Welcome back to how to invest in commercial real estate. We are back 2023. I know, I mean, we've been uh when did we start the podcast? 2021 like November 2021. So it's been a long time coming and you know, it's, it's exciting. We had an insane year last year and I think today we just wanted to go back and, and come into a spotlight on 2022 and then maybe at the end, go into what we're thinking for this year. So we did a ton of deals last year, right? Like I think we bought 10 and we sold four. So more than a deal a month, a lot of activity um obviously couldn't have done any of this without our investors. So massive. Thank you and shout out to them. We had a ton of new people get involved this year on real estate, right? Like the investor list continues to grow. How many new investors did we get on our list in, in 2022? Do you think you have any idea? Over 100 easily, 100 easily 100? But I think out of those 100 new people that invested with us last year that haven't invested before.

There's easily 25 people I want to say, I mean, at least two brand new people every single deal. Um which is just amazing, right? Because that's why we're doing. This is the, the testament to get people involved in real estate. We found a to make money also. Yeah, we're, we're selling you, of course, we'll make you money. Why we make money? Isn't that a fair trade? I mean, win, win. Anyway. So thank you to you guys for listening and being part of criterion and we're just gonna go through. So we started off the year with a bang and in January, we bought Plaza West. It was $7.5 million acquisition. So I personally love Plaza West. It's probably our biggest deal to date, right at that time was it. That was the biggest deal at the time. Big deal to date. It's been a huge home run, massive home run, right? So we, we bought this massive shopping center at three out parcels in front of it. We talked about it a lot on the show. We were able to successfully close those out parcels as well as distribute cash flow all year. And the investor irr is ridiculous on that. And they got 100% of their money back and we still own most of the shopping center and it's still cash flowing and it's still paying down the debt, massive home run on that deal.

Um Not too long after that. I think it was in April, we bought Gordon and farmer and that was a market or Marketplace Commons was like a month later. But yeah, both of those together, we combined in the Saint Louis retail fund one. So, um, that was going great. You know, we knew we had a decent amount of Capex work that needed to be done initially, you know, some roofing, some sidewalks and parking lots and stuff like that. But that one we actually walked into, we had several tenants immediately kind of non default. Um, a couple that were struggling with just getting them on our payment schedule. So, um, that one wasn't the best this year, but we're optimistic for 2023 and we've got a decent amount of vacancy to fill and that was the plan with that asset all really all along. Yeah, I'll just, I'll just make a note that uh, out of 10 deals, I would say the, that one or two has probably been the toughest deal and, and so I just remind investors, we haven't had deal, we haven't lost anybody's money, but there's always that chance that deals won't go the way we want them to. This is an example of a deal that hasn't gone anywhere close to the way we wanted it to, but it still is servicing the debt.

We're still positive cash flow. Uh and we've had a lot of vacancy. If we can fill that vacancy, we're gonna be, you know, back to paying distributions. It's just an example of a tough deal. Uh that isn't losing money, that isn't losing investor dollars. Uh But it's been a struggle, you know, I think that goes back to our original pitch, right? Like we want to find investors that don't have an investment relationship of $100,000 and they give it to us one time. You know, I want a relationship with somebody that can give it to us 5, 10 times a year and try to be in every single deal. We try really hard not to cherry pick ourselves in deals. I mean, we're in every single one of them for this reason to help mitigate risk and diversify. Um Next one, we bought another kitty Academy in Cyprus. Normally our kitty academies are ground up construction. Um But this one, we actually bought an existing kitty academy. Joel can't even silence his freaking phone. Its silence is vibrating. Um Anyway, so we remodeled this kitty academy. We plugged a new franchisee in there. We were able to get, we, we were able to get a 15 year lease with annual increases on that. And we actually just sold that right before the end of the year.

