👑 Meet the new queens of retail

👋 Hello, Best Ever community!

In this week’s newsletter, the Beauty Boom is on, Floyd “Money” Mayweather gets in on multifamily, and vetting a syndication becomes a little bit easier.

Today’s edition is brought to you by Viking Capital, which is proud to introduce The Townhomes at Bluebonnet Trails, a luxurious 114-unit 2021 build located in the Dallas-Fort Worth Metroplex.

Let’s CRE!

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CRE HEADLINES

💰 Floyd ‘Multifamily’ Mayweather: Boxing legend Floyd “Money” Mayweather is reportedly under contract to acquire a 1,000-unit affordable housing portfolio in New York City at a $402 million price tag.

🌵 Pharmacy Deserts: Walgreens could close 25% of its 8,200 stores while Rite Aid is closing 800 stores amid bankruptcy, as decreased reimbursements are squeezing drug retailers and creating “pharmacy deserts,” particularly in the Midwest.

👊 Detroit vs. Everybody: Detroit topped RentCafe's September list of most desirable rental cities, with a 16% increase in online views and a 38% decrease in listings, largely due to downtown revitalization, affordability, and new economic opportunities.

⛅ Sun Belt Slowdown: Sun Belt states dominated the major metros with the biggest rent declines in September, led by Jacksonville, FL, where the median asking rent fell 11.3% to $1,485, and Raleigh, NC, where rents dropped 10.6%.

💼 Back to WeWork: After declaring for (and emerging from) bankruptcy, WeWork has announced the launch of its third-party Coworking Partner Network, through which users of WeWork Workplace will have access to over 75 locations in 50-plus new markets across the U.S. and Canada.

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MEET THE NEW QUEENS OF RETAIL

The Beauty Boom is hitting retail. In 2023, global beauty market retail sales grew to $446 billion, up 10% from 2022 — this includes fragrance, makeup, skincare, and hair care — beating expectations and outperforming other consumer sectors, such as apparel.

Teenagers are a big reason why, as they have become a more significant factor in the retail market. Teen spending is up 4% year-over-year, according to a recent survey by Piper Sandler, and teens are expected to make up 70% of global luxury spending by 2030. Much of that is on beauty products. Teen spending on beauty products is the highest it’s been since 2018.

Three companies appear to be leading this Beauty Boom as the top choices among teen shoppers, and they’re all expanding: 

• Ulta Beauty announced this week that it will open 200 more stores in the next three years, bringing it to more than 1,800 locations.

• Sephora has been expanding through standalone stores, but also through openings in Kohl's and Tanger Outlets. Kohl's ended 2023 with a Sephora presence in 910 of its stores, and it’s adding small-format Sephora locations to 140 of its stores in 2024. Kohl’s predicts its Sephora partnership to exceed $2 billion in sales by 2025.

• E.l.f., a cosmetics and skincare company, closed its 22 brick-and-mortar stores in 2019 to focus on its digital presence. Since then, it’s adopted Sephora’s model with an in-store presence in national retailers including Target, Ulta, and CVS, leading to global expansion.

Trend to Watch: With 73% of Gen Zers having shopped at Chinese online marketplaces like Temu and Shein in the past year and 24% buying from those stores once a week, department stores could be in for a rough go. That’s mostly for clothing. Beauty retailers, however, offer in-store experiences that provide a tangible element that many customers still desire when it comes to beauty products, driving its brick-and-mortar growth.

WHAT IT ALL MEANS

The Beauty Boom has given birth to a new hot tenant for retail operators while boosting big-box stores like Target and the struggling Kohl’s brand with their in-store presence. Boutique beauty partnerships with companies like Sephora and E.l.f. could help bolster department stores’ viability (for now), while Ulta’s standalone stores look poised to dominate strip malls nationwide.

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THE TOWNHOMES AT BLUEBONNET TRAILS

Viking Capital presents The Townhomes at Bluebonnet Trails, a luxurious 114-unit 2021 build located in the Dallas-Fort Worth Metroplex.

