GI325: Investing in Retail Real Estate with Heath Binder

GI325: Investing in Retail Real Estate with Heath Binder

Heath Binder manages Investor Relations for LBX Investments, a diversified commercial real estate investment firm that focuses on retail and residential property investments. Heath has 16 years of experience in commercial real estate and financial services. Prior to joining LBX, he managed investor relations for Big V Capital, and previously, for RealtyMogul.com. Prior, he worked with ultra-high net worth real estate investors at Barclays Wealth in Los Angeles and he began his real estate career with Colliers in 2002, then worked as an equity REIT analyst at UBS.

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Transcript:

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host, Charles Carillo. Today, we have Heath Binder. He manages Investor Relations for LBX Investments, a diversified commercial real estate investment firm that focuses on retail and residential property investments. Heath has 16 years of experience in commercial real estate and financial services. Prior to joining LBX, he managed investor relations for Big V Capital, and previously, for RealtyMogul.com. Prior, he worked with ultra-high net worth real estate investors at Barclays Wealth in Los Angeles and he began his real estate career with Colliers in 2002, then worked as an equity REIT analyst at UBS. Thank you so much for being on the show!

Heath:
Sure. Thanks for having me.

Charles:
So you’ve been in going on two decades in real estate and investments. Can you give us a little background, a little bit more in depth of yourself, both personally and professionally, prior to you know, investing in real estate or being involved with firms that are investing in real estate and what you’re doing now?

Heath:
Yeah, sure. Yeah, actually I forgot to update my my bio info, maybe pulled it from our site. I mean, I’ve been in the industry for over two decades now, and I started off as a broker, actually got a, I’ve always been pretty good on the phone. I got a job calling I, I cold called the New York Times ad and I got a job as a, as a broker at Colliers in New York. Back in, in gosh, I don’t know, it was, what, 2002, you know, I wanted to get in the industry. I had some family members who were in it, you know, I was a young kid. I didn’t know anything. And you know, they gave me a big blue book and they said, just call everybody in there. And so I did that and, you know, I didn’t make any money, but it was, you know, it was a good way to get my bearings and, and, you know, kind of learn a little bit of the, the, you know, the industry, just the lay of the land.

Heath:
And then, you know, what I, what I did from there is I leveraged that into into grad school. So I went to NYU’s they have a, a real estate institute. It’s a master’s in real estate finance. I went there, completed that at night while I worked during the day. You know, and at the time I wanted something that was a little bit more call it substantive, right? I was, I was, you know, I didn’t just wanna be making calls. I wanted to actually understand what I was talking about. So I took a job at a, an appraisal slash consulting firm, and then I went my work, EBS did that for a couple years. Then the great recession hit, and, you know, like everybody else you know, all of a sudden, not like everybody else, but like a lot of folks around that time, you know, all of a sudden it’s, it’s we’re in, in 2008, 2009, and I’m figuring out, you know, what, what I’m gonna do next.

Heath:
And I moved out to la my then girlfriend, now wife is from out here. And there just was not a whole lot happening in the real estate business, and I was always pretty relationship skewed. So I I did, I took a job in, in wealth management with Barclays, post Lehman, and I did that for a few years. Wasn’t really what I wanted to do. I wanted to stay in, in real estate. You know, and, and so after that, I went and I, you know, I did, I, I took a, i, I took an opportunity at real T-Mobile back in the early, early days of real estate crowdfunding. You know, I did that for a couple years and it was, you know, it was good to meet a lot of people and, and, you know, kinda hit my stride.

Heath:
But, you know, really what I wanted to do was be on the private side. You know, one of the challenges with the crowdfunding model is, you know, when you’re on the front end of it, you know, you’re talking to investors and they’re asking about deals, but you don’t, you’re really an lp and at the end of the day, you’re, you’re an intermediary LP and, and you’re, you’re not actually doing the deal. So I would go and talk to people about a deal and raise money for it, and then they’d call me up, you know, six months later and asked me for updates. And I, you know, I have to check with our asset management team. It would check with the you know, with the sponsor who would then get me a resp. You know, it was, it was just, it was not direct enough for me.

