TGCI 35: Are retail malls/centers things of the past? This may change your perspective

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Episode 35 – Are Retail Malls, Centers a Thing of the Past? This May Change Your Perspective

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Summary

In today’s show, Pancham interviews real estate investor & operator Michael Flight.

As the virus has brought all businesses to a grinding halt, the one question on everyone’s mind is – is it really worth investing in retail real estate? Can retail real estate survive the ecommerce juggernaut? And, can you structure your retail real estate investment so that it is not only recession proof but also COVID-proof?

We attempt to answer these pressing questions in today’s show.

Additionally, you will learn about the different categories of retail real estate, red flags to watch out for, and the kinds of returns that you can expect to earn. This show will particularly interest those who are looking for alternatives to Wall Street investing.

We hope you enjoy this show!

PanchamHeadshotTGCI
Pancham Gupta
TGCI #35 - Michael Flight
Michael Flight
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Timestamped Shownotes:

  • 01:00 – Are retail malls a thing of the past?
  • 01:50 – Pancham welcomes Michael to the show
  • 02:22 – Why is Michael dead against Wall Street investments? He shares his experience
  • 04:02 – Michael shares his background information
  • 05:04 – What are the different categories of retail real estate?
  • 07:18 – Understanding the difference between a Net Lease, Double Net Lease (NN), and Triple Net Lease (NNN)
  • 11:42 – Can you, as a retail investor work in a completely hands-off approach?
  • 12:42 – Can you mitigate risk by passing off all variable expenses to the tenant?
  • 14:17 – How are the retail malls classified?
  • 15:31 – Key Success factors for retail real estate investing
  • 17:42 – Red flags to watch out for
  • 19:05 – Will certain businesses/tenants tarnish the appeal of your property?
  • 21:27 – What kind of returns can you expect to earn from retail real estate investing?
  • 24:43 – What is the future of brick and mortar retail considering the recent surge in online sales due to COVID-19?
  • 31:37 – How is Michael pivoting in light of the recent situation?
  • 35:40 – Taking the Leap Round
  • 35:47 – When was the first time you started investing outside of the Wall Street?
  • 37:05 – Can you share one investment that did not go as expected?
  • 39:02 – What is one piece of advice that you would give to people who are thinking of investing on the Main Street?
  • 40:39 – Michael shares his contact information

3 Key Points:

  1. Different categories in retail real estate
  2. Understanding the difference between a Net Lease, Double Net Lease (NN), and Triple Net Lease (NNN)
  3. Key Success factors for retail real estate investing

Get in Touch:

Read Full Transcript

Welcome to the Gold collar Investor podcast with your host Pancham Gupta. This podcast is dedicated to helping the high paid professionals to break out of the Wall Street investments and create multiple income streams.

Here’s your host Pancham Gupta.

Hi, this is Russell Gray, co-host of The Real Estate guys radio show and you are listening to the Gold Collar Investor podcast.

Pancham: Welcome to the Gold Collar Investor podcast. This is punching if this is your first time listening then thanks for coming. The Gold Collar Investor podcast is produced every week for your learning and enjoyment. I want to remind you that if you’re not part of the gold collar investor, private Facebook group, you can do so by going to thegoldcollarinvestor.com/fbgroup. I repeat thegoldcollarinvestor.com/fbgroup. Now let’s get into the show. Are retail malls a thing of the past? What about the small retail strip malls that you see in your neighborhood, the ones which have your local pharmacy, maybe a barber shop, and a restaurant that you like? Being in the tech world, I feel that the only experience related retail centers will survive. And anything that can be commoditized will be commoditized. For example, if you have to experience a nice outing, and enjoy a great meal, you will go to a restaurant or if you want to get a haircut, you will go out and find a barber shop. Things like that. That is here to stay. Rest all will be online. Wanting to learn more and explore this field retail investing a little bit more, I have invited Michael Flight who is an expert in the space and has been in retail real estate for 34 years and has handled more than half a billion…that is $500 million worth of real estate transactions. Hey, Mike, welcome to the show.

