ND: That’s right. I think, I think everyone in real estate has to be a little bit insane and I think by definition that’s doing the same thing again and again, hoping for a different outcome, which happened to happen on the fourth try. So that’s that’s right. 

DA: Wow. Okay. And so that, so eventually you did get that position and that was your start in the industry and that was specific in the net lease space.

ND: It was specific in the net lease space. It was to be kind of a, you know, a junior financial analyst. You know, a lot of the times kind of financial analysis and the real estate side is really just trying to determine the P& L for the property itself, right? What the costs are, the income, what rent can grow to for net lease, it’s a little bit different. It’s underwriting kind of the credits of the tenants, the operating businesses you know, public, nonpublic companies, and I had a finance background coming out of school. So that’s where I got my start for the 1st, years was on the finance side. 

DA: Okay, so I want to hear a little bit more once you got the job to where you are today, but before we do that, just for our listeners and for myself, maybe just give us a little bit of an understanding of the net lease space. What does that mean? And sort of what are you doing day to day? 

ND: Net lease refers to the fact that, you know, as landlord, the rent that you’re collecting on a monthly basis is the rent hits your bank account and there aren’t expenses going out outside of taxes, maybe some accounting. But the tenants are responsible for, you know, the real estate taxes, the insurance, the infrastructure of the building, the roof needs to be replaced, the light bulb need to be replaced, the parking lot needs to be plowed.

And so it’s really kind of the most passive at least on the surface kind of type of real estate that you can own. So, a variety of different people own it just because people like to own real estate, they like to own physical assets, but it doesn’t come with a lot of what other commercial real estate does, where you have to actually run what’s essentially a business, making sure that you’re re tenanting, that, you know, the waste is being collected, all those different things.

So net leases, this catch on, it becomes more nuanced than that. And some are double net where there’s some landlord responsibility and whatnot. But what it really is, is meant to be kind of a coupon clipper from a landlord perspective. And then on the tenant side they operate it as if they owned it. So I’m running a business. I want to run my Burger King. You know, I’m going to continue to run it the way that it would if I owned the real estate because I’m responsible for everything other than a rent check. 

DA: Right. Really interesting. And what are the obvious advantages, sort of, to each stakeholder group? So, the owner they don’t need an operating team. They’re not necessarily making revenue, you know, from the operations side. They’re, I guess, looking just for capital appreciation. 

ND: Long term. Exactly. Yeah, so there’s, it doesn’t appreciate as much and doesn’t depreciate as much as some of the other spaces because you’re not going, the rents are typically fixed with some built in escalators on an annual basis. And they’re typically long term leases. So 10 to 20 years of term, you know, it winds down here and there. But so you’re really collecting an annual income stream and it’s meant to be like residual income and regular income that’s coming in though a lot of retirees own that lease as well, because it’s just a different way of investing and collecting the rent that’s coming in without having expenses.

And so it’s, you know, similar to you can buy a lot of company stock right for the same type of tenants where there may not be a dividend and you have your ups and downs and your appreciation, but I can buy real estate you know, for a publicly traded company and collect was essentially a dividends and collecting income annually while still putting out the same. And I own a physical asset while having that same credit. So it’s meant to be more passive, you know, with any investment, though, you’re investing it. You have to manage your investment, right? And monitor different things. But as the landlord side from their benefit is, you know, and you don’t need to be overly sophisticated.

You don’t have to know every market in and out. And I can be in New York and own something in Alabama or California, Mississippi, wherever it may be and then from a tenant side they get to operate their business the way that they would otherwise, you know, for the most part they all have quiet enjoyment.

They all get to run it the way that they would, you know, I can’t build an amusement park on a McDonald’s parking lot as the tenant, but I can run my business the way that I’d want to. And it’s just a way of getting locations open and it’s just another source of capital, right? If I have to go and build it and put out the money to do that, it may not be the most efficient thing for capital when I’m the business. So I sell the real estate to a landlord through a sale lease back, or a developer builds it for me and I sign a lease. I get my business, I’m paying a rent, and I continue to focus on what’s important to me versus kind of running you know, real estate and finance markets. 