Heath:
I really wanted to be on the side of was cons, controlling things. And anyway, so I went and I, I did, I, I joined a it was an offshoot of a, of a, you know, called small family office in, in, on the east coast. Joined it with a friend of mine and you know, and, and then his former colleague, and that’s Rob and Phil. You know, there’s the, the guys who run LBX. And then when you know, they broke off to the former LBX in 2018, I went with them. And, you know, since then I’m largely been doing the, the, you know, the same thing. You know, my, my role here is I raise money for, you know, specifically equity for our real estate deals. And you know, raise it from, you know, a whole lot of different kinds of capital partners ran from, you know, small guys writing, you know, 50 or $25,000 checks all the way on up to, you know, funds and, and, you know, institutional groups that are, you know, writing significantly larger investments.

Heath:
And you know, my, my role is to, you know, build, continue to build out our network of, of equity partners. And then also, you know, I oversee all communications infrastructure related to investors. So, you know, all of our investor reporting, which is often a, an asset management. And that’s often that asset management function. But I oversee that you actually write the reports. You know, one of the, you know, maybe differentiators about me is, you know, a lot of folks in the, in the IR seat, they don’t, you know, have that deep of a real estate background. Whereas mine goes back, you know, pretty, pretty far. And, you know, and I’ve, you know, underwritten deals and I’ve, I’ve you know, conducted appraisals and, you know, done, you know, done, done a lot of the analytical work that was just a little bit uncommon for folks in IR to have, you know, that, that I’d say breadth of, of skills.

Heath:
So anyway, that’s me in a nutshell. And, you know, here I am. So, you know, as far as LBX goes since 2018, we’ve acquired, you know, close to a billion dollars and real estate, most of it’s been retail. You know, we’re a little contrarian. So when the whole world was going after multifamily, we you know, we didn’t like the valuation so much. Kinda scared us. We’re not, we didn’t ever wanna take interest rate risk, and it just felt like gambling. So, you know, we didn’t touch anything in the multifamily space, even though we all have a lot of experience in it. Yeah. But we saw real opportunities in retail. We continue to see interesting opportunities in retail. It’s a very deeply misunderstood sector. And but then last year we started dipping our toes back into multi again. We bought a couple really interesting deals and, you know, we’re able to just take advantage of all the, all the dislocation that’s been happening in that, that sector.

Heath:
And you know, we’re, we’re continuing to look at deals in both sectors. We just closed a really interesting deal in San Diego. Our deals tend to be a little bit more nuanced. We look for really good real estate that has, you know, either been mismanaged or, or you, you know, you’ve got some sort of selling pressure on the, on the sell. This just some sort of pressure on the seller that creates a, you know, good buying opportunity for us. And that’s, you know, a lot of what we’ve, we’ve done over the last, particularly over the last few years. We we bought a portfolio of assets from a REIT that was being forced to liquidate. One of the multifamily assets we bought was from a developer that needed funds to deploy into other projects. They had to, they had to sell it, and just things like that. And, and it’s been, it’s been good. How’s that for an intro,

Charles:
<Laugh>? It’s fantastic. So as you, you kind of went into like my next question about your investment strategy at LBX, and you said it’s residential, it’s retail. But I wanna dig a little deeper into retail because in my kinda research for this, for this episode, one of the things I found is you guys considered you know, neighborhood and community shopping centers being one of the most misunderstood real estate sectors, I imagine, you know, real estate sectors in general, and then also definitely within real retail that people don’t really, I guess, spend much time or understand how they can be good investments. Can you break that down a little bit about how neighborhood and community shopping centers kind of are a unique place within the real estate sector?