Michael: Hi, Pancham thanks for inviting me on. Really appreciate it.

Pancham: No, thanks for your time. Are you ready to fire up my listeners break out of Wall Street investments,

Michael: I am so ready to fire them up to break out of Wall Street investments because I’ve never believed in the Wall Street casino culture. And I could tell you how angry I was that initially when I you know, had a Self-IRA and I had my pension plan and, and other things. And the only options I had was investing in Wall Street. And I can tell you that I’ve been through some major ups and some major downs. And then the best one is my brother was working for a division of AT&T at the time. Like 1999 he says, oh, you should see how great this stock is exploding and so I do jumped into it. Like two months later the.com bubble bust. I actually…the thing went to like 50 cents. So I held on to it for a few years just because it’s like, well, it’s already sunk cost, and it never came back. So and I’ve never ever had that happen with a real estate investment. So, I’m not too excited about Wall Street because I don’t have a whole lot of control over it. You know, even when they say passive, it’s like, up and down and up and down. And then the same issue I had with…I was forced into investments with my kids – 529 plans, and, you know, that whole thing imploded. And, you know, I basically lost close to 40 percent. It went down 60%. I am not a huge fan of Wall Street investing.

Pancham: Now, you want to give us an overview of how and what you do.

Michael: Sure, my name is Michael Flight with Concordia Realty. We founded Concordia Realty in 1990. And I’ve been in the real estate business and the commercial real estate business, particularly investing in and redeveloping and leasing and doing just about everything you can with retail real estate, which includes shopping centers. We’ve done in closed malls, larger enclosed malls. And we also do what are called net leased properties or single tenant leased properties, or just the latter and that’s where we’re concentrating on moving forward is the single tenant net leased properties.

Pancham: Got it? Got it. So, you know, my listeners, some of them actually never heard of this term called net lease and so what does that mean? And also, the second question is can you explain…when you talk about retail center? What do you mean?

Michael: Okay, so there’s a division, all under the category of retail real estate. There’s a number of different things. So you’ve got from the very smallest, which is a single tenant building that you might see a grocery store. You might see $1 General, you might see a Walgreens. That would be a single tenant, and more than likely a net lease property and we’ll get into that in a little bit. Then you’ve got the next category up, which is a strip center. And you’ve got a bunch of different types of strip centers all the way from a grocery in an anchored strip center, to you know, a large size what they call power center, which is a bunch of larger big box tenants and they call them big box because they’re, they’re large, like a Best Buy, like a Bed, Bath and Beyond and they specialize in a particular thing. And then if you go up in larger retail than that you get into an enclosed mall or regional shopping center and so those go all the way up and some of the highest volume…highest sales volumes are in regional malls. So there’s …you guys out in New Jersey have some really good regional malls. Like the malls….that Short Hill and some of those other ones and those are just power what they call fortress malls. Those are going to be around and then there’s going to be a lot of smaller malls that have weak anchor tenants and going forward, those malls more than likely won’t be around and we’ll be repurpose, redeveloped or just you know sit vacant because retail is changing.

Pancham: Got it. Got it. So to kind of summarize what you just said. So we have single tenants like Walgreens and that’s the only tenant in that particular location and moving up from that we have….unlike strip centers where you have multiple places anchored by one or two of these big box guys and after that we have like full-blown retail malls, you know. So kind of three broad categories