They signed the contract the day after Christmas, they closed four days after that four and a quarter of a million dollars in cash. Fastest closing I've ever seen in my life. Fastest closing our partners have ever seen in their life. Uh They, how did that come out based on projections based on projections? I think that deal had like a 50% irr. So we bundled that deal in the New Jersey Kitty Academy, which is next on our list um together. So overall, that deal was a massive success. And again, we ii I don't know if I said this or not, but we did it twice as fast as we originally projected. So I think that one, we were supposed to hold a year and we bought it in June and we exited by the end of the year. So obviously a taxable event there, but when you make money, sometimes you have to pay taxes. All right, next one Kitty Academy in New Jersey, we did the exact same thing as Cyprus, right? We bought a failing kitty academy, we shoved in a new operator in there. We spruced up the place new 15 year lease that is currently on the market for sale today. As soon as that sells, it'll get the investors the rest of their money back and, and the profit as well. Um That one, I think we're supposed to hold 18 months, right?

Bought it in July. So we've already been under contract once it fell through within, within the next six months. Yeah, which just boost the irr, a ton. I think that one will probably end up with a 30 40% irr pretty easy after it's all said and done. Which is amazing. Right? Like, when's the last time you talked to somebody? How's your stock? You out and doing, man? I'm up 30%. Yeah. Stock markets were down 20% across the board for 2022 worst year, uh, for stocks since 2008. Oh, that sucks. Yeah, that's bad. All right. Next, see, this one is fun. This one is fun. Stonewood Village. I'll never forget we were sitting at smoke eating lunch. We were watching this auction. We're bidding on a property. Never seen Stone Mountain, Georgia. Didn't, didn't you? And I fly out there or was that after the fact after the fact? Oh, yeah, we, we bid in one. Well, we didn't actually win the auction that day, but we were bidding on it without ever having seen it. Right. And then they call us the next day and, and, you know, we're conveniently the winner. You know what I mean? You never know what it is with these auction platforms.

Anyway, we signed the contract the day after we wired them, we wired them $600,000 a day after that. Me and Brian hopped on the flight because Joel and Cancun probably or something. No, I was not in Cancun. Well, actually, depending on when this was, might have been like, no, I can I can. Um, anyway, Stonewood Village has been uh kind of a, a secret success, right? All of the tenants have, have stayed. All of the tenants are current and are paying rent. We've had tons of early renewals. Little Little Caesars just reached out a year and a half before the lease expires to renew another five year option, which is just a testament to how well they're doing now. They're, they're saying, man, we have to exercise this option as fast as possible. We have to lock down this location for another five years. Um We had that funny car crash, you know, somebody drove through the building, so we got the insurance settled on that. You know, we lost a few $1000 which is negligible. I mean, it could have, it was $30,000 worth of damage. But overall, we've got a property that's not leaking. We've got a property that's in good condition. We've got a property that's, that's paying us great cash flow.

It's got tons of money in reserves because we haven't had to spend anything really on, on capital expenditure. So if anything that's gone to plan or maybe even better since we didn't have any surprises, no surprises. I would say it's better than playing. It was, it was a good deal though. Good deal. Um The next one right, trying to top, uh we set a goal for $60 million in acquisitions. So we knew we had to do something big. We got presented an opportunity with the guys um in, in Fort Worth, the Woodmont guys um to buy a deal in Slidell, Louisiana, which is again a little out of the comfort zone a little bit, but they had a great relationship with several of these big box tenants to where they were just calling their senior real estate guy on the phone and saying, hey, would you renew at this location? Yeah, would renew. That sort is great. Here's financials, what have you? Um We we had an loy I think under while we were under contract, that tenant got moved in and the big value add for this place. Sure. It's a big box center and it's, it's an eight cap or whatever it is. It should cash flow fine with the debt we had on it.