Heath:
Yeah, I mean, so when you looked at retail, there’s a lot of different kinds of retail kind of going from small to to large, you know, at the one end of the continuum, you’ve got, you know, single tenant assets and you’ve got strips all the way on up to malls, right? With these gigantic malls. And we, we don’t buy malls. But, you know, I think what happens is people tend to lump all of retail in with each other. You know, maybe one consistent theme with retail is, you know, people particularly in this country, they like to shop, they like to shop in stores. They always have liked to shop in stores. And so, you know, if I think about retail, I think about like, some of the selling objections that we faced over the years. You know, and this has been dampened a little bit, but we used to get a lot of pushback on the Amazon effect, right?

Heath:
A lot of people that were, you know, concerned that Amazon was gonna come in and we were, you know, we were just gonna end up in a, a world where we never leave our house. You know, then COVID hit and people were concerned that retail was gonna forever change and certainly had some impacts. But you know, again, the consumer is is, you know, pretty, pretty hefty force in, in the US economy. And you know, to your specific question you know, people do like to shop in stores. And when you think about, you know, what a neighborhood or a community shopping center is, you know, it’s typically maybe a grocer or, you know, maybe you have some you know, some, some smaller tenants coupled with maybe some shop tenants. You know, these are, these are centers that we go to to, you know, conduct our daily business.

Heath:
There’s one right down the street from me. It’s a Whole Foods with a CVS. And you know, they, there’s a, we just moved in A-A-D-S-W shoe warehouse, which, you know, I don’t shop there, but it’s always pretty busy. And you know, I think what you’ve seen with retail is, you know, there was the Amazon issue and then there was also, I mean, I mentioned COVID, but there’s also been some high profile bankruptcies. And you certainly do have to be careful, right? Like, when you’re evaluating a retail opportunity you know, how you think about risk is, is really important. I think that’s an area that we’re really strong. I’ll give you an example, right? We have a deal that we bought in New Jersey and the whole market looked at it. This is back in I guess what, 2020 two’s, the end of year 2022, and has a Burlington that’s, I don’t know, 60,000 square feet.

Heath:
The whole market looked at it and, you know, was spooked by it because you know, it was a, a 60,000 square foot Burlington anchor. And, you know, their footprints these days are more like 30, 35,000 square feet. And market was just kind of scared that Burlington was gonna leave. But, you know, with our due diligence, you know, we went in, got really, really comfortable with the performance of the store, and we have good contacts at Burlington. And, and you know, we just, we were, we were very comfortable that they wanted to stay, but they were also gonna want to downsize. So when we underwrote that deal, you know, we didn’t underwrite them leaving. What we underwrote is that we were gonna be able to, you know, negotiate you know, downsize for them. And we underwrote, you know, spending north of a million bucks to chop their space basically in half.

Heath:
And then we assumed, ’cause this is the most conservative way to think about it, we assumed that we were gonna basically mothball the space next to them. You know, and, and we’ve been executing on that, on that plan. In fact, what we’ve done is we’ve gotten you know, we’ve gotten other retailers to come and, and take space to the center you know, more quickly than we originally anticipated. And, and what drives all that is it’s really good real estate. And, and so when you think about retail, right? It’s got certain characteristics. Retail the best, retail tends to sit right in the heart of, of, of town, right? And what we call a retail node, it’s gonna have good traffic counts, it’s gonna have good visibility. It’s where we all go and shop, right? And that’s typically what we look for. We look for, we think is the number one or two best center and a good market. You know, we like to see some growth in the market. And if we can buy a, a center that’s, you know, to some extent been a little bit mismanaged you know, or undermanaged, and we could buy it at a good basis, then you know, what we’ve, what we’ve seen over the years is we’ve been able to, you know, generate you know, pretty attractive returns for for our investors.

