Walgreens Closures, CRE Brokerage Class, CRE Conference This Fall (Office Hours)

Each week, I'm going live at 8:30am CST for my "office hours" to answer your questions about commercial real estate on the show. Let's hear what you'd like to know when it comes to brokerage, investment, and development!

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Key Takeaways:

• Walgreens is closing a significant number of its US stores, up to 25% of profitable locations, due to an unsustainable pharmacy model. This presents potential opportunities to acquire vacant Walgreens properties in good locations.

• Tyler advises against buying dollar general stores due to their short lease terms and potential for location obsolescence.

• Cauble is launching a commercial real estate brokerage mastermind and a 12-week course to teach foundational knowledge for new brokers.

• We discuss financing strategies for commercial real estate, including using commercial lines of credit and equity in existing properties.

• Tyler discusses his views on the affordable housing crisis in Nashville, suggesting government incentives and higher density rezonings as potential solutions.

• Cauble is planning a commercial real estate conference in Nashville in October with keynote speakers, breakout sessions, and exclusive content for his accelerator group.

About Your Host:

Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors.

Episode Transcript:

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Are you looking to take the next step toward investing in commercial real estate but don't know where to go? Series central offers a comprehensive education and coaching platform designed to help you get started. Our online courses cover a wide range of topics from the fundamentals to advanced strategies, ensuring you have the knowledge and skills needed to thrive in this competitive industry. As a member, you'll gain access to our exclusive online community and monthly group coaching calls, providing you with valuable networking opportunities and personalized guidance from experienced professionals. Whether you're a beginner or looking to take your career to the next level, cre Central has the resources you need. Visit www dot cre central.com. To learn more. Welcome back to the commercial real estate investor podcast live from the cobble group studios today for another round of office hours. We are diving into your questions, whatever questions you have around commercial real estate commercial real estate investing. So feel free to jump into the live stream with those questions and we will be sure to get them answered. Kicking us off first had a couple of things I wanted to cover. One just couple of updates, what we've got going on around here but to an article that I saw about Walgreens this past week, which I think is pretty interesting. And probably something we should dive into and talk about. So this is an article from CNN titled Walgreens will close a significant number of US stores shutting down many unprofitable locations. Let's see here. They're going to close a substantial number of its roughly 8600 locations across the US as the company looks to reset the struggling pharmaceutical chains business. They haven't released a specific number of store closures. But they are saying that it will be significant, apparently 25% of stores that are profitable. And that will include the closure of a significant portion of those underperforming stores. I mean, can you imagine? I mean, they're saying that roughly 25% of stores that are profitable, will be closed. I mean, that's considering where they are. I mean, listen, this is directly from Walgreens, quote, we are at a point where the current pharmacy model is not sustainable and the challenges in our operating environment require we approach the market differently. Walgreens revealed a few additional details about the closers on their call, but they said that they would take place over the next three years. The company also said it would consider additional closures if performance doesn't improve. The vast majority of employees working at affected stores will be offered jobs elsewhere. Looks like their stock has plunged on a weak outlook. drugstores are struggling across the board CVS and Rite Aid are also not doing well. thing I wanted to really point out with this is that oftentimes when we're talking to investors, they tend to look at, you know, Walgreens in these national tenant stores and think oh, well, you know, they've got really good credit, they're always going to be pretty strong. And you know, that's just not always the case, sometimes their regional or local business is actually better. That being said, to me, that means there's probably a lot of opportunity out there for those that are interested in buying dark Walgreens, right, these Walgreens you know, they still do have to pay their rent for these deals. Even if they decide to shut down the store because they're in a legally binding binding contract that says that they will do that. So could be an interesting opportunity to grab up some really good real estate. I mean, Walgreens is typically in a hard corner, and a high traffic area that can be used for a number of different uses. That's why when you're buying triple net, single tenant Net Lease deals, or commercial real estate, you know, in general, make sure that the price per square foot that you're paying for the building, and the future potential of that site are also pretty strong. It's one of the reasons