Michael: Got it, that is correct. And then to circle back to the net part of it…all retail or almost all retail I should say. But if you’re operating a retail property correctly, a shopping center or a single tenant or a mall, they’re net leases. So that the tenant signs a longer term lease anywhere from five to we’ve done, you know, 30 year leases. And the tenant is responsible for most of the expenses. So the tenant is automatically responsible for paying their own utilities. The tenant is automatically responsible for paying their own garbage. But then if you get a single net lease, that means that the tenant is paying… responsible also for paying the real estate taxes. If you get a double net lease that would be an nn…the tenant is responsible for paying the real estate taxes and the insurance. And if you get a triple net lease, the tenant is responsible for paying the real estate taxes, the insurance and all the maintenance. And then you get into a pure triple. So there’s a difference sometimes like in shopping centers because there’s a common roof and there’s common walls in between and stuff. So it’s not a pure triple net lease, but the tenant is responsible for paying real estate taxes insurance for the building liability insurance for the common areas in the parking lot. They pay for snow plowing. They pay for, you know, maintenance of the facade. And but the landlord would end up paying for the structure of the building and the roof in some of the buildings that you see like $1 tree freestanding or a Walgreens or a CVS freestanding. The tenant, or you know the biggest ones are like Chick Filet and you know McDonald. And all those guys or an AutoZone, they’re free standing. A lot of times they’re not only responsible for everything, they’re also responsible for the building. Okay? So they pay for the roof and the structure and everything else. All you do is collect the check.

Pancham: Got it? So I’m…sure, like we have three n’s, right? And would you say the McDonald’s and Chick Filet is like four n’s or three and a half n’s? Something like that?

Michael: No, no, it’s unfortunate that even though we say that shopping centers are triple net lease, they’re really just a kind of a double n lease. And so it’s an nn, and then the guys that are out there, they’re full triple net. So and the net is that you’ve got an A. Like, for example, you do apartment buildings. You’ve got your gross income, and then you’ve got your net operating income while they pay for a lot of the nets and so you just get, you know, basically a net operating income and you don’t have to pay expenses. That’s where the nets come from.

Pancham: Got it, got it. So it’s the difference between a gross lease which you get – gross income and a net lease where you know, the tenants pay for all that you end up getting just a net income. Got it? So you obviously would know as the owner of the strip mall or, or these places, how much are those expenses? Would it be you or would it be the tenant who would be hiring these services?

Michael: It really depends on what the lease says. So just to educate your listeners a little more. These leases are complex financial instruments. So the apartment leases are pretty long, but if you’re doing a lease and getting basically getting married to somebody for you know, five years up to 2025, but then like I said, I’ve had a 30-year lease and then a string of boxes. So that the lease could have extended up to 60 years. That’s a long time to live with somebody. There’s a lot of things that the tenant wants. And there’s a lot of things that the landlord wants. But some of the leases, the landlord is responsible for arranging for the parking lot to be swept, and you know, different things. And then they build it back to the tenant that’s a little bit more involved in other situations. And even in, in most single net leases, if it’s a free standing building, the tenant pays the real estate taxes directly to, you know, whatever, municipality or county or who’s ever, you know, charging for the real estate taxes. So you’re aware, and you want to make sure and as part of your management, like a lot of people say, oh, these things are management free. It’s like, no. You still have to check and make sure that the tenant paid their real estate taxes, you know, because otherwise if you’ve got debt on the property, you’re a lender. It is going to put you in default even though the tenant was supposed to pay him, right? So there’s stuff that you do and you do have to make sure that even if they’re responsible for plowing the snow, you have to make sure that they do plow the snow with insurance. No matter what type of retail you have, as part of your property management, you need to go and request an insurance certificate and make sure the insurance certificate lists you as the owner as an additional insured. And you’re covered with all this stuff.

Pancham: Got it. Got it. So you specifically…your company, do you do mainly triple net or single net or double net or all of them?

Michael: We try to put as much of the uncontrollable expenses on to the tenant because that just smooths out your income. And it’s one less thing because, you know, real estate taxes, nobody knows how high they’re going to go up. So if I don’t have to worry about that, but conversely, especially in the single tenant stuff, you don’t get as higher returns as you do because you’re not taking as much risk like you would be with a hotel or an apartment building. It’s more like a bond return, because you know, exactly what you’re going to get. There’s this agreement, and you’re doing an agreement and, you know, Walgreens, Dollar Tree, Dollar General, and, you know, McDonald’s, Chick Filet…those guys are investment grade credit. So you’re basically buying a bond but the other great thing about it is, is you get a tangible asset. And so your value, the value of your building is based on that lease. It’s not based on what some bond trader in New York or Singapore or, you know, London decides the value of those bonds are today.

