C LTV? Still 70 or was it lower? Can you just call him when we're done? It's my, it's my turn to ask a question. Damn it. Well, what is up everyone and welcome back to how to invest in commercial real estate. And today we are super excited because we have a guest on the podcast. I love talking to new people about commercial real estate. It's one of my favorite things. Nothing to add on that. That's great guys. Appreciate that out here alone, alone in the cold. We're gonna like, you know, provide some intro to the show. Hey, we're still raising money for Petra Max. We need your money, $12 million. Brian's not gonna eat until we raise it all. Like I thought we went over that. That is great. There's a lot to unpack, but yes, we are raising money for our new Petro Max uh sale lease back acquisition, massive uh 15 gas stations we're acquiring. This is a super cool offering because it offers a ton of extra depreciation. We think that could get uh go even higher based on the legislation right now and then yeah, we're raising $11 million Brian decided that he's not gonna eat until we raised it. If you wanna see Brian eat, then you have to send in money.

Otherwise, I don't know what's gonna happen. Brian's not going to eat this. What's going to happen? Oh, I'll eat anyway. For, for Brian's sake. Uh, take a look at the offering. It's super interesting. I think you're gonna like it. Ok. All right. Moving on enough of that. Um, over to our guests based in Gaffney, Alabama, we have Grant Reeves from Stoic Equity Partners and this is a cool guest because I love having people on that do different stuff than us, right? Um So light industrial, a lot of people like to do light industrial. A lot of people that I know. Anyway, it's, it's a hot asset class right now. So without further due grant, uh tell us a little bit about yourself. Tell us about Stoic. Tell us how you got into commercial real estate. Give us a scoop. Yeah. So thank y'all for having me on today. Good to see you guys. Um So as you mentioned, my name is Grant Reeves. I'm the co-founder and managing director of Stoic Equity Partners. We are based in South Alabama down on the Gulf coast and specialized in multi-tenant flex industrial value add acquisitions. Um, started out in commercial real estate right after college, um went to Auburn University and right after that, got into the brokerage world, um, here in in the mobile area, really did a little bit of, of kind of generalist stuff for a while.

Ended up with a specialty really in um limited service hospitality. And so was selling my Hampton Inn Holiday Inn expresses all that kind of fun stuff. Um Mainly a lot of owner users, some kind of larger funds reach that kind of thing. But did that for a long time, ended up in Mark and Mi out um at their National Hospital group worked there for, for actually, I was a licensed broker there until about two months ago, but I was a really bad broker once I started stoic. So it was a little bit, a little bit different. But um but yeah, so how Stoic got to be is Jeremy Friedman, who's my 5050 business partner in Stoke. We were long time brokers together and worked at a firm prior to me going to Marcus, I always stayed friends that kind of thing, talk deals. And in 2019, I had decided I really wanted to, to get on the principal side, start raising money, doing my own deals, whether that was developments or acquisitions or, or I didn't really have the strategy I wanted to go after at that time, just kind of was looking at everything learned how to model, how to underwrite different JV structures, LP GP structures, all the kind of fun stuff that we do now.

And so I spend a lot of time reading every book, I could find every youtube video really figuring that out. Fast forward to 2020 COVID hits. Um And Jeremy and I were just kind of talking one day and, and he brought up a building that he had come across and it nothing and brokerage was going on at this time. So we kind of just kind of delved into, to looking at what the opportunity was there and, and he was like, now, I really think this is a cool deal, but I have no idea how to structure, you know, JB LP, how to raise money, how to legally that structure looks or anything. And I was like, well, fortunately for you, I spent the past year of my life figuring that out. Um So I can be a great resource. So we did that first deal together that ended up being stoic. We decided we kind of wanted to build an enterprise around that. It started off as just coming. That one deal is what we were gonna do. And we kind of built that now to where we are today. We have um 13 properties, we about 900,000 square feet, um about 87 million in, in asset value that we've done.