But the real value add, the real heavy lifting was those out parcels, right? And one of those were um under contract with a car wash to buy one of those and that's over a million dollars in sales proceeds right there right there. It'll probably pay back a third of the equity. And the beauty of that deal is when we set up the loan on the shopping center, we had them specifically exclude the out parcels from the value. So we get 100% of those sales proceeds. Um So now the cash on cash will go from something like 11%. What it's been paying the past two quarters, which is what I would consider a great cash on cash return. Now, that'll probably go up to like 15%. Right. So massive win. So, and that we think that might happen. Q two based on the LO I Right. Yeah, they, we, we have to go and get the lot split, they have to go and get permitting and, and there's like two or three other out parcels, there's three left. Yeah, so that, that could end up being a really, really massive home. I agree. Yeah, massive deal. And that set our record purchase price for the year largest acquisition to date and last year of $12.5 million a big massive deal.

Um After that, uh these are my favorite because it's in Owasso. So the next one is at 96th in Garnett, uh a really busy retail corridor of Owasso, Oklahoma, which is part of Tulsa uh just north of there. And this is a retail development. So the story behind this land is it was owned by this family forever. They sold the majority of the land to develop the JC Penney, the best buy the this massive quarter million square foot met Power Center and she refused to sell the rest of this land, even though it was just an amazing location, there was a bar in there. And literally as soon as this old lady died, the land sold and it's now, immediately developed, everyone was kind of waiting for it. But anyway, um, we put in a, uh, salad and go, um, we're, we're developing a salad and go. We're developing a five tenant, um, strip center next to that salad and go. So I think it's probably a $4.5 million development cost on that. We put around a million dollars in equity into it and the building should be complete by the end of the second quarter next year. Um, and hopefully sold by the end of the year next year, we did that again.

So on the other side of that lot, there's Chipotle. On the other side of that, Chipotle is this hard corner, 30,000 cars a day who doesn't want to be next to a Chipotle. It's perfect. Seriously, Chipotle chick-fil-a next door. Uh There's the Hawaiian brothers. I I think anyway, Chipotle is a great location. I mean, the Chipotle has literally had a line out of the parking lot into the street, backing up traffic because Owasso doesn't have a Chipotle. It's mind blowing that we have at Chipotle, but now we do amazing location. Um That one is a lot easier deal. We're doing two ground leases and people really aren't familiar with ground leases. I think Joel explain, I guess in the layman's terms as easy as possible, what a ground lease is. It's really easy. You have some land and you have a restaurant that wants to go on there or it could be anybody but you just, you do a lease like you do a normal retail lease only. You're just leasing them the ground, they can put whatever building uh they want, maybe you have approval rights. So they, they construct a building on your land, but you're just leasing in the land. If they ever go out, then you own that building too because the that's permanent fixtures that they put on your land.

So if they break the lease or don't want to renew the lease, then you get the, you, you get the land back with the improvements, the building, the building, it's pretty, it's pretty crazy. So in this case scenario, we have to deliver, uh, a pad with utilities on it. So we're gonna do some dirt scraping. We're gonna get utilities, uh, Taco Casa and then the other one, is still under Loy right now. So we can't release that one, but it's gonna be another, um, fast food place, uh, uh, ground lease, fast food place. So two ground leases, um, will exit those. Um, we will deliver the pads in the first quarter. Most likely they'll probably have the building out by the end of the second quarter, maybe end of the third quarter and they'll probably sell before the end of the year next year. Good news. We got the Taco Casso Casa lease signed, what, today or yesterday? I got it. Yeah. I got it signed today and, and then they've got uh a lot of interest on the, on the, the, the remaining space. So there was a lot, I mean, and there's uh a lot of bigger brands that are kind of teasing us a little bit and throwing their weight around of like, hey, you know, of course you want this, you need to give me the time timeline I want and I think we're kind of playing hardball with them because we've got other great tenants that are willing to sign and pay great rent.