Pancham: Yep, yeah, Got it. Got it. So like how do you classify these strip malls? Is it what you just explained? A triple net or double net, single net. Are those the classifications? Or you know in apartment buildings, we have a class A, Class B, class C or in self-storage we have five…or mobile home parks, five-star, four star. Do we have something like that in retail centers?

Michael: The large enclosed malls are more classified from a being your fortress mall, your best mall. Your…you know like a Tyson’s corner in you know Arlington, Virginia, and it’s the forum shops at Caesars and those are malls that are just like super huge producers. And if there’s one in I think…it’s the Alamo mall in Hawaii, and in those malls…they are some of the best malls in the world. And those are always going to be Class A in strip centers. There’s not as much of a classification. It mainly depends on who the anchor tenants are. So do you have powerful anchor tenants? Do you have tenants that anchor tenants are going to bring in traffic to your shopping center? Because the whole point of having a shopping center is everybody does better. You know, if you’ve got the anchor and you’ve got the other tenants feeding off of it, if you’ve got the other specialty tenants bringing in people that then they go shopping at the anchor. So there’s a cross shopping. And so in a shopping center, there’s an art to merchandising your shopping center. But there’s also different things as to what is a good shopping center or a bad shopping center. The biggest thing with a shopping center is visibility, traffic, and access. And the next biggest thing is your anchor tenants and then the demographics surrounding your area. So if you’ve got really low end demographics and working class demographics, you’re going to hope that you’ve got some higher population densities to offset the lower spending power. But you’ve also…people might say, well, I want high end demographics. Well, if you you’ve got like a low end tenant, they’re not going to do well in the high end area. And conversely, I get a lot of municipalities that say, oh, we want a Neiman Marcus here. We want the latest and greatest. I can’t get you know, a Gucci or a Pucci or sushi here. It’s like, well, you know, your demographics are working class, middle income to lower income. And you’ve got a large representation of specific ethnic groups here. So you’re not going to get those tenants there. But we can, if it’s a Hispanic market…a great traffic driver is, you know, a Hispanic grocery store. There’s a ton of great Hispanic grocery charts store chain. And the same thing is like there’s some very good Asian specialty stores. Like my favorite grocery store in the world is H Mart, you know, and it’s a Korean grocery store. And then, you know, there’s Patel brothers and in just different things. And so if you’ve got that type of demographic in your neighborhood, it’s like, you might actually be better off putting one of those guys in and really drive a lot of traffic than putting in, you know, your run of the mill Kroger or your run of the mill shop. Right? And then you have one of the best grocers in the world out by you. Wegmans. Wegmans is also a fantastic grocery store.

Pancham: So, got it. Got it. So what kind of things you need to be careful about when you invest in these shopping centers, like as an active guy or as a passive investor? What would, you know, be some key things that you look at if you’re a passive investor?

Michael: You’re going to want to make sure that the company that you’re working with has knowledge of this. You don’t want them to be working on their first shopping center, or if they are working on their first shopping center, you want them to have, you know, a background of a few years in the industry, because it’s really about tenant relationships. Because the key driver of all your income is leasing, as you know, with apartments. But the leasing that’s in retail is driven by relationships with national tenants and regional tenants and local tenants. So you want somebody that has relationships, or if you are going to invest yourself, you’re going to want to, you know, get some relationships with some of those people or, you know, get somebody like a broker or a property manager that has some of those relationships if it’s your first venture. Number two, like I said, you want to make sure that there’s access because all the time, you want to make sure as much as possible that there’s left and right turns in and out. You want to make sure that there’s traffic. You want to make sure that you can see the tenant signs, because if the tenants you can’t see the tenant signs, the tenants aren’t going to go there. The tenants also aren’t going to go there if there’s no access. And like I say, you also want to be careful about your merchandising because you don’t want to, like say, you’ve got a vacant space and you’ve got a TJ Maxx and you’ve got, you know, like a party store and you’ve got, you know, a supermarket, and you’ve got this vacant space that you really want to lease and along comes like a marijuana dispensary or like a porn shop that is really going to change the nature of your shopping center. So even though the marijuana dispensary is legal, and even though the marijuana dispensary might pay a lot of money to be there, those other tenants aren’t going to want to be next to them. And you also want to make sure that there’s enough parking. So a lot of national tenants like Ross and Marshalls and those guys will put restrictions on who you can put next to them because they don’t want a health club next to them, where people are just going to kind of go their park for an hour or two, and then just get back in their car and leave because they’re all sweaty after they went to the health club or you know, they’re tired, and they don’t necessarily cross shop.

