InCommercial Capital: Pulling the Levers of Real Estate Solutions
An Interview with Restaurant Finance Monitor
Both Wes Staples and Marc Barber like solving the capital puzzle for restaurant operators. “It sounds nerdy, but one of the fun things about this job is solving capital issues,” said Staples. “How do we pull the levers of what is going to work for restaurant developers? How can everyone win and make money from deals?”
Indeed, that’s what makes Barber’s day, too: “How do we use our money to help you grow?” Barber is managing broker and Staples is vice president with InCommercial Property Group, a firm “focused on providing real estate capital for growing restaurant companies,” Barber reported. The company was started by real estate executive Erik Conrad in 2003, who launched the commercial brokerage with an SBA loan (West Town Realty). Today, they own or manage over 300 properties, mostly net leased.
As they’ve grown, they have increased the number of services they provide to single-tenant retail operators, including restaurants. Those solutions include:
• Joint Venture Equity
• Preferred Equity
• Mezzanine Debt
• Recapitalization/Sale of Partnership Interest
For the following services, InCommercial doesn’t directly provide them, but can arrange for their clients:
• Credit Facilities
• Permanent and Term Loans
• Construction Loans
“We have found that many of our competitors need clients to fit into their box,” said Barber. “We’re not focused on that. We’re working with our clients to tailor-make solutions to address their pain points” in the real estate process.
He finds most failures for restaurant developers happen early in the process, a place where InCommercial jumps in.
“As an operator you often have that first outlay of capital and you don’t get it back,” he explained. “We can provide capital to close on the land, or for construction, quickly.”
In fact, “we can contribute up to 100 percent of the capital stack,” Staples said.
They are also keen to provide sale/leaseback financing to multi-unit restaurant operators. “We feel like that’s a great way to monetize the real estate for the most value,” said Barber.
They target restaurant operators with more than 20 locations, with financing needs ranging from $1 million to $60 million. And, their term sheets are “friendly,” Barber explained. “Our term sheets aren’t overly onerous. We are putting together terms that don’t include points, for example. Our lending costs are market, or better-than market.”
Plus, while they work in large DMAs, they aren’t afraid to own locations in tertiary markets, either.
“Because we’ve owned in tertiary markets before, we can be comfortable with some of those other brands” other real estate companies aren’t, said Barber. “We think there is an opportunity gap in some of the smaller markets because they get ignored sometimes. Everyone needs to eat, and when the market has only a couple of options, you can get a bigger share of that market.”
For more information, contact Marc Barber at mbarber@incommercialre.com, or at (916) 717-2079.
Whitepaper: The Case for NNN-Leased Investments
InCommercial announces the release of its recent whitepaper titled: The Case for NNN-Leased Investments in Your Portfolio.
The whitepaper discusses the one asset class that is the most predictable and durable – long-term, single-tenant, absolute triple net-leased properties with an investment-grade guarantor.
Written by James G. Shaw, President at InCommercial Property Group.
Download Whitepaper: The Case for NNN-Leased Investments
Introduction:
When I tell people that at InCommercial Property Group we focus primarily on triple net properties, leased on a long-term basis with an investment-grade guarantor, they often tell me that they are boring, and not “sexy.” Okay, fair enough, but investors, particularly 1031 Exchange investors, are increasingly seeking predictable and durable income as their investment property of choice, especially in today’s turbulent and unpredictable economic environment.
When viewed objectively, there can be no doubt that the one asset class that is most predictable and durable is long-term, single-tenant, absolute triple net-leased properties with an investment-grade guarantor.
CCIM Institute Lease-Default Analysis:
The CCIM Institute published a lease-default analysis of 100 single-tenant, net-leased deals consisting of 70 investment-grade and national tenants and 30 franchisee, regional and local tenants located nationwide. Of the 70, no investment-grade tenants defaulted on their leases (0.00%) and only one national tenant defaulted (1.43%). Of the 30 franchisee, regional, and local tenants, five defaulted (16.67%) (1).
A 40-year study by Standard & Poor’s of corporate bond defaults between 1981 and 2021 (which included several recessions, including the Great Recession) found that corporations with an investment-grade rating experienced bond defaults at a rate of only 0.075% per year (2).
InCommercial Portfolios of Triple Net Lease Properties:
Looking at the portfolios of triple-net properties leased to tenants with an investment-grade guarantor owned and/or managed by InCommercial, there have been zero tenant defaults and zero mortgage defaults. Even during the peak of the pandemic, with the economy at a virtual standstill. We experienced 100% collection of contracted rents in our portfolios of net-leased properties with investment-grade guarantors (3). We are not aware of any other real estate asset class that can make a similar claim.