So I don't really care if there's this amazing brand that wants to play hardball or somebody else who wants to pay me rent in a good position on those. Yeah. So we, we feel good about that and that was actually a start of a brand new relationship for us. So we've done a lot of deals with the Woodmont company now, I think five or six maybe seven. Um and they introduced us to another company called um Retail Partners. That was our second deal with them. We're looking at several more deals with them. We'll most likely have several in 2023 with them for sure, great group of guys. Um And then the last deal of the year, I think we closed this on December 5th um was a small gym deal in Oso so a small two tenant gym deal, it's being fundraising right now. It went up, um, on the website, it was a super small equity raise that and the last two OSO developments. So, if you hate us because you didn't get in. I, I'm sorry, I mean, it, it sucks. Right. Like we have to fund this deal. We know a million dollars isn't a massive equity raise for our investor lists. It, it sucks. The last one sold out in an hour, I hate getting a phone call from the guy two hours after I launched it saying what the heck, man, it's full.

He, he actually, he doesn't hate getting that phone call. He loves, he loves filling that up in one hour. He actually gets a lot of those calls, but people get frustrated. Right. Hey, you just sent me this email two hours ago. What am I supposed to wait at my computer for you? So, you know, it, it's tough. We have, we have a lot of investors. We can't accommodate everybody. Uh And it's just the nature of the game that those that are, that are most interested that trust us that have been in deals before are gonna pull the trigger faster uh than, than certain other people. And it's not that we don't want to let people in it. It's just no, it's really you not wanting to let people in. It's not your fault. You know, we want to find more deals. Uh We found a lot of deals. This didn't even include the precision equity deals that I was involved in. So there's a lot of deals done in 2022. I think the 2023 deals just to, to talk about that they'll look different. There won't be as many cookie cutter multi tenant retail deals that we're buying at a cap and getting debt at, at 4%. Uh We're gonna maybe look to do a lot more development partnerships because the market is still pretty good. Uh But, but getting long term debt with sellers that are unreasonable on their pricing expectations is, is gonna be a little tougher in 2023 the development seem like they haven't slowed down or maybe it's because we're relatively new on development and it's becoming a bigger part of our portfolio.

But I think the development you're, you have such a short holding period and the arbitrage is the lease right that you're selling. So it, it can support the increased carry cost of the debt, right? Whereas the long term cash flowing property, it it can't really support the the extra debt costs because it it's cash flowing. So I think if you do see a retail deal, which I'm I'm sure the probability of us doing a retail deal next year is pretty high. But I would say in the short term, you're gonna see us underwrite 2 to 3 points lower cash on cash until we can get that rate. Refi obviously, we believe we can get a rate cheaper than, you know, 7% or whatever the heck it is right now. Um So you'll see us, you know, hey, here's year 12 and three. Not amazing. It's really shitty debt. We, we understand that but year four, here's what it looks like with great debt. Here's what it looks like with January 2022 4%. Amazing. You can buy whatever you want debt. Yeah. predictions that I have for 2023. I, I believe we'll see sellers starting to adjust uh their cap rates uh maybe by 2nd, 3rd quarter of this year.

So before where rates went up, so fast sellers were holding now there are gonna be some sellers that need to sell for whatever reason. So we'll start to see some of that adjustment. So we'll look forward to trying to take advantage of those deals. Absolutely. I think some of the word that I'm hearing Joel, I don't know if you've been reading up on this is that late uh 2023 maybe Q four that maybe interest rates start leveling off and maybe start tinkering down just a little bit. I agree. Yeah, I mean, what what I would say is, you know, on the criterion building that interest rate is slowing because we believe long term rates are, are still have the possibility to come down in the short term. You know, we think we can refinance that asset in in Q one or Q two. Um, so I, I think of 2024. Maybe. No, I mean, yes, but maybe earlier. Yes, but maybe you want like this year we're in Q one of 2023 we're not thinking about, I think long term interest rates are, are coming down in the end of the first quarter. Probably. We'll see. We will, we'll have this on video. It's documented. Well, good.

I think it was a good run. We look forward to 2023 2023. Hopefully, uh, you guys listening will make a commitment to get involved in commercial real estate uh in this coming year. Absolutely. Well, that is it for this episode and we will catch you guys next week on how to invest in commercial real estate.