I don't like buying dollar generals. We typically advise our clients not to buy dollar generals because the average dollar general stays around 17 years with a 15 year base term. So if you think about it, you've got like a two fifths chance that they are going to renew and their location, which means that you're probably going to be left with a you know, seven 810 1000 square foot box in the middle of nowhere that nobody's going to really want to take so something to keep in mind for the future. So I don't know pretty interesting. What are your thoughts on the Walgreens closures? Do you think? Is it surprising? Do you think Mark Cuban has anything to do with it? I think he certainly could. Okay, before we dive into those questions, wanted to catch up on a couple of things for this past week celebrating my birthday on Sunday. That was a lot of fun. went camping with a bunch of friends out away in between the wakes up towards Kentucky. It is it's awesome. I haven't been there since I was a little kid. And we we had a good time camping. We're right by the right by the water which is always nice. So it's good weekend. was at a deposition all day on Friday. I mean, we're talking 9am until 4pm, with a think three or 410 to 15 minute breaks, but no lunch break. I mean, we powered right through it, I wanted to get it over with. I was the one being deposed. So I figured, you know what, let's just not break for lunch. Let's just keep going. And it's, it's fine. I'll, you know, we'll see about that court case, maybe I'll be able to tell you all about it someday. It is one of those cases where I mean, the tenant is suing me because they decided they couldn't pay rent anymore. And that is as wild as it sounds. But hey, that's part of being in commercial real estate. Sometimes you're just going to get into lawsuits, and you got to be prepared for it. Fortunately, we do have clauses in all of our leases. And I highly recommend that you always have this, that the prevailing party will have their attorneys fees paid by the losing party. So that means when we win this case, that tenant is then going to have to pay all of our attorneys fees, which, you know, doesn't necessarily recoup us for our time, but at least we're not out of pocket for having to defend ourselves. So that's fun stuff. Okay. 12 weeks to break into care started last night, really excited for that group. I think we had 27 people on the call, we're going and I initially said we were only going to accept 20. But, you know, hey, we had 27 Apply, we figured we'd accept all 27 Really looking forward to that, you know, Logan and I are launching a commercial real estate brokerage mastermind on October 1, but it's really more for your intermediate to advanced commercial real estate brokers. And the more that he and I were talking we figured you know what, there's there's nothing really out there for people that are just interested in getting started in commercial real estate brokerage. How did they learn about you know, the market about being a commercial real estate broker? How do they get the foundational knowledge that gives them the confidence of being able to go out and get a job so that's why we created 12 weeks to break into cre really excited about where that goes. Had a had a phenomenal first call last night. A couple of other just housecleaning items. We have a happy hour tomorrow, July 3 5pm. At basics here in East Nashville. If you're around, come hang out with us. Check out my Instagram. I have an Eventbrite you know sign up form. You're welcome to go fill out and then July 15. I'm going to be down in Gainesville, Florida. I've actually got a serie accelerator student that crushed it on one of his deals we're going down there to do a story that deal got a couple of other students from the Florida area that are driving up to hang out with us for the day. So really looking forward to that if you're in the Gainesville area hit me up maybe we can grab lunch grab coffee or whatever while I'm in town. Have a good time. All right, let's check out these comments here. Connor saying Tyler I'm 20 and own a couple Connor own a couple what couple houses? Couple Walgreens? Either way Congrats man that's exciting. Let's see Sang Woo Brian King is saying how do you finance deals using properties that you currently own in the commercial real estate space and a residential they have he locks what is available, usually for commercial properties. So Brian is the exact same. Pretty much when it comes to commercial real estate. It's not obviously not called a home equity line of credit, that you can get a commercial line of credit on the equity that you have in your space, you could of course just refinance the entire property and pull that out as well. You could look at getting mez debt or a second position, but a, a commercial line of credit is essentially a mezlan. Right, because it's coming in on top of your credit, well, technically, it's behind your traditional or your senior debt. And that is that is one way to tap into it. You could also use that equity as a, you know, as a placeholder, or as collateral for other loans as well. So you know, you're not technically putting any debt on it. But you're using it as collateral to go and find something else. So that's, there's a couple of ways there for you to tap into the equity that you've built up into your property. I mean, you could do the birth, the birth strategy, just like you can in residential, with commercial properties. Jeff, what's going on man, he's