DA: Makes total sense. And not every business, you know, necessarily can be an expert in, in, in, in all aspects. And certainly real estate being so specialized just takes that sort of burden off of their backs and to your point, allows them to focus on their core business. So Nico, you know, with all that you’ve accomplished to date, what do you think has led to your success? What has helped you to be successful? 

ND: Yeah, I think 1st and foremost is working hard and, you know, not really treating it like a work week, right? It’s not Monday to Friday. You know, it’s a full circle. I think when you’re working in a 7 days a week, and some days maybe lighter than other, but I work a lot. So that’s going to be the biggest thing. I think part of it is hating to lose. Versus liking to win, right, wanting to make sure that we succeeded, not just personally, but as a company and doing that but beyond that, I think, right? Because some of that you can just do. I think the biggest piece is. Learning as much as possible, like I alluded to in the beginning. Also, I think I take a lot of pride in the fact that. I am pretty well knowledgeable in our space and I try to know as much as possible of historical transactions, ones that haven’t happened yet, what’s going on, knowing the space, knowing the market.

And I think people come to us from an advisory perspective at least because we are the most knowledgeable in the space. Mm-hmm. , and I think that’s probably the biggest thing and I employed that as a company, but to myself more specifically. And I, I think that helped build a reputation. And then also just being a being means managing a lot of different things, wearing a lot of different hats and seeing the larger picture on everything. So, I think that’s been. You know, 1 of the biggest pieces beyond working hard to kind of everyone can do that. I think it’s just seeing everything as a, as a whole and knowing as much as possible so that people come to you. 

DA: Nico, do we have to have a conversation about work life balance? 

ND: I think it’s a conversation that a lot of people have with me. It’s gotten I’ve definitely gotten better. It’s like two two little ones. And my daughter’s only about eight weeks old. So it’s definitely, it’s definitely 

DA: Well, maybe it’s too late for the conversation, but I think the reality is probably got to be playing a factor and hoping to rebalance that a little bit.

ND: Yeah, that’s that’s right. It’s also why I’m sitting on a couch right now trying to take take some time with the family for a little bit during the summer. So it’s yeah, that’s great. 

DA: Well, and congratulations on the new one. Then that’s, that’s. That’s awesome. So listen, this is where we get to go a little bit deeper into the industry. And you alluded to some of the challenges that your industry is facing and maybe why, you know, the fact that your company has sort of branched out and has taken on, you know, more parts of the business has been a good thing. But you know, we want to delve into sort of your mindset, your expertise. And as we look at commercial real estate, we know that it’s still the largest asset class in the world that has not changed. However, it has gone through a very challenging period, not the first time, but certainly one of the most prolonged periods of low levels of occupancy. And I think we’re still in a place where, you know, the industry as a whole is trying to figure out what business it’s in.

It used to be just, you know, build it and they will come. They were in the space business provide space and people are likely to rent it or lease it. And I think we recognize today that it’s very different. That the physical workplace is now much part of it’s part of a much larger workplace ecosystem.

There are more options in which you can be and work from and live from. And the boundaries between the two, I think are also blurring. So, you know, again, from your sort of lens into the industry you know, the types of buyers you’re seeing, the types of companies that, you know, are deciding to take move towards a sale, lease back versus owning and, and being an occupant to their space. What’s changed? What is different? What was going on now from, you know, really understanding the industry and emerging to this new world specific to, to what you do every day. 

ND: So it’s a little bit unique relative kind of the rest of the commercial real estate world, right? Because a lot of the rest of the world focuses like you said, the occupancy coming into the office on a daily basis. Whereas a lot of what we’re dealing with on the net lease side, we do industrial office that net lease still exists. There’s those components to it. But a lot of it is retail or health care or entertainment or education where people have to come in.

