03 Oct 2024
Navigating the current acquisitions market can be tough, but Lisandro from Frontera Real Estate shares valuable insights on building trust between investors and operators. Learn how balancing occupancy and rental rates is crucial for maximizing returns in today’s competitive landscape!
James: Hey, this is James with Radius+. I'm joined by Lisandro from Frontera Real Estate. So in such a tough acquisitions market, can you speak on a little bit about trusting both your investor and also trusting your operator to make sure that value add acquisition goes the right way? Can you speak on that a little bit?
Lisandro: Yeah, it's tough right now. Everyone knows that right now, people could go and look at treasuries and they could get sort of a fixed security and get an income that way. You have to tie a deal up, which is already difficult to make pencil because of rates and what's happening. In addition to that, you have to feel comfortable with them, your investors performing as well, right? You tie a deal up and now it could be your reputation. You could tie a deal up and you can’t raise the equity what happens then, right? Like you're as good as your last fight. So you don't want that to go on your resume, so to speak, that you tie a deal up and then you can't perform. What was part two of the question?
James: Being able to trust your operator to do what they're expected to do and drive revenue while also kind of having that scary part in the beginning where you lose some occupancy while raising rates, bringing the average price per square foot to something that your investor is looking for.
Lisandro: Right. So finding the equilibrium, right? Like you're going to have to sacrifice some some vacancy. But in order to push rents, you have to go, OK, what does that look like? I might increase rents by 15 percent. I might lose occupancy by 5 percent. But what's the greater good there, right? Are you more comfortable operating at 85 percent occupancy but with higher rates or do you want to keep occupancy as high as possible with lower rates? You ultimately have to figure out like what's your comfort point. Right. And then looking at DSCR is what that looks like. Right. Debt covenants. What's going to happen if you don't hit that? It's interesting right now. Yeah, it's sort of a it's finding the balance is important right now in in self-storage.
James: It’s a fun market, but that's why pros like you keep things going. Thank you so much for your time, Lisandro.
Lisandro: Thanks, man. Appreciate you. Cheers.