saying Walmart closed or is closing a bunch of the doc and box clinics CVS won't be far behind. It's all about insurance reimbursements. And I can't offset the loss with the premium prices and non pharmacy. Yeah, I mean, it's pretty wild to see what is going on in the pharmaceutical world. I feel like we're gonna have a relatively good revolution here pretty soon I mean, you know, you've got guys like Mark Cuban that are really pushing affordability when it comes to these these pharmaceuticals. And you know, there's going to be Fallout when it comes to these drugstores and honestly, I think they kind of deserve it. I just to me when you look at other countries and how much they charge for insulin compared to the United States or just medicine in general. Oh, no, I don't think that we should be justifying those prices that gets off on a tangent. But hey, it's semi related to commercial real estate. Eddie Brock is saying good morning. Happy belated birthday. I appreciate it Eddie. It was a good one for sure. In What's up Tyler felgo Bro keep crushing keep crushing it brother. Awesome man what's going on? Man? He isn't abundance I am and go abundance that is a mastermind that we are a part of. Highly recommend checking it out. I mean, I highly recommend checking out any mastermind, right? I mean, masterminds are a phenomenal piece of my education, they have really helped propel me to another level when it comes to my commercial real estate investing and business in general. So make sure that you're always surrounding yourself with the people that are gonna help help you get to where you want to go. Let's see Kevin is asking how much is the 12 week care brokerage Crash Course. So Kevin, we we actually didn't charge for it this go round, we wanted to just get a cohort of 20 plus people into it and get some written feedback, see how they liked it. And then you know, Logan, and I will probably end up doing this, you know, twice a year, maybe moving forward. So we'll see. It could be $500 could be $1,000. Could be $250. We don't really know yet. What I do know is it's packed with a lot of information, and will be everything that you need to build a foundation to get a job as a commercial real estate broker. That's what we're aiming for. So it's, it's good, like we're gonna have fun with it. Okay, Captain Kirk to sing Happy Birthday is having a Walmart and Target near a flex space development, a big added bonus, or does it not matter in data research, we use them in mobile home park data, but new to flex. So Kurt man, I would say probably not necessarily a big deal. You know, when it comes to industrial, they don't necessarily look at demographics the way that you would in residential or retail type of units. However, if you are near a Walmart or a Target, they have determined that that is a location that a, a fair amount of people within a target area will drive to, which means that it's probably a pretty good location for you to have your base of operations from, which is essentially what a flex space is, right? If you think about an HVAC technician, they're gonna have a fleet of vehicles, they'll have a bunch of people, you know, driving in to work for them from all over the city. And then those people are going to be driving out to houses throughout the area. So if it is a, you know, if it's near a Walmart or a Target, that's probably a pretty good accessible location, easily drivable. There's probably some pretty strong interstate connectivity over there. So while I can't say that, yes, like a Walmart specifically is going to have a positive impact on Flex, Walmart and Target have done all of the research to determine that that area is a good area for them to be. So certainly couldn't hurt to be there. Let's see Kevin, saying how much is the 12? Re? Yeah, we already covered that one. Let's see, Shawn. What does affordability look like in your market? Shot? That's good question, man. It depends on on exactly what you're talking about. Right. So I mean, affordability, you know, on an apartment unit, you know, something affordable is probably 1500 bucks a month, right? For one bedroom. For a, you know, flex space, you're probably talking about, you know, high single digits to low double digits per square foot, triple net. Right. I mean, it's kind of all over the board. So you know, Nashville is certainly an expensive market, it is certainly growing in terms of of cost. You know, unfortunately, unfortunately, right. I mean, there's there's pros and cons to either side of that. I wish that, you know, the government's would do more to incentivize affordable housing development. I do think that that is something that we we don't have enough of. I mean, here's the thing, I don't know, a single developer that wouldn't be out there developing exclusively affordable housing simply because of the overwhelming demand in that space. If it weren't for the fact that you cannot pay market rate for land. You cannot pay market rate for construction and development, and