Pancham: I see.

Michael: It’s a little bit like I said, a little bit of an art and some science to, you know, leasing but the main thing is having a location. We call the best location out there, the main location. So that’s what really differentiates shopping centers. If you’ve got one shopping center that’s got the good tenants and it’s on the corner with all full access. That’s your a class shopping center. And you could have the next shopping center right next to it. But if it’s off the intersection, it’s necessarily going to be a B class shopping center because all your best tenants are going to want to be right at Main.

Pancham: Got it. Got it. We get back to Wall Street because this is literally Main Street investing. So you know what? Kind of again, I’m going to ask very general question. What kind of returns can investors earn? We are talking in 2020. And we’ll get into, like, this COVID situation. But in general, like what kind of returns people can get as compared to, you know, let’s say apartments or self storage or mobile home parks? Are they higher or lower or similar?

Michael: It’s really hard to say. We’ve traditionally up until a few years ago specialized in value-add deals, and so we were getting some really nice returns and also from about 2010 on, unless you were brain dead, most of the time, it was pretty easy. And you just you had to get a good start to the one thing is, is that with apartments, you can kind of improve them and do different things to make them better. There are some shopping centers that will never ever be a good shopping center. So you should just avoid them, you know, and it’s just the location is bad, the access is bad, and all the rest. I explained to people all the time. If a retailer can’t make sales, it really doesn’t matter, because they’ll be losing a lot more money than just paying you rent. So it’s all about whether a retailer can make sales. So you can actually give them the space and pay them to take the space. And they’ll still lose money because they’ve got to keep their store open. Right? So that’s why you see so many in certain situations where a lot of tenants will close the location, continue to pay rent and move, you know, someplace else and open up a bigger store or a different store or a better location.

Pancham: Wow, amazing.

Michael: Well, they’re obligated to pay rent, so they’ll continue to pay the rent. And as long as they don’t have what’s called a radius restriction, they’ll just move to a new location, that’s a better location where they can make money or they’ll just, if it’s just a bad location overall, and they don’t think that they want to put a store into that market, they’ll just close the store because it’s cheaper for them just to sit there and pay rent on that store and move on with their business in other areas.

Pancham: I see, I see. So, you know, I want to switch gears a little bit and being an engineer from, you know, my background is engineering and I’ve been into tech space for a very long time. And, you know, with the advent of Amazon, I’ve been hearing for last decade, that retail is dead, right, like, you know, the malls are going to go away. That’s everything is going to be online. It was supposed to be online in 99. You know, you could get your groceries you know, online. You’re going to get your bags delivered online. Everything was supposed to be online in 99. And now we are in 2020. You know some of that has come about it has become true and we are not at the level of drone deliveries that Amazon has been proposing but we are hit with the situation of coronavirus, which has led to like closures across the you know industries and I’m sure retail, hospitality…everyone is getting hit bad. Right? So, like what do you see the future of retail strip centers in the face, let’s say right before coronavirus?

What was your take and what is your take now with that situation we have on our hands right now?