Charles:
So Heath, what is a typical value add kind of business plan, look for a neighborhood shopping center, whereas with, like, with multifamily, something like this, you’ve got short term, let’s say shorter term leases. I mean, they’re not going over one year in most situations. So it’s easier to kind of roll tenants. You’re increasing tenants rents, you’re, I mean, you can, you can really value out a property within 24 or 36 months in most situations to the, you know, the majority of that property. What do you really see with, I mean, what is a business plan when you have longer term tenants, maybe several years left on the recurrent leases? Like you said you had to like, work out leases with someone that was downsizing. How does it really work when you go into it to see where we can, you know, grow value, you know, grow NOI?

Heath:
Yeah, and that’s a great question. So this is not always the case if you have a large box space, like we have bought centers where there’s a large box based lease, but if you have somebody that’s in place in a large box, which you’re effectively doing as a credit analysis, you know, to, to determine whether or not you’re gonna have an opportunity to re-tenant that. Because if it’s, you know, say you have like what’s a good large credit save, like a hobby lobby or something, you know, like a, a really, really strong retailer, say they’re in your, your center and they have, you know, tenure year lease and you know, a bunch of five year options after that, you’re not gonna get growth from that box, right? You’re gonna get a lot of other things from that tenant. They’re gonna attract, you know, shoppers and they’re gonna bring stability to your income stream you know, credibility to your rent roll, et cetera.

Heath:
But you know that that’s not where you’re gonna get your growth. But sometimes, you know, we bought way, for instance, we bought a deal in suburban DC in, in northern Virginia a few years ago. And, you know, that deal when we bought it had a, you know, really large box and, you know, we’re, we’re working on we’re, we’re just about to put a large tenant in there, knock on wood. And that was the, that was the primary business plan for that asset, right? So each thing, every deal we do is deal by deal. And I just wanna caveat that up front, but you know, your, your two main areas where you generally are, are gonna see some, some value creation and more of a pop in retail are, one is shop space leasing, and the other is arbitrage. So arbitrage is pretty easy to understand.

Heath:
If you think about a typical center, you’re gonna have the, the shops that are sort of set back from the street, and then you’re gonna have shops or you’re gonna have you know, boxes that are closer to the street. So I think like that Starbucks, that’s, you know, got a drive through that’s out by the, the road. So the, the real estate that is out by the road, those are called out parcels, and quite often you can carve those off and they trade in the, the single tenant market predominantly the 10 31 investors, you know, or institutions. And they tend to trade at tighter cap rates than you buy the whole center for. So the simple example is okay, we bought a, a center in Orlando this was back in 2018. The first deal we did is LVX, and it was an academy sports anchored center.

Heath:
And Academy at the time had some, some credit issues who were able to buy the center, even though it was a great location, we were able to, to buy it at a, you know, little, I guess it was around a nine cap, eight, nine cap, right on that. So there was a Taco Bell out on the street. We carved that off and sold that off. There was a it’s a check cashing chain, which is a big private company in Florida. Anybody out of Florida doesn’t know it, but in Florida it’s, you know, very reputable. That’s having a really big corner with hundred thousand cars going by. We’re able to sell that off at a, at a sold that, like a five and a half cap, something like that. And then we brought in a Jolly Bees, which was you know, basically like a, like, I think it’s like a Filipino McDonald’s.

Heath:
I mean, it’s a very rapidly growing you know, international fast food chain. We brought them in for one of the out parcels and sold that off at like, it was 4.3 cap rate. The cap rates have, you know, come up a little bit. Obviously the, the world in 2018 is, you know, is much different than the world today. But the main point is that when you can buy something at a nine cap and sell off pieces at a, you know, six cap you know, that’s creative. And so we like those out parcel plays. You basically are, and really doing a couple things, right? You, you, they give you the opportunity to, to play that arbitrage game. You’re returning equity to investors. And then you’re also paying down some debts. You’re de-leveraging the asset. So you’re improving your basis, de-leveraging, de-risking the overall profile a deal.