then rent units out or sell them at below market rates. It just financially does not make sense. That's why you have to have government involvement. And we're just not getting enough of that support right now. That's that's really what has to happen. In order for more affordable housing to come online. You know, one, there's a couple different ways to do it. One, you could do it through government incentives, right? Like the government actually giving you cash. You can also do it through granting high density rezonings. Right. I mean, if I'm paying, for example, you know, I bought a piece of property that I'm actually selling to an affordable developer. I went in, I paid $618,000 for 1.7 acres. We got to rezone. I'm taking the affordable route for 63 units, we're now under contract for 1,000,005 50. But that person that's getting it for 63 units they can justify to come in and actually take the time to build affordable housing units. Now, if they went in and paid 1,000,005 50 for it, and then the government was willing to give them 120 units a density, just imagine how much more affordable that site could be. That's the thing is that it just it comes down to density, allowances, really, at the end of the day. I mean, if if you had if if the majority of the urban core of Nashville, and the urban neighborhoods around Nashville had zero density ceilings, there wouldn't be an affordable housing crisis? It wouldn't it couldn't exist, because everybody would start building hundreds of units, and then the market would self correct, right. So you'd have a lot of people building a bunch of units trying to get to that point. And then they would have to become affordable because you've got a glut of units at that time. So that is definitely a tangent on affordable housing. I could talk about affordable housing all day. But you know, I have I have a lot of opinions on it. And I think that if the if the government's not going to give you enough money to do it, then the only other way to solve it, in my opinion, is through rezonings. Eddie Brock is saying I've had a lease out to a potential tenant for eight days, we didn't know why they've been communicating saying that their attorneys are reviewing the lease, I'm going to reach out today advice. So Edie, I wouldn't say that eight days is necessarily a problem. When it comes to getting a lease turned around. Sometimes attorneys are just very slow. When it comes to this kind of stuff. Now, if they're not communicating with you, and you know it, which it sounds like they have been communicating, then then I would start saying, Okay, you probably don't have a deal, go find somebody else. I mean, here's the thing, I like to stay on top of those deals and assume that they're not dead. But at the same time, a deal is not done until it is fully executed. And I have a check in hand. So I will continue marketing that property, I will continue touring it, I don't care if we are waiting, you know, this afternoon, the lease is going out for signatures, I will go for a tour that morning. That's how everybody should really approach it. Because you never know. I mean, that tenant might decide actually, I don't want to sign this this afternoon. And now you've wasted all this time when you could have had somebody else, you know, at least halfway to the finish line. That comes from years of experience. I've had to teach my brokers that as well. You know, look, just because you have a fish on the line doesn't mean that why it's not going to snap, you got to keep making sure that you're doing everything you can to just get something across the line. Never let that pipeline dry up. The CRA group is saying hello from Nodak. Hey, Kristen. Good. Good to see you, Kristen. I've been talking to John here. It's, it's good to see you. Hopefully I'll be coming down to see the CRA group. This fall. I believe I might have been invited for a pheasant hunt. And I will definitely be taking you up on that one. So that'd be a lot of fun. Kevin saying thanks, Tyler. Happy belated birthday. By the way. Quick question. Yeah, absolutely. Kevin. Appreciate it, man. Thanks. Thanks for the birthday wishes. Grant What's going on man, grad student and Syria accelerator. Appreciate the info so far. Tyler working on curing my addiction to multifamily. I appreciate that grant. Hey, we're all we're all recovering from something. Right. It's it's good. I mean, I get asked this all the time, because I do have some controversial opinions on multifamily. I mean, I don't think that multifamily is, you know, inherently bad. I just don't prefer it. And also, like the past. I mean, since really 2019 2018. It hasn't had the returns that I think justify the amount of work that go into it. But it is the easiest, you know, asset class out there for most people to understand, right? Because people live in it, you take if you understand how single family house works, you multiply it by 150. There you go. You've got an apartment complex, it makes a lot of sense.

