🗞️ News & Moves 🏠

CMBS Distress Cools—Office Still in the Hot Seat (Commercial Observer)

After four months of high distress, February offered some relief.

CMBS distress fell to 10.8%.

Delinquencies and special servicing rates dropped.

Retail stayed stable at 10.7%, while hotels held steady at 10.2%.

Office?

Still feeling the squeeze.

Distress climbed to 19.3%, setting another all-time high.

With valuations changing and landlords being creative, there's a chance for a turnaround.

Chicago rents hit new highs—and they're not coming down (Real Deal for You)

Downtown Chicago hit a big milestone—average apartment rents are now over $3,000 for the first time.

In Streeterville, the priciest spot, rents hit $3,648.

Why?

Demand is booming, and supply is vanishing.

Developers are stuck in limbo, with only 500 new units expected this year—way below the 10-year average of 3,500.

That means lower vacancy rates and higher rents for years.

For landlords, it’s a golden era.

For renters?

Better lock in a lease now, because relief isn’t coming any time soon.

🚨 The Fed Pulse 🚨

Recession panic is reaching new levels.

This week, the authorities released the latest CPI and PPI data.

Investors are feeling the pain—some might even grab a Jack Daniels to cope.

Inflation is cooling, but not fast enough for the Fed to shift course yet.

Core CPI sits at 3.1%, still sticky, while PPI made a sharp drop to 2.1%.

Meanwhile, CEO confidence has tanked to levels last seen in 2012.

The last time this happened?

Nothing catastrophic followed.

But the economic climate now is far from predictable.

Rates are moving, though.

The 30-year fixed mortgage dipped to 6.65%, and the 10-year Treasury yield is hovering at 4.27%.

Case Study: No money down deal

Today, I want to break down a case study on how to buy a property with no money down, negotiate a lease that adds over $1M in value.

My partner and mentor, Rafik Moore (Facebook), did this with a single-tenant Goodyear property in Eagan, MN.

Here’s how it went down.

The Deal:

In 2022, Rafik’s associate offered him an off-market deal.

This included a 22,240 SF Goodyear Commercial Tire & Service Center located on 7 acres at 3815 Nicols Road, Eagan, MN.

The seller was an out-of-state owner from Houston who inherited the property through a family trust.

He had no interest in fixing up the building and was looking to cash out.

The ask: $2.5M, not a penny less.

At first glance, it seemed a bit high—over $100 per SF for an older building.

It had only one year left on the lease and a $180K NOI.

But Rafik saw an angle:

🔹If Goodyear left, he could convert the site into a truck parking facility, which would significantly increase NOI.

🔹If Goodyear stayed, he had room to negotiate a new long-term lease at higher rents.

No Money Down

Rafik structured the deal using $600K from an investor friend on a 50/50 split and borrowed the rest from a bank.

Essentially, he got into the deal with no money down.

Unlocking $1M+ in Value

After buying the property, Rafik thought Goodyear would leave when their lease ended.

But after digging deeper, he realized:

They were generating $1M/month in sales from this location.

They weren’t going anywhere.

So instead of preparing for a vacancy, Rafik initiated lease renewal talks.

Goodyear agreed to stay, but they had a list of demands:

✔️ New asphalt

✔️ Fresh paint

✔️ Updated bathrooms

✔️ General facility improvements

Rafik originally asked for $25,000 a month, which would be $300,000 in annual NOI, along with a 10-year absolute lease.

They ultimately settled on a 7-year absolute NNN lease for $21,800 a month.

This amounts to $262,000 in annual NOI, a quite increase from the $180K old lease

This single move boosted the property’s value by approximately $1.2M.

Rafik paid an $80K commission to the broker who negotiated the lease.

He also spent about $200K on improvements. '

In the end, it was a game-changing move.

The Exit

After the new lease was signed, Rafik refinanced the property, which had an appraisal of $4M. He then repaid his investors' capital.

Then, in 2024, he decided to test the market and listed the property at $3.995M. After negotiations, it sold for $3.7M.

Takeaways

📌 Never assume a tenant will leave. Dig deeper into their business—if they’re making real money, they may be willing to pay more to stay.

📌 Lease renewals can be the easiest value-add move. Securing long-term commitments at market rents is the most effective way to add value to the property.

📌 Everyone wins when the deal is right. The investor got a 31% annualized return, Goodyear got an improved facility, and Rafik made a healthy profit.

This is how you buy smart, negotiate better, and create massive value.

That's it for today.

If you have a question or a comment, please hit reply.

(I read every email).

Be Well,