🍿 'Weird' real estate at the movies

👋 Hello, Best Ever Community!

In this week’s newsletter, “weird” real estate saves movies but not operators, Trevor McGregor’s five keys to success, and one investor raises the NOI on their multifamily property by 67%. 

➡️ Plus: Want to promote your business to the Best Ever audience? Here’s your chance! By referring new subscribers to the Best Ever newsletter this month, you can earn a chance to win a branded blog post on our website, a dedicated branded email, and more. Learn more below!

This week’s newsletter is brought to you by QC Capital, a leading private equity investment firm specializing in the acquisition of institutional-grade multifamily and car wash assets in the southeast United States. Learn more about QC Capital here.

Let’s CRE!

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CRE HEADLINES

🏈 Down, Set… Hike?: Following the recent CPI report showing that inflation rose 3.5% YoY in March, expert consensus around interest rate expectations has shifted. Some even think another rate hike may be in store.

📈 Blame the Rents: The Fed wants to see inflation cool before lowering interest rates. But rents are still rising, pumping up inflation. How low rents need to go remains the question.

🏢 Conversions Rising: Nearly 70 million square feet of office space (1.7% of total U.S. supply) was undergoing conversion in Q1 2024, up from 60 million in Q3 2023. Conversions are now on pace to double in 2024.

🛠 Record Apartment Completions: In the first quarter of 2024, the U.S. apartment market delivered a record-breaking 135,600 new units, nearly doubling the previous decade's average.

🌴 No Love for Luxury: Asking rents have been slashed for upscale four- and five-star-rated apartments as a result of oversupply, with rents plunging from 11.8% year over year to -0.3% in Q1 2024.

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‘WEIRD’ REAL ESTATE AT THE MOVIES

Movie theaters are one of the few areas of retail real estate where landlords don’t have the upper hand right now. Retail has recovered strongly from the pandemic and even seen a resurgence with an influx of in-person shopping and dining pushing rents higher. Landlords have largely avoided rent concessions, as availability has fallen to record lows. Operators with movie theater tenants, however, have not been as fortunate.

🤪 Saved by the Oddball: While office-to-multifamily and big-box-to-self-storage conversions are all the rage, movie theaters, with their “oddball” constructions, don’t lend themselves to conversions. Cinemas have sloped concrete floors for stadium seating and large windowless rooms in buildings that are often attached to or tucked behind dying malls, making it difficult for landlords to reimagine the space for new tenants. Thus, they’re forced to offer rent concessions to keep their buildings occupied.

🎞️ Hollywood Woes: After pandemic closures and Hollywood labor strikes, the number of movie screens in the U.S. has declined nearly 12% since 2019, and ticket sales in 2023 remained 33% lower than 2019 levels. Even hits like Barbie and Oppenheimer couldn’t save theaters. In 2023, in-theater sales reached $110 per square foot — a 20% drop from pre-pandemic levels. The main thing keeping many theaters nationwide alive has been the inflexibility of the real estate and operators’ willingness to offer rent concessions and invest in upgrades.

🔧 The (Short-Term) Fix: With the rise of streaming services, many movie theater operators are investing in upgrades to make the theater experience more exciting than the living room couch, including installing giant screens, playgrounds for children, and cocktail lounges for adults. Some chains have added features like bowling alleys, arcades, and event spaces to help withstand slowdowns in the movie industry.

HOLLYWOOD ENDING?

Many anticipate a rebound in the coming years as theaters become more experiential and film production normalizes. Operators and analysts are optimistic about a turnaround in 2025 as production ramps back up. Either way, we’re not living in the days when you’d go to the mall on a weekend and hang out with your friends, and movie theaters have suffered. Property owners and operators are trying to keep up as the entire asset class changes before our very eyes.

_{🚘 QC CAPITAL}
QC CAPITAL’S STRATEGIC ENTRY INTO A $35B MARKET

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With QC Capital’s Car Wash Fund, you can expect:

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✅ Proven Expertise: Backed by a track record of successful projects.

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Don't miss out on this opportunity to diversify your portfolio and secure your spot today! Learn more here.

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FROM VIKING CAPITAL

When discussing how individuals become clients of his coaching services, Trevor McGregor highlighted key fundamentals that lay the groundwork for success. He emphasized the importance of not just being interested in change or improvement but being fully committed to it. Only when a potential client is genuinely dedicated to the journey ahead can effective coaching begin.

Trevor lists five essential characteristics for unlocking your full potential:

1. Ambition: The fuel that propels action and fuels resilience in the face of challenges. Ambition ignites the drive to persist relentlessly toward your goals.

2. Aptitude: The fusion of intellectual and emotional intelligence, empowering individuals to navigate the complexities of the world with wisdom and grace.

3. Attitude: Cultivating a positive mindset that serves as the cornerstone for achieving your aspirations. A positive attitude primes you for success, fostering resilience and attracting opportunity.

4. Appearance: Prioritizing your physical well-being and health lays the foundation for a vibrant lifestyle and habits that propel you toward success. By nurturing your body, you cultivate the vitality and energy necessary to thrive.

5. Authenticity: The transformative power of honesty and genuine belief in oneself and one's words. Authenticity breeds trust, connection, and alignment with your true purpose.

By consciously integrating these five A's into your life, you unlock a potent force for transformation and elevate your journey toward realizing your fullest potential.

👉 Discover more of Trevor’s keys to success here.

🎓 Download Viking Capital's free passive investing course.

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67% NOI INCREASE + 90% RENT GROWTH

Diana Lin, AIA raised the NOI on this 22-unit property by 67%. Here's how she did it. 👇

🏢 Property Details: 22-unit property purchased in November 2021 in Glendale, AZ, at 95% occupancy. 

💸 Finances: Purchase price was $3.425 million with $1.4 million in equity raised.

💵 Debt Structure: $2.859 million loan, 10-year fixed, 75% LTV. 

💼 Business Plan: Exterior upgrades include paint and landscaping, while interior upgrades include in-unit washer/dryer installation. Amenity upgrades include a dog park, pergola, BBQ grill, and private patios, and she incorporated a ratio utility billing system (RUBS). The plan is to hold and cash flow or refinance.  

🍾 Results: Current rents are at $1,334, compared with $1,205 pro forma rents and $700 rents at the time of purchase. In total, rents went up 90% and NOI increased by 67%. The projected five-year total return is 2.01x, the five-year IRR is 16.5%, and the five-year average cash flow is 5.2%. 

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

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25 PRESALE TICKETS STILL AVAILABLE

Last week, more than 1,000 of today's leading CRE investors, operators, and syndicators gathered in Salt Lake City for the 2024 Best Ever Conference, and it was ridiculously amazing. 

But don't take our word for it. Here's some of the amazing feedback we've heard so far:

💬 “Hit it out of the park again. Already signed up for next year.”

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💬 “I will make millions of dollars over time from the relationships/experience I gained last week; that is absolutely worth the cost of traveling and admission!”

If this sounds like the sort of experience you could use to propel your investing, secure your 2025 ticket today. We launched 200 presale tickets and less than 20 remain. This is the best price you'll see. Guaranteed!

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—Joe Fairless