And also, there's just a ton of education. There's a ton of resources out there on it. It's you know, unlike commercial real estate, there's just not that much on this market really out there. If multifamily I will say this If multifamily gets to a point where Cap rates are closer to seven or 8% on classy assets, then you're going to see me starting to get interested again, because then it's going to be worth the effort. The problem though is what's the value add opportunity? Because I mean, like I've said this before, most of those units have already been value added to hell. So I don't really know what else you could do there. Max, what up Tyler? Any thoughts on the northwest Arkansas market asset types to go for Max? I'm going to be completely honest with you man. I have no idea what is going on in the northwest Arkansas market. Logan Freeman would probably be the guy to reach out to he's in Kansas City. I know he's familiar with the area. From what I understand he's he's just Oracle, he loved multifamily. He typically operates in multifamily, it's in that one to $5 million range. So it's a very different beast. It's a little, it's too small for institutional, too big for your mom and pop. So, he may have something for you, I'd reach out to Logan, and see kind of what he is thinking. But yeah, that's, uh, that's, that's really it. I mean, it's been been an interesting few weeks looking forward to the rest of the summer. For sure. You know, I'm working on my my next book right now, which has been a lot of fun. Gosh, I mean, like, writing a book. I feel like I've said this before writing a book is like getting tattoos. You know, I wrote my first book when I was 25. It took a year, I was so exhausted after writing that I never wanted to write another one. And then, you know, here I am glutton for punishment. It's the same as getting tattoos. You forget how bad how bad it was like, Oh, yeah. Okay, let's just go through that whole process. Again, writing a book, it's not easy. It is a lot of work. They say what it takes a village to pull that together. I am aiming for it to be done. Maybe by the end of this month or the end of next month in time for our event here in Nashville. We're going to be throwing a conference I believe in October. So stay tuned for that. Want to make sure we've got two to three months of time to really get that out there. It will be between 250 and 500 people is what we're aiming for for this commercial real estate conference. And it's going to be a good time. We'll have a couple of keynote speakers. We're going to have some breakouts some some masterminding. If you're in the serie accelerator group, you'll get to come hang out with me for an exclusive day before the conference. We're going to tour some of my assets we'll do some masterminding workshopping. That'll be a lot of fun. So yeah, if you have any other questions on commercial real estate, feel free to jump in. Otherwise, I'm just gonna keep on rambling. We are finishing up a new YouTube set, which is a lot of fun we've got so like this one that I'm in here currently, is my what I call the studio. This is you know, pretty much where I do all of my live streams. So we've got kind of this, this blue background couple guitars on the wall, I've got like a news desk halfmoon right here. And then in the other room, it's going to be more like, I mean, it's literally painted dark green. So I'm calling it the Green Room. But it's a little more casual. We've got couches, leather chairs. I mean, it's almost kind of like an executive setup, and building some, some bookshelves right now we're gonna have those completely filled up. So it'll be cool. It'll be nice to have a couple of different, you know, areas to shoot YouTube videos from. And you know, as always, just trying to scale up the scale up the content for us. Let's see, Jeff is saying northwest Arkansas, because Walmart has been an interesting market for the last several years. Yeah, I mean, you know, if if Walmart's HQ is up towards there, I would imagine there's some pretty interesting things going on in that market. I have heard good things about the Northwest Arkansas market. I just couldn't tell you specifically, what is good. I've just heard Hey, it's a pretty good area. Because I was out in Kansas City not too long ago, and they were talking about him escaping the neon, is there already info out about the conference? Great