Absolute NNN or Ground Lease?

A majority of the single tenant NNN properties that are Ground Leases are marketed at a lower cap rate than traditional NNN leases. The (ir)rationale for this is that the tenant pays for all the improvements built upon the land and the LANDlord has no responsibilities. So, therefore, some would assume that the investment is more valuable and should therefore sell at a higher price/lower cap rate. I disagree...
What the landlord does not get in this scenario is the ability to depreciate the building - this value goes to the tenant. The shift of this financial benefit from landlord to tenant usually is very significant. And to pay a premium for this less-than situation is ridiculous. The far better alternative is the Absolute NNN lease. Whereby the tenant pays for absolutely all costs of the property and the landlord still has technical ownership of the improvements (building) so he can still depreciate the property.

Another Technology Real Estate Death

Near the corner of Stevens Creek at Lawrence Expressway in San Jose is a new for lease sign. It sits in front of the recently closed approx. 4,000 square foot Blockbuster Video store. 10 years ago this would have been a very hot NNN investment property - little did people see how technology would reshape the real estate world. We want to be very forward thinking whem investing in commercial property. What can change in the next 5 or 10 years - the time frame when you may want to sell or exchange. Food is hard to sell on the internet. But cell phones as an example - do they require such an abundance of retail stores? Banks are also significantly shrinking their retail space requirements. All these changes morph strip malls and the investment outlooks behind them. That's what I think while waiting for my haircut at Supercuts.
Mario Pinedo, CCIM
Intero Real Estate
Office 408-342-3155
Cell 415-269-6249

Where to Invest?

Or what to invest in? That was a question just posed to me by a new friend of mine. Big question if you think about it. It all started off by her asking me if I liked Pinkberry frozen yogurt as we were walking through Santana Row. Then the conversation went to the competitors in that marketplace - Red Mango and others. Good or bad for an investor? They are making a volume of sales for sure. Does that make for a good real estate investment? I would say in general no. Starbucks was the industry darling for quite a few years. Everyone wanted a strip center with Starbucks as a tenant. And those single tenant Starbucks and strip centers sold at a premium (lower) cap rate. Now, with Starbucks closing locations, this darling is no longer courted. And owners of these will not be able to sell at the same premium cap rates that they bought. Starbucks was a trend - it didn't seem so at the time - it seemed as if the world economy had shifted to have an endless demand for coffee. Pinkberry is also a trend and trends wane. I'm boring and conservative when it comes to real estate investments - I like unhealthy hamburger and boring drug stores over flash in the pan froyo and grande lattes. And then there is the thing about location...

Estate Quality BANK REO near Silver Creek

Feel like you are on vacation in your own home! Breathtaking views of golf course & city lights from this elegant Ponderosa Ridge home. 6 bedrooms,3 ½ baths with upgrades throughout. Excellent floor plan with marble, hardwood floors, new carpet & paint. Spacious master suite with fireplace, vaulted ceiling, huge spa bathroom. Open kitchen and family room overlooking pool and flagstone patio. 3 car garage. 4,001 square feet on a 15,681 square foot lot. Built in 1999. This is a very well priced bank deal in the Silver Creek area. Just came on the market. Offered at$1,319,900. Call for a tour quickly. I am holding this home open Sunday, May 10 from 1:30-4:30. 4751 Whitetail Lane, San Jose, CA 95138

Investing in Short Sales and Bank Owned REOs seminar

This Thursday at Intero Cupertino we will be holding our investment seminar specifically focused on short sales and bank owned properties. Our manager Jess Wible and Jason Smiley from Intero Mortgage will covering many strategies on how to invest well in this market. Only 6 seats remain for this class. Please email or call me to RSVP. This Thursday, May 7, 2009 6pm-7:30pm.

Warehouse and fenced yard San Jose

Very good deal and excellent location for an industrial warehouse property with parking for trucks or equipment. $1,300,000 is the asking price for this freeway exposure property currently rented by an asphalt paving company. There is over 5,000 square feet of warehouse and dock space. Over 20,000 square foot lot. This parcel is right at the "clover leaf" of North 101 going to South 880. Perfect deal for a construction company that wants to own their own space.

Call me for a tour:

Mario Pinedo, CCIM
415-269-6249