Um The first deal we did with self storage went on to do a few more self storage deals and then transitioned into flex industrial. So talk to us real quick. I'll interrupt you, talk to us. About, um, I mean, we're a little bit familiar but our audience might not be. What is flex industrial? What can it be? What kind of businesses does it serve just to give them a baseline for what kind of asset class you're in? For sure. And we call it flex industrial. Some people call it class B industrial, shallow bay, industrial contractor, garages. They're all kind of under that same umbrella, but essentially it's, it's uh office warehouse complexes. So 50 to 100 and 50,000 square foot building made up of a lot of I'd say 7000 square foot office warehouse sweeps throughout. So we really prefer or they have kind of office front. So maybe like a break facade or, or stuck up facade on the, on the front, it kind of look like a regular office building on the rears. You have roll up doors or dock high doors, which is where your warehouse entrance, typically metal frame, uh a lot of metal frame uh but also tilt up construction as well. A little bit of both.

Uh T top is just obviously a lot more expensive and you don't really get any better rents for it. So usually the numbers work better on metal. So typically we, we see these as uh maybe not quite office buildings, but more of a, you know, a hands on industrial type company that's got either machine shops or maybe auto detailing or some area where they want an office, but they also need space to do whatever it is they do, maybe even warehouse product that they're gonna sell or something like that. That's why, maybe why it's called Flex is that it's got, it's open to a bunch of different uses depending on what's needed by the business. Yeah, for sure. And you see a lot of different layouts, I mean, you'll have certain tenants that need 60% office and some that need 10% office and just for varying different degrees of, of what they do in that space. That is one of the reasons we like flex those because if you need to have a large portion of your workspace be warehouse, you cannot go work over zoom and it kind of protects that whole um work from home trend obviously that you see in office space, which is, you know, been really detrimental to that aspect class.

Um We do see a lot of crazy different tenant mixes though. I mean, we have Tin X and a lot of ours, um which is pretty downstream general, a lot of general contractors, a lot of H VAC, a lot of plumbers. Um, what else do we have um by the gyms, but also you get into some more obscure stuff like labs. Um So we have a couple of pharmaceutical type tenants that do ivs, they do prescription drugs and do compounding that kind of thing. So their, their warehouse is actually lab space. Um We have Tyson Chicken that is a tenant of ours that does food safety. So they test all their packaging and, and um salmonella and all that kind of stuff. So again, their whole warehouse is all built out as lab. Um And then you have just come some traditional industrial tenants like UPS fedex. Um they're using it as, as you know, logistics centers too. Um Then Ecommerce is another big one that we're seeing more and more of a trend of we have a decent amount of those tenants already. But like people that are like we have one in, in Mississippi and it's an Instagram boutique and um these girls are sitting in there all day taking pictures of, of women's clothes and selling them on Instagram and shipping them out of the back of warehouse.

So it's really diverse. But yeah, that's exactly what you said. That's why they call it Flex because it, it serves so many different tenet, Nexus grant. Is there something you like about industrial? You said you had uh experience in hospitality and self storage. Is there something about industrial that, that you prefer over those other asset classes or, or you've just sort of kind of moved into this particular area? Yeah, we didn't really, we, we always liked the flex piece of industrial um just based on the supply demand metrics is really how we found ourselves there. Um in most of the markets we play and we play in primarily like secondary cities in the southeast. That's gonna be like Memphis, Tennessee, Jackson, Birmingham, um, Alabama, places like that. Nobody's really built any Flex. So that's kind of how we ended up there in the first place. Um, but specifically why we like flex is just based on the fact that it can fit just about anybody. I mean, it's, it's the cheapest space in town. Ecommerce can, can do well there as well as more heavy industrial uses. So when you have a product that can serve so many different options, you're not really tied to one industry doing well, which is a big, big reason that we were drawn, drawn there too.

I like that. I got some questions on the, the metrics. So you're out, you're trying to find uh a new asset to syndicate or buy for yourself. Uh What kind of uh cap rates? Uh are these types of properties going for in today's market? Is there a, is there a number a sweet spot for you guys where you're like, OK, if we can get it at this cap rate, we, we know we're gonna be able to get the cash flow that we want. Yeah, so I mean, we are value add so like we'll buy stuff that are four caps so we can get to twelve's yield on cost, you know. So I mean, it is a little bit all over the board but for the most part for like a more stabilized deal, we bought 100 and 60,000 square foot portfolio in Mississippi last week that um was a 770 cap. That was kind of a, more of a core plus deal. I mean, it was value added, but it was a pretty stabilized deal. So I feel like it's good benchmark around an eight is to answer your cap break. But what we're looking for usually is, is the ability to buy it around. Um, I'd say around a six or a seven with the option to be able to get it over 10 within two or three years. Sorry, I interrupted you.