Right, because it’s I’m going to pick up food from a chain restaurant. I have to bring my child. What we learned a lot from being remote was that education is better in the class, right? And being there. So, you know, for early childhood education, or K through 12, which falls into net lease too, people are bringing their, their children there. And so you’re seeing a lot of that. What I think has been interesting for us is how the businesses are thinking about locations long term, right? Talking about sale, lease back, not knowing if I want to sell the real estate under a sale lease back and commit to a 20 year lease term because I don’t know who’s going to be in this area, right?

It’s it’s not a destination. Maybe it’s a Wendy’s that people are driving by so it needs to be well positioned or there needs to be the The office space there. They’re getting a lot of daytime customers and whatever it may be I don’t know now what that market’s going to look like five years from now, two years right now ten years from now so I don’t know if my Business is going to be profitable.

They’re doing want to sign up for these long term leases. So I think we’re seeing some of that from impact. And then also just from the businesses too just that’s becoming more and more difficult to necessarily hire the same way it is for other groups who are trying to get people to come into the office if it’s more finance oriented or law or whatever it may be. But I think that people in our space are from the development side of the business operating. Are thinking through too, you know, where they really want to be and what has long term viability and can I actually staff and can I get people to come here? Because. Remote type of roles are quasi remote type of roles are becoming more and more prevalent.

So it’s interesting how it’s playing to because ours isn’t the. And what’s the least assigned if the credits there I’m not as concerned about is going to become vacant relative to my office space or residential or multifamily. But I am trying to get me concerned if I can, I need workers to produce the product that I’m trying to to sell you know, or I need residents in the area who are going to bring their sick dog to the vet’s office or whatever it may be. So I think we’re seeing that as, as people look at it but then too, I mean, a large part of, and at least also it’s been, you know, headquarters sales back or manufacturing distribution with office component. And so we’re definitely seeing some hesitancy there as to people rethink how much base they’re going to need, or what they’re going to do.

So that’s all that’s all been interesting and then beyond that, too, it’s just. How people think about their experiences, right? I think a lot of remote is being determined to as, you know, what experience am I getting from my job? What experience am I getting from the apartments and living in the condos and the amenities and everything else that I have? So, I think that’s transferable to my space a bit too, is, you know, the, the same 4 wall box that they’ve been building may not necessarily be the thing to best service. You know, their customers, their clientele, so, you know, it’s, it’s all being impacted, right? As people think about, you know, occupying office space or where I’m going to live, or how mobile am I going to be? I think it’s just a little bit different kind of how it’s impacting our space then. 

DA: Yeah, for sure. Interesting. But, but nonetheless, you know, experience, which is obviously a big part of what we do every day and, and what we are recognizing in terms of the industry. Being more focused on is playing and it’s having an impact on your side of the business as well.

And I think that just shows that no matter what part of the industry we’re involved in, that the nature of it is changing and it continues to change. At what point, you know, over the last number few years, particularly in light of the pandemic, did it start to really impact your business? Has it impacted your business more so recently than, than over the last year or two? And, and sort of, where are you in that sort of. The ebb and flow of that of that impact right now. 

ND: You know, just given that, you know, for the same reason office occupancy or people moving different things aren’t as impactful. They’re still impacted, but aren’t as impactful in that lease. You know, the pandemic lease the first year and kind of depending on what markets you were in was definitely more impactful too, just because places couldn’t be open for business. I couldn’t, I couldn’t enter into the dining space.