Michael: Well, the prediction and it appeared because pure play internet retailers have a lot of expenses to drive traffic to their websites. So and they’ve got the additional expense of delivery. They’ve got the additional expense. People ordering a bunch of stuff just to try it on. And then buying the one thing and returning, you know, maybe four other items. So it’s really hard to make a living doing it as a pure internet play. And Amazon found that out. So Amazon went and bought Whole Foods. And Amazon had been up until March, opening up stores, their Amazon go stores. They were been opening up Amazon bookstores. And so the market was changing to what was called omni-channel. And the biggest part of omni-channel is what they call BOPUS, which is buy online pick up at store. I say pick up in store. And so that was a super huge thing that was even changing the way restaurants do things. So I was just talking to….we’re working out a deal where we’re giving a rent break to a Longhorn steakhouse, which is part of Darden and you know, they’ve got over 800 landlords. They’ve thousands of restaurants. And they had already started doing pickup windows because there were a lot of people that just wanted to order and pick it up. And you can see it in with Chili’s…it was doing a big part of that. And so people in the restaurant business were doing a lot of pickup even if they had a sit down type of a restaurant like a Longhorn Steakhouse or an Olive Garden or something like that. So the market was kind of going to omni channel where you could buy online. You could buy in the store, or you could order it and then pick it up at the store. You wouldn’t have to go into the store. Even Walmart was really good. They turned on a dime, you know, and as soon as they saw the threat from Amazon, you know. I never would bet against Walmart because they’ve just are huge. They’ve got sharp people and they’ve got a ton of money to spend. So, but Amazon can probably match them dollar for dollar, but we’ll go into that later. That’s the way the market was going. There were some winners. There were some losers. And there was people like Ross that didn’t even develop their website, their online sales because a large majority of their customers didn’t, you know. They paid in cash or paid with a debit card. A lot of their customers were lower income, and a lot of their customers didn’t shop online. So a lot of the news stories that you hear are written in Washington, Chicago, Los Angeles and major urban areas. But once you get out beyond that, a lot of people aren’t buying stuff online and it gets more difficult to deliver something to the middle of Indiana, as they’re finding out now. But I will say that moving forward, there probably will be a lot more online sales… taking a lot more…figuring out how to get the merchandise to the customer, the way the customer wants the merchandise, but I still think at the end of the day we’re social animals. We want to go out. It’s going to be difficult to stop us from going out. We’re going to go to the mall. We’re going to, you know, at some point maybe go to movie theaters. I don’t know how they’re going to that. It is going to be something that’s going to be a really difficult ride. We’re still going to want to go to bars and all the rest of it. And if and when they get the vaccine for this thing, you know, everything will be normal, but there will be definite changes. But I think at the end of the day, there’s certain things that you want to touch, that you want to feel, that you want to have the experience. And if you have a very good experience and you have, you know, people that know how to sell in your store, you’re going to have the experience and then you’re going to have the dollar stores. And what we’ve been focusing on is the single tenant dollar stores, the single tenant drug stores, and pharmacies because they not only act as health care providers, they also act as convenience stores, and many grocery stores and they’re doing a lot of the same thing that the dollar stores are doing. The dollar stores are, you know, many type of Walmart things and a lot of times …they’re in small towns that don’t have any type of…so that’s their only general store that they have. We really like the service providers. We’d love what’s called med-tail, which is your dentists. Your urgent care place, right? We’d love the dialysis places because people absolutely 100% need to do the dialysis. And these are both fortune 500 companies with excellent credit. And we really like the Auto Service places like your Jiffy Lube, your gas station, AutoZone. Well, I don’t really like AutoZone as much as I like people that are doing service like the oil change the tire places we’d love car washes those places where because I think at some point AutoZone or A lot of that stuff is going to go half online and half offline, right? And so I really like where you have to get your car fixed then that I, you know, with your technology, guys, your technology guys are probably screaming at their iPhone right now saying, oh, but it’s all going to go to you know…everybody’s going to drive Ubers or it’s going to go to self driving cars or stuff. It’s like, well, at some point, somebody’s going to have to service that stuff, right?

Pancham: No matter what it is, right? So like, what you’re saying is, in summary, that anything that’s experienced related, whether it is going and eating food outside and having a good time, or you know, having something like a barber shop, which is again, experience related, you cannot get your hair cut online. Right? Someone like that, or you know, if you have things like, you know, servicing your car, whether it’s the car wash or fixing it and all that. So all that is going to remain and like really nothing. It’s going to be very hard to touch those things and as far as other online retail is concerned.

