Episode #092 - It's DISTRIBUTION TIME! Criterion's Q4 and 2022 Distribution Recap.

Today hosts Braden Cheek, Brian Duck and Joel Thompson discuss the distributions that they sent out in Q4, as well as what their total distributions were for 2022!

how is it going And welcome back to another episode of how to invest in commercial real estate. And this is our favorite time of the year. It is distribution time. So this is the best time of year because we get to send out checks. We, we raise a ton of money to put these properties together and people are investing the money because they're getting a return on that investment. Some of them are development deals where you may not see any cash flow along the way, but a lot of them are shopping centers Or something we're gonna hold for a long period of time. We distribute that cash flow every single quarter. So just last quarter for Q4, we'll do last quarter and then we can do some fun stuff for last year. Just last quarter criterion did $250,000 worth of distributions. Super excited about that. What about you guys? Just the last quarter, just last Quarter, precision equity is around 600,000, which is kind of our run rate lately. That's a lot of money. $850,000 every single quarter going out to our friends and family and colleagues and business associates and now people all over the country thanks to the podcast and people going to the website and signing up to the investor list but just laugh Last year.

So last year was a great year, we set a ridiculous goal. We said, Hey, interest rates are amazing. The market is hot. We need to strike, we need to go out and buy some real estate. So we bought $60 million dollars worth of real estate last year and last year we were able to distribute $5.7 million video massive applause and that's something I think we're all super proud of. That's a lot of money. And, and so some of that, a lot of it was cash distributions, but some of it was from sales. Yeah, so a million was distributions from those assets that we're holding for the cash flow, 4.7 million of that was from four assets that we had, um, cell last year. So that will be the portion of their original investment back and um, whatever share of profit was assigned to those sales. So just, just a note on precision because some of the same investors, we, I think just in distributions, no property sales, just cash flow and profit from deals that people invested in 4.5 million.

That's insane. Um, so that's over 10 million between the two companies. Yeah, It was crazy. And so when investors, when they, when they sign up on our investor list and then, they we launch a deal and they're like, it filled up in two hours. This is why, because not only do they have more assets to invest, but we're every quarter we're sending 850,000 back to them that they want to turn and get back to us. So it's this game Of our investor list is growing. But so are the pockets of our investors as we give them distributions every single quarter. And in the case of this year, when we had property sales and precision equity hitting records, uh, almost $10 million dollars going back into the pockets of people that want to do more deals. We can't find the deals fast enough at the moment, especially with interest rates rising. Uh, so it's gonna be a tough year and you're gonna have to act quick if you wanna get in these deals. Yeah. And I would say on that note, right? Like if you, if you're interested in getting involved, don't wait for a deal. Don't wait for me to send you an investment, asking for something, ping, ping one of us call one of us and say, hey, I love what you guys are doing or hey, you guys suck whatever whatever you want to start with.

But I'd like to get involved with you on investment side. Keep me in mind on your next deal. A lot of people now I go and pre place commitments for it because I know that guy is going to be in for 50 every single time. I know this guy is going to be in for 75 we can adjust that on the back end. So just shoot us a note and say, hey, I'd like to get involved more, reserve me a spot on the next deal. And then if we need to back you down, it's fine. Just hit us up and say, hey, I think I've got this much money I'm willing to invest. And why don't you pre populate me next time so that I don't lose that? And what, Why? That's so helpful for both companies is that we're going out and looking at deals. And, and if you can, if we had, let's say 10 investors, 15 investors, 20 investors say, Hey, I'm good for 50 on the next one. I'm good for 100 on the next one. Now it helps me go find a deal because I know I've got the backing. So let's say I'm looking at $5 million deal. But now I can look at a $12 million deal because I know I have the capital that's able to take that deal down. And once again guys, if you tell us you're in for 100 and, and then you, we pitch the deal to you and you're like, I don't like that deal. It's no commitment on that. But it does allow us to foresee how many investors want in and to what kind of capital we have access to on each given deal.