Heath:
That’s something that we like to do, and we’ve done a lot of it return a lot of capital investors over the last several years use utilizing that strategy. The second is shop leasing and shop leasing. You know, maybe the, the simple way to think about shop leasing is technically shop leases are anything that’s 10,000 square feet or smaller, but, you know, generally speaking, you’re looking at set that’s 5,000 square feet or smaller, and these are the mom and pop tenants, you know, and sometimes they’re national chains, right? That, you know, like a Jersey mikes or something like that. But these are restaurants, hair salons, nail salons, yoga studios, you know, this is, this is like the, the fabric of retail. This is, this is the stuff that, you know, a lot of, a lot of what’s offered in shop space. You know, you can’t, you know, you can’t replicate it online, right?

Heath:
You can’t go get your, your, you know, I mean, I guess you get someone come to your house, but you can’t, you can’t go and, and get your hair cut, you know, on Amazon. That’s not how it works. So shop tenants tend to pay more on a per square foot basis than a larger anchor. So say, you know, you have two boxes, right? One is 20,000 square feet, and then the other is a cluster of, of shop spaces that, you know, is equivalent to 20,000 square feet. So maybe I get, you know, national tenant like a TJ Maxx or Ross in the 20,000 square foot box. They’re gonna pay a lot less on a per square foot basis. Now there’s a trade off, right? They’re great national credit tenants, they bring a lot of shoppers to your location, but you know, you’ve got that 20,000 square feet of shop space that’s aggregated, and I make get double the rent for that.

Heath:
And, and also by the way, it, you know, those tenants are gonna have a lot less requirements and restrictions and a lot less control provisions in their leases. So, you know, we love to buy a center where, let’s say it’s, you know, we’ll buy it from an institution. Institutions tend to be really, really good at bringing the large tenants, but they don’t actively manage the centers the way, the way that we do. So let’s say we buy a center and maybe it’s 90% leased, but you know, there might be, you know, 10 or 15,000 square feet of vacancy in the shops, you, and that, that’s where we strike, right? And our, our model is we, you know, we tend to work with local leasing partners, and what we really want to see is that they’re, you know, really aggressively you know, canvassing for, like, we have a very active outbound approach.

Heath:
We’re not just sitting there waiting for, we’re not just like casting a rod and like waiting for, you know, someone to take the bait. We’re, we’re actively out there looking for tenants to fill the shop space. And, and that’s really, really worked. It generates a lot of NOI growth. And also what’s nice is, you know, on the backend, you know, when, when you go to sell a center you know, you’re generally getting, you know, you’re getting capped on, you know who your, your bigger name tenants are. So if I have a grocer, right, or, or, you know, a national name brand tenant, that’s what the, the buyer is gonna look at on the, on the exit before they’re really digging in on the shop space. And that’s really what’s gonna set the cap rate. And, and so you know, that income that you’re generating from, from the shops, you know it’s gonna go along with it. And, and you know, it’s just a, it’s a really great way to create value.

Charles:
85% of total retail, like you were talking about before, is still completed in store today. Even with what we went through with COVID and stuff like this, and I’m not sure you know, how they came to that number, but what, what are you seeing when, in your, kind of, in your centers, where are there different requirements that retail tenants are requesting? Because now, I mean, we went through COVID and everybody was like, really pushing online, ordering, delivery, you know, all this shopping, everything like this. Ha what has changed? Have there been different requirements that some of these national anchor tenants have come into and say like, oh, we need more parking here, or we need, we have different requirements for how the building’s gonna be, you know, for that ti the tenant improvement, how it’s gonna be done so that it can fit more for people that are ordering online? Or has it been pretty, I mean, has it been pretty normal over the last so many years where it’s just that they kind of worked around what people online ordering or anything like this? I’m just seeing, you know, what kind of changes they’re having that really how you guys are marketing a pro you know, a property, a space, if that’s different at all with what people are really looking for, companies are looking for to be in that anchor tenant spot.