Um, well, the, uh, the value a play is it, is it more occupancy increase or you come in and say, hey, these rents are eight bucks a foot and I, I think they should be 11 or 12. Yeah, it's much more. Right. Um, occupancy. There's pretty much no vacancies of flex that we play in or that we see. I mean, it'll be a lot of, a lot of deals that are 100% occupied. Like we have a lot, we bought it, it was $4.56 rents. Um, we're signing at 850 a year later. So, I mean, we're doubling rents there. Uh, but you do have some that are more of a, of a vacancy play. Those are buildings that are built out with too much office so you can have two different sides of the coin. So you have the right play. But then also, like we bought some deals that are seventies or 80% occupancy. And that's because all the vacancies are built out as 100% office. Um So you can go in there and tear out that office, turn it back into 50 50 60 40 office warehouse and shoot up a shoot up the occupancy really quickly. Um which is another good strategy that we've done. So, uh where would you say is uh the best place to find these opportunities?

We have a good broker network. Uh We were prior brokers. So obviously, we, we knew a lot of brokers already in the, in the marketplace. But the thing about flex is it's a little bit different than even what we used to play in hospitality, like hospitality brokers. Like we worked all over the country. I said in Alabama, I sold stuff all over the place. Uh But I was very specialized on one product type. Flex industrial is very localized to each market. So like the Memphis brokers, they really only work Memphis. So they'll be a national firm like a Cushman way, but they're only work in Memphis. And so getting into the markets that you want to be in meeting the brokers that are running with flex space on the lease side, management side as well as the investment sales side, making sure they really understand what you're looking for. Um is really how we've been able to find deal flow. So we buy most stuff through brokers but off market nice. Ok, so what is the the debt? Yeah, I do too. What does the debt uh look like on this kind of stuff? Let's say you're buying seven cap and you think you're gonna be able to value add the rents. Uh what's the going in debt? So usually it's regional bank debt. So there are like 5 to $10 million deals. So a little bit smaller.

Um So we're usually 70% LTC. We'll have a construction loan component depending on, on how much left is there a lot of times we're redoing roofs, we're redoing stucco doing parking lots, we'll have a decent amount of T I money on the front end just to be able to refresh face or rent out office like I was talking about. So, um so we'll go in 70% LTC. Uh current rates or, you know, eight is what we're seeing. Um 25 year a year, two of IO depending on how long the term is gonna be. Um Usually like if, if it's gonna take us, I'd say three years to stabilize an asset. We're trying to get three years of, I have sometimes that's more like 18 months, 24 months. But as long as we can get, um I will say on the more the larger, more stabilized stuff like that larger portfolio we bought in Mississippi. I mentioned um that was life insurance debt at um a 585 rate. So that would work out really well. Um But was the LTV still 70 or was it lower? Can you just call him when we're done? It's my, it's my turn to ask a question. Damn, it. Come on. Jump in here man. Come on.

Ok, so uh a four cap value add deal, we're, we're trying to get it over 10, right? And it said 13 properties 87 million in transaction volume. I mean that's, that's a ton of deals in a short amount of time. You guys are, are shitting and getting where is, is the money coming from? Tell us about like your fundraising and then what is a normal offering look like and, and just like that for cap and it takes us three years to stabilize it and it's three years interest only tell us about the the cash flows through that period and, and when you underwrite your irr and, and a little bit about that. Yeah, for sure. So starting off the 1st 10 deals that we did were all single syndications. And so we started out with friends and family money just like most people do and um have expanded that more into some more family offices, some more kind of quasi institutional money. Um But those are all deal by deal syndications last fall, we decided to get more of the fund model. And so we started SEP Industrial Holdings One, which is currently raising um a $25 million raise.

We're at 7.5 right now, but there's three properties we bought last week for three of the fun. Um We had some JV partners directly in each deal. So we're able to bring in some equity from AJ V partner, some equity from the, from the fund to be able to, to right size the, the portfolio. Um But yeah, on the fundraising side, I mean, we, you just like everybody, we started out with, with old real estate clients. So we knew that like to invest in real estate and raising $50,000 checks and we're still doing that. We love those guys, love people to write $50,000 checks, but we also have some larger family offices that write 2 $3 million checks, which is also really nice. Um That's really a big push for us right now. It's just kind of getting that out there and, and letting people know what we're doing. Um because I mean, y'all are in business fundraising is, is as important as the real estate side, right? That's a, that is a large portion of our effort. Um We have a team behind us to be able to do that. So we have in house analysts, we have uh accounting in house asset management, in house investor relations in house and then Jeremy and I running the running the firm. So I mean, to be able to grow to that, that, that size that quickly, uh we need to have a good team around us.