National Multi Housing Council Study:
For comparison, the National Multi Housing Council conducted a study of more than eleven million apartment units between April 2019 and December 2021 (4). They found that for occupied units, during all of 2021 (when the pandemic was waning) 22.1% were at least six days late in paying rent and 6.00% did not pay their rent at all in each month. Add that to the actual or projected vacancy rate and even an asset class perceived to be as low risk at apartment properties is not quite as predictable in its income stream as investment-grade, triple-net leased properties.
Predictable and Durable:
The predictable income streams of investment-grade net-leased properties are also durable. Typical lease terms for these properties range from 10 to 25 years and almost always contain tenant-controlled options to renew for multiple terms, potentially creating generational income streams. The net operating income from these properties is equally predictable as the tenants pay all expenses, including repairs and maintenance in an absolute net lease like those that make up most of the properties in our portfolios.
But what happens when single-tenant, net-leases do mature (expire)? InCommercial has managed more than one hundred lease maturity events (5). Of those we had ninety-nine successful renewals with an increase in rent; one non-renewal where the property was sold at a profit; one non-renewal that was re-tenanted and still owned; one non-renewal sold at a loss; and one non-renewal which is vacant and still owned.
Unpredictable and flashy may be exciting to some. So, label us boring if you wish but predictable certainty makes for a good night’s sleep and happy investors. Frankly, in today’s economic environment, that is just fine with us.
Download the full whitepaper HERE: The Case for NNN-Leased Investments
Sources:
(1) https://www.ccim.com/cire-magazine/articles/323688/2014/11/net-leased-single-tenant-risks/
(2) https://www.maalot.co.il/Publications/TS20220424121828.PDF
(3) InCommercial Property Group Portfolio Data
(4) https://www.nmhc.org/research-insight/nmhc-rent-payment-tracker/
(5) InCommercial Property Group Portfolio Data
InCommercial Hires New President, Capital Markets
Leading real estate company InCommercial Property Group announced that James G. Shaw has joined the firm as President of Capital Markets.
With over 40 years of experience, Jim is a respected authority in the industry. To date Jim has been involved with the acquisition, financing, management, disposition, and brokerage of investment real estate properties with an aggregate value of more than $4.5 billion on behalf of both institutional/corporate and individual investors.
In his new role, he will focus on designing and implementing capital market strategy as well as managing and expanding key industry relationships, strategic partners, clients, investors, and the development of new offering products.
Jim is a proud recipient of the 2007 ACE Award (Registered Rep) from TICA (the predecessor to ADISA) for excellence in professional performance and ethics.
Welcome aboard Jim!
Read the Biz Journal People on the Move feature here: https://bit.ly/3eUthfX
Company Pool Party Come Rain or Shine
The rain didn’t stop the InCommercial team from having a day filled with fun, food, libations, good conversation, swimming, Irish jigs, pickle ball and lots of laughs! InCommercial CEO, Erik Conrad, and his family graciously hosted a company pool party for the whole staff and their families. The bar was overflowing with refreshments of all types including the “punch” which was a crowd pleaser. Poochie’s was served for lunch and included delicious grilled burgers, veggie burgers, polish sausages and incredible cheddar fries. The pool was filled with kids laughing, splashing, and enjoying the day (rain or shine). The highlight of the party was being able to meet and spend time with all the team members outside of the office, especially those who flew or drove in from out of town! Many laughs and great conversations where had by all. Thank you, Conrad family, for hosting a wonderful company get together!
International Women’s Day Interviews
In the spirit of International Women’s Day at InCommercial Property Group, we have asked what the day means to some of our female leaders in the commercial real estate industry, advice they’d give, barriers overcome, and who inspires them. On this day, we acknowledge the individuals, groups, and organizations that have come together to advocate for women’s empowerment. Together, we reflect and discuss what International Women’s Day means to each of us.
Tiffany Fraley, COO
What does International Women’s Day mean to you?
It is a celebration of women’s achievements and an acknowledgement of the strides we have made economically, politically, socially, but also a reminder that we still have a lot of ground to make up as long as inequality, especially for women, exists in the world.
What barriers have you faced, as a woman, in becoming successful in your field? How did you overcome them?