Heath:
Yeah, it’s a good question. It is, you know, I don’t wanna get out over my skis on it because you know, I, I certainly have enough leasing knowledge to be dangerous, but it’s, it’s really a, it’s really a question for our leasing team. I, I don’t think that there have been, you know, significant, significant changes in terms of you know, the requirements that, you know, the retailers coming to us have. But I, I don’t know, you know, it’s, it’s, I I’d say where we’ve seen a big change versus prior to COVID, and this is not a reflection necessarily of you know, changing preferences of retailers, changing requirements of retailer, it’s just overall costs have, have, you know, come up pretty significantly. And you know, something that we did, we brought on a, a, a guy who has a, you know, very deep construction management background. And he, we brought him on a few years ago and he’s been really, really helpful in terms of helping us navigate you know, modern requirements for retailers. But, you know, in terms of giving you like a specific answer as to, you know, whether some retailers are, you know, requiring, I don’t know, ghost kitchens or different parking or you know, additional parking or, or you know, some other call out that’s tied to how they’ve changed their model in response to COVID, I dunno the answer.

Charles:
So you mentioned before about, you know, if you’re taking over a, you’re purchasing something from an institution, and I think everybody’s been inside one of those kind shopping centers and it kinda looks like a ghost town. There’s a lot of vacancies, stuff like this. It’s just, I don’t know how they market it or what their kind of business plan is behind it. And you guys here you have like, you know, LBX is taking like a different approach where you’re a little bit more aggressive. Can you talk a little bit about how being I, you know, I guess your, your property management slash leasing, having that in-house or doing it through kind of third party property managers and how that really differs in returns to your, your investors at the end of the day?

Heath:
Yeah, so first off, we don’t buy ghost town retail. There’s certainly a lot of bad retail out there and, you know, it sounds, it sounds like I don’t know, it sounds simplistic to be like, this is good, this is bad. It sounds like something out of a, you know, outta a I dunno, a cartoon or something, but, or Star Wars, right? We have we have the dark side of retail, but you know, realistically we try to buy good retail, right? You wanna get the stuff that’s really centrally located and that is gonna attract demand, right? And there’s been something that’s really important to understand about retail is there, there’s been no new additions to supply for the most part for the last 15, 20 years. So when you buy, well, retail that sits in, generally speaking, you don’t need to worry about a whole lot of additional supply coming online that’s gonna compete with you. And if you get it a good basis, gives the ability to be flexible and, and, you know you know, you can negotiate good deals with, with retailers. Sorry, gimme the second part of the question again.

Charles:
Just kind of when you’re doing your leasing, like how you are.

Heath:
Yeah. Got it. Okay. So, so we’re vertically integrated with property management. Our portfolio is nationwide. We have certainly, you know, you’ll, you’ll have vendors that you work with because we’re not on site every single day, it’s a little bit different from multifamily property where you’re, you know, cutting leases every day with, you know, prospective renters. You’re, you’re, you know, you’ll work with your vendors, you’re gonna have a quarter, you know, guys like that who are gonna, you know, be there you know, to, to make sure everything is operating smoothly. But our property management team, they, you know, they get typically to the properties several times a year. And then when they go, they’ll do a very, you know, thorough run through of the properties, speak to all the tenants you know, they’ll, they’ll spend quite a lot of time on site and put together, you know, very detailed reports that they, you know, bring back to all of us.

Heath:
Leasing’s a little bit different. So our head of leasing is, is he’s, he’s fantastic. He’s one of the more knowledgeable leasing folks you’re gonna find. He’s been in the industry forever. I probably wouldn’t like me saying that. He’s he’s, but he’s, you know, he’s, he’s been around a long time you know, knows everybody, and we’ve got relationships with, you know, all the, all the big guys. But the way that our model works is we wanna have a local presence. So he will tag team with a local presence, and he’s, you know, he’s got some junior guy junior guys working for him. But he will tag team with what we think is the strongest local leasing team to ensure that we have a local presence. And we’re very thorough in terms of how we bet our leasing partners.