Michael: I’ll just make one caveat though. I don’t know how those are going to come back, especially the, you know, the haircare salons, the restaurants and stuff like that. I don’t know how they’re going to come back after COVID. So they’ll probably be a slightly different experience.

Pancham: Yeah, no. I was about to ask that actually. Yet, you know, based on what you just said that was like pre COVID. But now, given the COVID situation, right, what would you say? Like the impact to your portfolio or people, you know, their portfolio and how is it going to move forward?

Michael: Well, we’re right now in the middle of a situation and I was just mentioning to you that we’ve got, you know, a number of shopping centers where up to 40-45% of the tenants are not paying any rent or anything because they’re completely closed. And so it’s the some of them are claiming a force majeure. That it’s more along the lines of a government eminent domain that, you know, the government closed them down so they don’t have any control over it and they can open up. Right. But we had been kind of moving away from a lot of that model anyways. And we’ve been putting together a fund that has single tenant uses that weren’t going to be disintermediated by the internet. And so they’re more service uses. So we’re, we’re looking at investing in auto service, we’re looking at investing in med tail, we’re looking at investing in drugstores and dollar stores, and then with a small smattering of funeral homes if they were well-located in a retail setting. So those are all things that are number one, they’ve got some pretty good credit behind them because they’re either good fortune 500 credit, you know, credit rated tenants, or their high net worth business owners, franchise owners that you know, have a number of stores, or their high net worth doctors and dentists. And so we’d like that model there. And what we’re putting together and we still are is a portfolio that’s geographically diversified, that’s credit diversified. And is, you know, pretty much I don’t want to say recession proof, but extremely recession resistant. And also, it’s proven out our investment thesis is proven out because it’s pretty COVID resistant too.

Pancham: Well, that’s great.

Michael: And then the other cool thing that your guys…if they’re their tech guys are going to love is we are right now investigating doing that in a security token offering.

Pancham: Oh, you’re actually putting everything on blockchain.

Michael: We’d like to. We’re trying to.

Pancham: Oh, you are. That’s great. I would love to chat with you offline on that and find more. Great, thank you, Mike for all the knowledge that you’ve shared. So we’ll be back after this message. If you are an accredited investor and have been thinking about putting your money to work for you, then I have good news for you. I have created an investor club which I call the Gold Collar Investor Club. I will be putting together investing opportunities exclusively for the group. These are the opportunities where I have done the due diligence for you and will be investing my own money alongside you. If you are interested, please sign up on thegoldcollarinvestor.com/club. I repeat thegoldcollarinvestor.com/club. I will reach out to schedule a 30 minute phone conversation to discuss your investing goals once you sign up. This can be a good opportunity to diversify and take some chips off the hands of Wall Street to produce some passive income. Come. And in case you were wondering, what is an accredited investor? An accredited investor is someone who has earned more than $200,000 as filing single or more than $300,000 filing jointly for last two years. Another way to qualify as an accredited investor is if your total network is more than $1 million, excluding your personal home. It includes your stocks, 401, K’s, IRA’s, cars, etc. Just not the equity in your personal home. If this is you, I would highly encourage you to sign up. Let’s move on to the next section of the show, which I call Taking the Leap round. I ask these four questions to every guest on my show.

So my first question for you is when was the first time you invested outside of Wall Street?

Michael: Well, I was, I think either a senior in college or just had graduated from college. I can’t really remember what the year was, but my brother and I bought a three flat apartment building. And that was our first investment outside of Wall Street.

Pancham: Okay, well, how long ago was that?

Michael: That was like 1985 or 1986.

Pancham: Wow.

Michael: And I was around 20, 21 years old.

Pancham: Wow. That’s great. Cool. So what fears did you have to overcome when you did that when you first invested outside of our city? Did you have any fears? People usually in college don’t.

