, if you’re listening to this and you’re on our website, you can check out Ron’s stuff.
[00:37:00]
So again, thanks Ron. And to everyone listening out there, thanks for listening and we will catch you on the next episode.