Heath:
But it’s, it, it’s just when you think about how we operate compared to how let’s say like a big REIT or some other institution operates, we think that our approach is much more nimble because look, we have the relationships with all the, all the nationals, right? All the big guys have relationships with the nationals, but when, like, if, if you don’t have a local presence on the leasing side of the business, then you’re not gonna be in the flow of what’s happening in the local market. It’s really, really hard to manage a center that’s, you know, in, I don’t know, Orlando from Atlanta, right? Because you’re just not in the market every day. Now, if you have, you know, somebody who’s really aggressive and you know, very well connected and really knows what’s going on in Orlando, that really aids your efforts. And we’ve, we’ve just seen that time and time again in terms of how we approach retail. You know, we, you know, we can go into any new market you know, we can scale pretty quickly and, you know, having a local leasing partner that, that, you know, we, we trust and, and, you know, can really rely on is, is, you know, pivotal to that.

Charles:
Yeah, it makes perfect sense. I’ve had a few retail guys on the show here over the last several months, and one of the things, I guess one of the recurring themes I say is, is kind of having local partners that they’re working with, whether they’re doing development there and they’re bringing in local people to come on their team, or like you’re saying, local people to work out the leasing team. So it’s very interesting. It makes perfect sense that you would have that because it gives you, I imagine it’s much easier to rent, you know, rent when you have that that footprint there already of of a team and partner.

Heath:
Yeah, it’s also, you know, if you just think about, you know, any, any market you go into, right? You got, you got locals, right? We all, every everywhere’s got, you know, you got a local flavor, local feel, it’s all a little bit different. You know, you’re gonna, you know, local, local movers and shakers and you know, people you need to know. And it, it just, it really you know, really gives your efforts a boost when you’re, you know, you’re collaborating productively with, you know, local people who are in the know as opposed to, you know, going in and, you know, trying to figure, figure it out from square one, right? And we tend to be, you know, pretty collaborative as a firm. You know, we have, you know, numerous examples of deals we’ve gone in and it’s, it’s not just about leasing, it’s also about, you know, building, you know, relationships with, you know, maybe it’s local government or, you know, some, some other you know, local resource that you know, you really, you really need to know in order to, to, you know, execute on your, your value add plan.

Heath:
So having a a local partner is really key for us.

Charles:
Keith, kind of as we’re wrapping up here, you mentioned a few different I guess mistakes that or opportunities that lb xcs when they’re acquiring properties. And could you kind of give us maybe a little bit more of a breakdown on maybe some common mistakes that you see retail investors make? And I imagine those are a lot of the properties that you kind of focus on and try to acquire, but what do you commonly see that retail investors, the mistakes they make over your, you know, decades in the business?

Heath:
When you say retail investors, you mean? So if we were buying <crosstalk>,

Charles:
I’m sorry, retail real estate sector investors, not just like mom and pop investors, sorry.

Heath:
Here’s, here’s some examples, right? And they’re not necessarily mistakes, sometimes they’re just, you know, conditions, right? You know, things that happen. Sometimes you will run into a selling partnership where you know, there’s a fund in the mix and it’s end of fund life and they’ve gotta trigger a sale. It doesn’t really even have a lot to do with the business plan of the asset. It’s more, you know, maybe, maybe something else is going on maybe it’s end of fund life or, you know, maybe, maybe, you know, they just have, have to harvest gains for some reason. But anyway, they’ll bring in asset to market and it’s not really tied to the business plan for the asset. So, you know, we look for opportunities like that. We have found opportunities where companies are being forced to liquidate. Those can be great, right?

Heath:
You know, they gotta, you know, that’s a selling pressure. They have to shed assets, right? So, you know, instantly that puts us in a position where you know, maybe we can be a little bit more opportunistic because they have to trade. We have bought from developers who maybe aren’t as strong at operating or who maybe have you know, shovels in the ground on, you know, different projects that they need to fund. So that also puts them in a position where they need to you know, get out of a deal. We have bought, we bought in situations where, you know, the seller, you know, had had, you know, let’s say messed up a, a, you know, local relationship maybe, or, or you know, just a deal hadn’t gone right for them for some reason. But we felt like the real estate was really, really strong.