Michael: Yeah, I was so young and stupid that I didn’t really know the difference between investing in Wall Street and I really at the time wasn’t interested in anything Wall Street because I didn’t have any money to invest in Wall Street but my brother and I could get a FHA loan with very little down and you know control a building which at the time we bought it, I think it was like $80-$90,000 and, you know…so you can make close to $100,000 investment. And we just put $2,000 into it.

Pancham: Wow, got it. Got it. Cool. So my third question is, can you share with us one investment that did not go as expected?

Michael: I can say that we’ve had a lot that didn’t go as expected. But the thing is, is that we’ve always managed to overcome them. We’ve never ever given a property back in our 30 year history. We’ve had situations where our investors did not make as much money as they could have. But our investors have never lost their principal. So the worst one I ever did was when we put together a fund and raised money from Canadian institutional investors right after the 2008 crash, and we were buying single tenant portfolios of homes, redoing them, and then flipping them and selling them or renting them. And my biggest problem was trusting a contractor that he was doing what he said he was doing, and so we got out ahead on the, the payments to him, and then he just kind of disappeared. So yeah, you know, and it was something that we should have known but he was also a brother in law of one of the partners. So no, he was actually a brother. So he’s a brother of one of the partners and you figure that he’s not going to screw his own brother but evidently this guy, you know was a really, really a lowlife.

Pancham: Wow. No, you know as to say you do and you learn and because these are seminars.

Michael: Absolutely, you know. I don’t care who you are now. It’s like if you’re putting in a request for payment on a construction project, we’re going to go through lien waivers in, we’re going to…somebody’s going to go out there and sign off on the fact that the work is done and all the rest of it. So lesson learned, and it was something that we should have known in the first place, but sometimes you get lazy.

Pancham: Yeah, no, you do and you learn. Cool. So my last question for you, Mike is what is one piece of advice would you give to people who are thinking of investing in Main Street that is outside of Wall Street?

Michael: I would say that, you know, come on over here, the returns are much more stable, whether you’re talking about apartments, whether you’re talking about triple net stuff, whether you’re talking about industrial buildings, whether you’re talking about cell towers, I mean. This is where you can get some real stability, some real wealth creation, and especially if you’re looking at the market up and down. I get really scared when my entire investment, you know depends on what type of tweet the President makes. I get really scared, whether there’s a tsunami someplace or whether there’s a virus. I mean, we’re getting hit with it now but just the market plunging for some reason that doesn’t have anything to do with what you’re doing in the middle of country.

Pancham: Right.

Michael: So I really like the fact especially with what we’re doing, we’re doing longer term leases. I also like what you guys are doing because people always need a place to live they need a roof over their head. And so we’re, you know me and you are kind of in the same business that we’re providing goods and services to people that people need. You’re providing, you know, roof and shelter for people that they absolutely need. So, I mean, those are your basic Maslow’s hierarchy of needs.

Pancham: All right. Great. Thank you for that advice. So Mike, this has been great. Thank you for your time. How can the listeners reach you they want to get in touch with you?

Michael: Sure. They can go to our website. It’s concordiarealty.com. That’s concordiarealty.com or they can send me a, you know, an email directly at mflight@concordiarealty.com. We are going to have more information about our new security token fund. We’re putting the website together and getting the legal documents put together. But that’s going to be at Liberty fund.io. That L-I-B-E-R-T-Y.

Pancham: Great. Well, thank you, Mike, for your time today.

Michael: Thank you.

Pancham: I hope that you guys enjoyed that show and got some perspective on retail centers. Thanks for listening. If you have questions email me at p@thegoldcollarinvestor.com. That’s p@thegoldcollarinvestor.com. This is Pancham signing off. Until next time, take care.

Thank you for listening to the Gold Collar investor podcast. If you love what you’ve heard and you want more of Pancham Gupta, visit us at www.thegoldcollarinvestor.com and follow us on Facebook at The Gold Collar Investor. The information on this podcasts are opinions as always. Please consult your own financial team before investing.

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