The real estate industry is very male driven which makes sense because women didn’t gain the right to own property until the 19th century and even then, we couldn’t afford it because we couldn’t take out lines of credit until the 20th century. These types of barriers take time plus an effort and a struggle that I’ll probably never face, along with change and acceptance. As a Caucasian woman in America, I know that the barriers I face are far different than women of color and other nationalities. I am able to overcome most barriers because I have the choice and the opportunity to overcome them. For instance, I was allowed to go to college and graduate school which for some is a huge barrier due to culture or economics.
How do you help to empower women or encourage others to pursue leadership roles in their career?
I think one of the biggest ways I empower and encourage women is to really listen to what they want, write it down and then work out a measurable plan to accomplish it.
What advice would you give to someone just starting out their career?
The same advice I’d give to someone starting out in their dating life, try a lot of different ones and don’t settle, ha! With each job, you’ll find out more about yourself, what you like, where you can improve and you’ll be that much better and prepared for the next role.
Is there someone that has empowered you or a strong woman that inspires you (professional or personally)?
I don’t give her enough credit, but my mom always supported my endeavors and never held me back…even when that meant moving out of my home state, Tennessee. She’s a very brave, kind and generous lady who likes to cuss a little and drink miller lite. She taught me to have thick(ish) skin, work hard and to love animals. At my core, I know that she is the reason that I am who I am.
Claudia Sapir, Senior Transaction Coordinator
What does International Women’s Day mean to you?
A day that recognized all women regardless of their race, religion, political affiliation, or economical and professional status.
What barriers have you faced, as a woman, in becoming successful in your field? How did you overcome them?
Probably at the beginning but once I became more knowledgeable and passionate about my job, I never felt there were any barriers.
How do you help to empower women or encourage others to pursue leadership roles in their career?
There is nothing we can’t achieve. If we have the correct mindset, we will be able to conquer every goal.
What advice would you give to someone just starting out their career?
Always study, learn as much as you can. Work hard. Be many steps ahead.
Is there someone that has empowered you or a strong woman that inspires you (professional or personally)?
A public personality, I would say Michelle Obama. In the personal and professional field, Tiffany Fraley is a great example of growth, hard work and confidence. I think she empowered me and many women (and men) in our company.
Karla Lombardi, Controller
What does International Women’s Day mean to you?
The day gives us space to reflect on how far we’ve come and discuss how much more work there is to be done. We have to end violence against women – domestically and abroad, in our homes and outside of them. We have to remove bias from education. We have to continue to fight for equal parental leave. More women need a seat at the table.
What barriers have you faced, as a woman, in becoming successful in your field? How did you overcome them?
It was very challenging to be in consulting as a new mom! I had to set boundaries (which weren’t always respected). I missed a promotion because I “lost” three months of experience (while on maternity leave). I overcame it by leaving public accounting to do in-house tax planning for a Fortune 100 company.
How do you help to empower women or encourage others to pursue leadership roles in their career?
I always offer career advice to my female coworkers. I’ve been active in the women’s groups, as well as PRIDE. I mentor anyone who will let me.
What advice would you give to someone just starting out their career?
Know your worth and negotiate! It’s easy to believe that you’re paid fairly, and it’s uncomfortable to ask for more, but you’ll never get if you don’t ask for it.
Is there someone that has empowered you or a strong woman that inspires you (professional or personally)?
I’ve been fortunate to have worked for several strong women ever since I changed my career to accounting. At a previous company, the VP of Treasury was an amazing mentor who always found time to support me in my career and offered to open doors for me (yet I hesitated to let her?!). There were a lot of incredible female leaders there who noticed that there weren’t enough women in upper management, so they started a women’s group specifically for Finance. It was so empowering to get time with these leaders and connect with them about not just our careers, but life in general. Ever since my first accounting job, where I worked for an extremely intelligent, successful Controller (and a SuperMom), I’ve wanted her job. Last but not least, a major reason I came onboard here at InCommercial was to work for one of the best, Tiffany Fraley!!!
Aloha! Let’s Luau
The InCommercial team escaped the Chicago winter for a much-needed Luau office party! They brought the leis, mai tais, and Hawaiian sunshine to the office. With a variety of appetizers, from upside down pineapple cupcakes to Hawaiian ham and cheese sliders, the team indulged in some yummy dishes. To complement these dishes, a variety of Hawaiian themed beverages were displayed, including the “shark bite” drink and Mikey’s famous mai tai – all topped with little umbrellas and festive garnishes. To tie it all together, leis were happily passed around as the team relaxed, socialized, and listened to island inspired music. What a wonderful way to end a Friday in the office, Aloha!