Heath:
Think of some others, you know, and then sometimes it’s non-core. I mean, I’ll give you an example. So when when COVID hit, if you remember, there was all of a sudden the Sunbelt became very, very popular. It had been popular before and, you know, demographic trends had been, you know, very attractive in the Sunbelt for a long time. But, you know, I remember, you know, once COVID hit, there was like an, an actual theme right? Before leaving the blue markets gonna, the red markets, everybody was basically going short, you know, short, big cities, short, you know, short areas that, you know, weren’t, weren’t sunny and warm all the time. And, and, you know, deploying significant capital of the Sunbelt. And we, we started off, you know, the first several assets we bought were, were all Sunbelt assets. Like we were predominantly focused on the southeast initially.

Heath:
And so, you know, our view was anytime somebody’s like, like going long on something, that means they’re selling out of something in order to to, to, you know, to do that. And you know, what we’ve just over time found is, you know, a lot of times guys will try to get out of deals and they’re, they’re really solid deals. So we, we started looking at markets that were gonna maybe a little bit less glamorous, right? You know, we bought, bought a really great piece of real estate in Fort Wayne, Indiana, right? It’s not a huge market. We’re not, you know, planning on, you know, buying tons and tons of assets there. But, you know, we, we bought, we felt was, you know, one of the best retail assets in the entire market. You know, because the seller was, was, you know, cycling out of, of that market and going into, you know, other areas.

Heath:
We bought a bunch of really interesting deals in Chicago. Same thing. Chicago, you know, has reputation. You know, it’s kind of unfair in a lot of respects, you know, but you know, we’ve been able to buy some great deals there and, and, you know, predominantly because groups were cycling out of, of Midwest and, and, you know, looking to, to allocate elsewhere. And, and actually, you know, we’ve, we’ve expanded our portfolio. You know, we’re now nationwide there. We used to be sort of southeastern focused. Now we own in California, we own outside of Philadelphia, we own in New Hampshire, we own in the Midwest. You know, we can go anywhere that we think is, you know, really good real estate. But it’s, you know, all a function of, you know, or not all, but there’s, there’s, there’s, we have several assets that are just good assets that we’re able to pick up because you know, somebody wanted to invest in something else that, you know, they deemed to be more in line with, you know, what the street wants, right? So we like to jump on those. We, we, we like to play that contrarian theme sometimes.

Charles:
Interesting. Very interesting. Well, Heath, thank you so much for coming on today. How can our listeners learn more about you and LBX?

Heath:
Yeah, I mean, we’re, our, our website is www.lbxinvestments.com. You know, people can email me or, or call me, my information’s up there, email me at Heath. So it’s like it’s like the candy bar, so HEAT h@lbxinvestments.com. And yeah, shoot me an email. Always happy to, to chat with prospective investors.

Charles:
Eve, thank you so much for coming on today. We’ll put that link down in the show notes as well, and looking forward to connecting with you here in the near future. Yeah,

Heath:
Likewise. Thanks so much. Appreciate it soon. Take care.

 

Links and Contact Information Mentioned In The Episode:

About Heath Binder

Heath Binder manages Investor Relations for LBX Investments. In this role, he oversees investor relationships with both high net worth and institutional capital, financial reporting, and marketing efforts for LBX.

Heath has 16 years of experience in commercial real estate and financial services. Prior to joining LBX, he managed investor relations for Big V Capital, and previously, for RealtyMogul.com

Prior, he worked with ultra-high net worth real estate investors at Barclays Wealth in Los Angeles. Previously he began his real estate career with Colliers in 2002, then worked as an equity REIT analyst at UBS. Heath has an MS in Real Estate Finance from New York University.

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