Let's just know what side of the deal we might want to be able to chase. Um, and with that in mind, that's not a bad segue into our next deal. And the first deal of 2023. Who what is it? Oh it's on me now. Okay so it's in uh Burleson Burlison. Well it's B. U. R. L. E. S. O. N. Burleson. We know a lot about this investment, We know how to pronounce where it's from. We'll just say it real fast Burlison. Oh my that's not gonna edit well at all. Okay we should know how to pronounce the name of the city. South Fort Worth. See that's easy. It's a suburb of Fort Worth texas growing growing South Fort Worth suburb. So our partners on this deal retail partners, they're based in Dallas. Our other partners, Woodmont. Um come we've done tons of deals with both of these companies now, both of them are in Dallas. The guy who connected us to retail partners is Woodmont. So actually there they are in Fort Worth, this is in their backyard and retail partners is in Dallas.

But anyway it's a growing suburb of Burleson. And we're basically repeating, see I still can't a suburb of the town. He can't pronounce that we're getting real small on. Anyway. Anyway the last two deals we did with retail partners were a 3 to 5 unit multi tenant commercial strip center that we're building from the ground up. And they were accompanied with a ground lease or a pad side or or a build to suit. So this is essentially the exact same thing we're doing a ground lease with Black Rifle coffee company, which is a local veteran owned um drive through coffee concept similar to a Dutch Brothers or a Starbucks or a scooters or something like that. And then there's a three unit commercial strip center going in and those three units are filled with fat burger, which is a burger franchise. Obviously they sell burgers, they're probably super greasy. I bet it's delicious to be honest. You know when you get the brown sack and it's just like fat burgers. We have a fat guys burgers here, but fat bird, just fat burgers, fat burgers.

They literally don't have any meat on them, They're just fat. It's just greasy. Anyway, so there's a Fatburger, uh cool greens, which is essentially the opposite of the Fatburger. I can't remember, you don't want a Fatburger. How about a salad? So that's either place a franchise based out of Enid and it is really healthy um quick fast food and they have a to go market as well. So salads, wraps, um you know that, that sort of thing. And then there's an athletic o, which is a physical therapist. So those three tenants in a building Black rifle coffee company that has a ground lease. Um we are scheduled by two acres I think is what it sits on one point 1.89, 1.89. The land is ridiculously expensive. I mean 3,090,000 for the land, wow crazy. But it's in a great location. This is supposedly the spot to be. You know, the major retail thoroughfare that runs through the city. This is right on that. Obviously, you know, it's, it's a good enough location for all these tenants.

These tenants are fairly picky about their locations. Um, and our partners feel really good about it. So location seems fine. The leases are great credit. Um, there, I believe they're all 10 year leases. Um, we're gonna go get a 2 to 3 year, I think it's a three year construction loan. Um, the rate on this deal obviously, you know, rates kind of suck right now. I mean, they're insanely high. It's hard to make stuff work. We talked about that with shopping centers all the time. You know, if we're, if we're going to buying this massive shopping center and paying 7% on the debt versus 4% on the debt, That 3% is hundreds of thousands of dollars sometimes. So that comes directly out of the investor's cash flow, right? We're on this deal, we're not gonna have cash flow until the building's done anyway. And as soon as it's done, we're gonna put it up for sale because we're not planning on holding the asset. So it's really just about the caring costs of interest for that first year and since you're holding it such a short amount of time, it works out to pay the higher interest, How Many months for construction on this 1?

You Recall Super Quick I mean eight yeah that's what I would expect. The investors want to know how much they were gonna make. What's the what's our projected ir on this? Great questions. So we do a best case kind of a middle, you know average of the two in a worst case. All all blended in. I think the worst case scenario is an 18.54 I. R. R. Um That's assuming an exit in the 18th month. Is that to the investor or to the investor which is a 1.3 equity multiple. The best case is a 24.5% I. R. R. Which is 1.41 equity multiple. And then the middle where they normally come around as 21 point 631.35 equity multiple. And that's right in line with a lot of the Kiddie academy's we've done um The Dallas Kiddie Academy we just exited with 1.33 equity multiple. The kiddie academy redevelopment fund will be I think a 14 El luchador was I think around 1.4 equity multiple.