So that's been a big focus as well. Uh When Jeremy and I first kind of felt like you need to be kind of like a deal shop which like a couple guys, maybe an assistant out there running, doing your own deals where you can really build kind of more of the enterprise side of things. We want more of the enterprise side of things sometimes that that's a headache. So we wish we would have gone the other direction, but for the most part, it's it's good. So we like it. So what do you think the metrics of of the fund are like, what are you, what are you pitching right now on that first one? Yes, we're talking a 7 to 8% cash on cash um over a five year whole period. And so that's average. So these are value ideal. So year one will be like four or 5%. Year five would be like 9 to 10% which averaged back in the mid sevens, irr 1516 overall equity, multiple 1718. Um but to get there, we're we're blending different properties. So we're blue bla like that Jackson portfolio has an investment through the fund and that, and so that's 8.2% cash on cash pretty much throughout the entire life of that, that five year whole period. But for also then there's that forat that I was mentioning that's a mcdonough Georgia deal.

Um We buy, we're buying that for 64 bucks a foot or we bought that for 64 bucks. So I guess bought that two days ago. So sorry. Um but bought it for $64 per foot. Average rents in there are five markets, 12, it will take about three years to turn over the the rent roll. So that one will really won't see any cash on cash return or any distributions off of that one specifically until I'd say month, 30 month, 36 somewhere in that range. Uh But when we pair that up with like the Jackson portfolio that spin off 8% in year one, we can kind of be able to hit our metrics the way we need them to. Um I mean, obviously value add your, your biggest thing you're looking at is equity Mobile and IRR but being able to deliver cash on cash throughout that hold is obviously very important to a lot of people. So what's the exit tragedy of the fund? I'm assuming the equity is locked up for the the entire term. How do you see liquidating all of this? Yeah, so it's a a five year close to fund. Um So total portfolio size with, with JB partners like himself will probably end up being around $100 million. Um We will group together portfolios and geographical locations, so we own a bunch of stuff in Jackson.

So we'll probably group all that together and sell that off to one larger group if the market is there for that. Um This is not a play where we're gonna roll up a portfolio of, of assets to gater throughout the Southeast and sell them to one large group. That'd be great if we can. Um That's just not really an opportunity we currently see in, in the flex industrial space is a little bit more localized still and not institutionalized enough to be able to say, hey, we're gonna sell this whole portfolio of Memphis Jackson Birmingham assets to one group. Um But yeah, so he'll start selling um probably midway through or right before the about midway through year three year four to be able to give us enough time to divest of all those assets as well. So that we're, we're hitting the target to be able to close out December of 28 is when we haven't, we haven't closed. Are you, are you guys doing the fund management in house or you guys uh utilizing like NAV consultants or somebody else like that? Yeah, we used Juniper Square as a fund administration and portal access. Um So we have those guys made up um uh third party uh artist as well every year.

So we have in house accountants, but we also have a third party audit that, that overlooks everything too. Yeah. Well, man, you, you're doing awesome stuff. I mean, I, I'm really impressed and I just wanna, you know, hat, hats off to you and in the short amount of time I know. I know. I mean, I feel like we've done a lot in 2019 and, and talking to you, I mean, it's awesome. You're doing some awesome shit. Um So how do people get a hold of you if they watch the podcast and they wanna get more information? What they, what should they do? Yeah. So, um my email is G Reeves. So Greaves at Stoic ep.com. So ST Os Ce p.com. Um our website also has that it's Stoic ep.com. Um I am on Twitter. I need to be more active on there, but it's Reeves underscore Grant. Um I'm also on linkedin. I don't know my app linkedin, but I am on there. If you Google me love to connect with you. Yeah. Well, good. If we run into any uh flex space, we will hit you up for your advice and maybe we can partner on a deal. Love to, we love to do O GP deals.

We love to do JV deals. So, yeah, I love to work with you on. Please let us know that'd be awesome. Alright. Well, we will see you guys next week for the podcast and Grant. Thanks. For hopping on. It was amazing. Good luck. Congratulations on your success. Alright, bye bye. Alrighty. See you next week.