question. No, there is not. I am in the middle of booking the hotel right now. So once we have the hotel booked, and we actually have a hard date, then I'm gonna go on a on a huge push, you guys will hear a whole bunch about it. We'll do kind of a presale on tickets, you know, you'll get early bird pricing, then we'll do regular pricing. And then we'll have like a day off if you want to just show up. So we're working on that right now. I'm working on speakers, we're working on the blocks. It's going to be good. I've got I've got some really good people that that are lined up to give some talks and do some some breakouts. And, you know, I mean, it'll be unlike kind of any other commercial real estate conference out there. I know there's a lot of conferences in the commercial world, but they're really institutional. You know, I mean, it's so high level that even my eyes glaze over when I start thinking about some of the conversations they have. And it's it's great, right? I mean, you do want to know how interest rates are impacting commercial real estate globally, but I want to know how interest rates are impacting me, you know, in Nashville, right? Like, how is this impacting the way that we are doing self storage? What is going on in you know, X y&z market, so it'll be good. I'm really looking forward to them. Isabella is saying, Hey, Tyler, hope you're having a great day. I am. It's great day. It's Tuesday morning. I've had my coffee. I'm feeling good. I'm looking forward to the networking event at the wash tomorrow. Yeah. Awesome. Excited to see you there. We were at the wash 5pm July 3, we do a monthly happy hour. Just so you're aware, typically at the wash. So if you're interested in that, follow me on Instagram. And you know, you can learn more about it there. We've got signups for it as well. Come hang out anybody welcome to Joy, you don't necessarily have to be a commercial real estate investor, you could just be interested in getting into commercial real estate, we just hang out, have a couple of drinks and have some good conversations. There. Ken is saying, Hey, Tyler, sorry, I'm late Viken How dare you, man? How dare you show up late. Appreciate you jumping in at all. So, yeah, I mean, it's good. We've been, we've had a good get a little weak, you know, onboarding, an office manager, which is something I have needed for so long. I haven't had a real like true office manager, really since I started company. And so that is, hopefully going to be an absolute game changer. Marcus Cottrell Happy birthday. Happy belated birthday, Tyler closed on an 8700 square foot office space, converting to flex. Marcus. Love to hear it, man. First of all, thank you so much. I appreciate it. Marcus is in Serie accelerator. And we were actually talking to him about coming down to look at some of the flex space that he's doing. So Marcus, we've got to get down there, we got to talk about this one that you're converting. I love office space conversions to flex they are. Especially today, you could probably get a pretty good price when it comes to buying the office space, right? Because there's a lot of people that are just scared. They don't understand it. They don't know how to convert it to flax. And really, I mean, if you're buying it right, you can you can convert to flax, relatively cheap. So that's awesome. Marcus, excited to hear more about that. I'm looking forward to it. Oh, cool. Well, that is all we've got for today. Appreciate you all for joining us live on office hours every Tuesday 8:30am central standard time jumping with your questions happy to dive into those. Otherwise, we'll see y'all next week. Are you looking to take the next step toward investing in commercial real estate but don't know where to go? Series central offers a comprehensive education and coaching platform designed to help you get started. Our online courses cover a wide range of topics from the fundamentals to advanced strategies, ensuring you have the knowledge and skills needed to thrive in this competitive industry. As a member, you'll gain access to our exclusive online community and monthly group coaching calls, providing you with valuable networking opportunities and personalized guidance from experienced professionals. Whether you're a beginner or looking to take your career to the next level. Cre Central has the resources you need. Visit www dot cre central.com To learn more