So fairly standard with the last few developed with ones that don't take a long time. Normally people that are looking to invest on a five year, maybe 2 2.5 times cash. But here these are 18 months maybe maybe two years. And so the equity multiples are smaller but you get your money back a lot quicker. Yeah. So a little bit more on the demographics. Um, five mile population, 102,000 people, 35,000 households. Average household income of $96,000 with the media and the southwest wilshire boulevard, which is where the site sits on has 39,000 cars a day. So great little location there. We think it's gonna be a great deal. It is a two point $161 million 1020% of that ourselves personally. Um, we're raising the rest. So today's Thursday this episode releases on Monday the investment will probably release Friday. So a couple days before you saw this. So it it might still be open.

Yeah. If we sent out $5.7 million dollars last year, Raising two million, might not take too long. The last one we did was a million dollar equity raised and sold out in an hour. So this one could go fast two hours an hour. Is that how it goes? That's how it goes. No way. So Anyway, that's the first deal of 2023. I think we can expect more of these. Um, there's several, I think in the pipeline that can come in maybe the end of the first quarter, we have um not a whole lot else in the pipeline right now. I mean, the shopping centers, like I said, it's a great shopping center with a great owner is not really gonna transact right now. I mean, not that I'm seeing the shopping centers that are trading are, are really distressed. Um, you know, bank owned people. Unrealistic cap rates. I am seeing cap rates inch up slowly slowly. I'm starting to see some eight cap deals come back in the market, 8.5 cap.

They are, they are not primo spots, but I think we're going to see more of that. And I think, uh, the inflation, the numbers came out today, they were a little lower than last year increased. So I think, I think this thing may start to stabilize and hopefully race can start coming down in the next six months to a year. That would be nice. These developments though are popular with our investors. A lot of them that I've been surprised is that they like giving us their money and they like getting it back in 18 months with a nice little profit, right? Uh, as opposed to putting it in one of our shopping centers where, you know, we might not sell it for 5 to 10 years. They like getting their money back and then they've got to do whatever they need to do with it and reinvest it or buy something if they want to. But these development things have become really popular with our investors. Yeah, there's, there's several, I've talked to you though that, you know, it turns into a job because the money turns so fast. You end up, you know, paying a little bit more taxes immediately. Whereas a long term investment, you know, that's kind of deferred until you sell or sell or, or maybe it's deferred until you trade into something else and that cells and then, you know, just if you're doing a lot of these constantly having to find the next deal, like Joel was talking about earlier.

It's hard to find these deals. I mean if we just had a dozen of these in our back pocket, it's not like we're just strategically releasing one a month over the next year. It takes more work. I, I would say investors can take my word on this. I like the cash flow. I like steady cash flow. So every month I know that my investment shed, you know, whatever they shed 100 grand or whatever, you know, and The finding of the deal is hard. It takes work to close the deal. Then you have the sale, takes work, uh, to organize and then you have the taxable event. Now of course, if we hit our numbers and people are getting a 1.3 equity multiple after 18, 15, 18 months and they put in another one and they compound that and the compound that, yeah, it pays off. But we'll keep trying to deliver both options. We want to deliver cash flow opportunities and we want to deliver uh cool brand new development opportunities. Well I think I'm excited about the deal. Go on the website. See if there's still room left, see if it's still open. Um We are excited about this year. We're gonna have a ton of deals.

We had an amazing year last year. Um You probably have already gotten a ton of investors updates. You probably have a ton more on the way and you're gonna get your K. One. I promise. I promise you're gonna get your K. One as fast as as possible taxes due the 15th. Yeah can we just buy The 13th? You're gonna get it like just let's let's be real file an extension. Just file extension. Just do that for me if you like me like you wanna hook up Brayden file an extension. Say Brandon I got you. I filed my extension. Don't worry about my K. One. Then you're my best buddy. Otherwise we're gonna get like hundreds of calls. Where is it? Probably starting next week. I can I can I can list the guy who's gonna ask first. I can him who will not be named him who will not be named anyway next time on how to invest in real estate