This newly developed build-to-rent community offers expansive floor plans at below-market rates, making it highly attractive to the key rental demographic in the DFW area, which tops the charts as the No. 1 city for domestic migration, growing at more than 53 times the national average.

With minimal new supply and a low-density design that combines the benefits of multifamily living with a single-family feel, The Townhomes at Bluebonnet Trails is a prime investment opportunity.

Click below to learn more about this investment opportunity and secure your spot.

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6 RISKS TO CONSIDER WHEN VETTING A SYNDICATION

There are endless real estate syndications that target returns in the mid-teens and higher. While that may change as the dust from the recent economic turmoil settles and markets correct, the fact remains that some syndications are riskier than others.

Here’s a framework of six risks to assess to decide if a deal is worth a closer look, from Brian Davis of SparkRental:

1. Debt Risk: Examine the loan-to-value ratio, loan term, and interest rate type (fixed or floating). Consider how debt could lead to cash flow problems or forced sales in unfavorable market conditions.

2. Property Management Risk: Focus on the track record of the management team working with the sponsor rather than whether management is in-house or outsourced. A long history of successful collaboration indicates lower risk.

3. Construction Risk: Evaluate the sponsor's relationship with construction and renovation teams. Prioritize deals where the sponsor has a proven track record with the teams involved.

4. Market Risk: Analyze the sponsor's projections for cap rates, rent growth, and expense increases. Look for conservative estimates and substantial cash reserves to mitigate market uncertainties.

5. Regulatory Risk: Consider the potential impact of tenant-friendly regulations on residential properties. Non-residential investments may offer lower regulatory risk in some cases.

6. Concentration Risk: Diversify investments by spreading capital across multiple deals with smaller amounts. This approach helps mitigate the risk of a single underperforming investment.

By applying this framework and diversifying across various real estate investment types, investors can build a balanced portfolio that leverages the law of averages for long-term success.

👉 Read the full blog post here.

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PITCH YOUR DEAL. WIN BIG.

Vali Lazarescu of Group RMC won a $400,000 investment at the Best Ever Conference in 2024.

Now, it’s your turn.

We're thrilled to announce that for the third year in a row, we are hosting the Best Ever Pitch Slam at Best Ever Conference IX!

The Best Ever Pitch Slam is a Shark Tank-Style competition where you present your opportunity live on stage in front of 1,200+ investors, including some of the biggest names in the industry. You’ll get direct feedback from industry leaders and a chance to win over six figures in investment capital.

Applications are open now! Click the button below to submit yours today.

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FROM 60% OCCUPANCY TO A 17% IRR

Michael Morawski and the team at Resilience Equity are turning this 60% occupancy C-Class asset into a win for investors over the next five years. Here's how they're doing it 👇

🏢 Property Details: This 65-unit C Class asset located in Tulsa, Oklahoma, was purchased in September of 2023.

💸 Finances: The property was purchased for $3.8 million and the team raised $1.2 million in capital. They assumed the seller's underlying debt of $2 million at a 3.9% interest fixed rate until 2031. The seller is holding a second loan of $1 million with no interest and no payments for 10 years and has a small participation percentage in the upside.

💼 Business Plan: At the time of purchase, the property was only 60% occupied with 26 down units. It needed a complete cosmetic overhaul. So far, the team has completed renovations on a new roof, parking lot, exterior lighting, and signage. They have also rehabbed all interiors, and occupancy today is over 80%. The biggest challenge thus far has been finding quality contractors to complete the necessary work.

🍾 Projected Results: Projected LP returns of 17% IRR with a 7% pref. Distributions will begin this quarter. This is a five-year hold with an estimated valuation of $5.4 million in 2028.

If you have a deal you'd like us to feature, share it with us!

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FREE DOCUMENT DOWNLOAD

5 Questions to Be Prepared to Answer Before Meeting with Investors

It is extremely advantageous to be prepared to answer questions you know your investors will ask BEFORE reaching out to them asking for private money or presenting a deal. Here is a list of five questions you should be able to answer quickly and efficiently no matter the deal.