We couldn’t go into school. And so definitely impacted, I think, too, how people thought about buying real estate and then the operators thought about doing the sale lease facts, you know, am I going to need the space five months from now, right. It was on a much more condensed timeline. So I think it was like a more abrupt kind of disruption in our space where everything kind of seeped for a little bit just that people thought, hey, how is this going to kind of change our worlds here at the same time, as things started to loosen up a little bit, I think net lease became probably one of the most popular real estate classes kind of heading into like the end of 2020 and then right up into like the end of 2022. So call it like a, you know, a little bit more than a 2 year span. Just because looking kind of, you know, what wasn’t necessarily fully open, but what did well, fast food restaurants did tremendously well, they actually became more profitable with closing down their dining room space and having the drive thrus. And it also emphasized how important it was to buy real estate that had a drive thru. For schools, I think it supercharged how people thought about daycare and early childhood education. Parents realizing how difficult it was to have their kids around all day while they were trying to work as well. And then to just, you know, industrial, I think, had a big boom in our space to, as people thought about buying and thinking about manufacturing distribution and what that meant. So it was really tumultuous where there’s, you know, call it a 4 to 6 month kind of stoppage and what we’re doing at all, but I think it shed light on how it was. What we’re really experiencing now is just the impacts of financing and kind of the lack of availability is the biggest thing that we’re, we’re seeing. And I think from a more long term, more so since right since 2008 to 2010. We’re seeing kind of the similar types of impact in the space, just because there’s not an availability of debt, or the combination of available debt is extremely expensive and the selling market that hasn’t necessarily caught up as much as they as they should or recognizing kind of where rates are is really what we’re seeing. At the same time businesses continue to grow. They need open locations. They need to do different things. So it all kind of ends up meeting the market and and sale lease back and net lease really is just another form of financing. It’s just another piece of the capital stack. But we’re hurting like anyone else is as far as you look at that. That also means there’s a lot of opportunities on both the buying and sell side for what’s really great real estate and great businesses.

But I think it’s interesting to play out as anything else does. I think where there’s maybe on the financing side, we utilize a lot of the same banks that the rest of the commercial real estate space is where there’s maybe some concerns on on defaults or office space or the housing market and what that’s going to look like. You know, I think that’s kind of impacting our space as well, where necessarily shouldn’t cause the core businesses are strong and they’re doing well and most of them they’re doing better than they have in the last three or four years. But it’s interesting to see if that sentiment catches up, you know, a year from now or three months from now.

DA: Right. Now, there were a couple of, I think, high profile sale leasebacks announced for some large single occupier users of space. So, do you think that will start given you know, capital constraints given sort of maybe you know, overall asset value, not what it was once worth and, and again, these companies looking to really focus in on their core business, do you think there’ll be more? Of those as sort of the, the world equalizes you know in a sort of way.

ND: I think there will be , I think some of the companies that a lot of private ones, some, some public ones that are well positioned, but I think the ones who have access to a lot of cash in the balance sheet, or maybe a facility that they put together before rates went up, I think they probably will sit on, sit on the real estate, just knowing where values are.

But I think for the most part, everyone else, again, it’s, it needs to be kind of perceived as another form of financing, just the same way real estate debt markets are really tight right now. So are the business side of debt, opco loans and everything else. And so we’re operating business debt is double digits or high single digits or mid teens. Even if at least that cap rates are 200, 300 basis points higher or get to that point from where we were a year ago, that’s still a more effective use of capital than taking on corporate debt and doing the sale leaseback. So, I think as a result of that, you’ll continue to see a lot more sale leasebacks come into the space.

And it will probably be getting done on more of an institutional level size, just as they think about it versus the private markets and the smaller kind of ones off, onesie, twosie types of transactions until debt shakes up. But I think we’re seeing a lot of groups who are doing sale leasebacks who wouldn’t have thought about doing that for the last 10 or 15 years. They didn’t have to. So I do think it’ll keep, continue to grow. 

DA: Okay. Nico, let’s take a short commercial break and we’ll be right back. 

Commercial Break: This episode of 10 is proudly brought to you by HILO. HILO is a rapid deployment workplace engagement platform for the hybrid world that enables building operators to connect to their tenants, whether they’re at work, at home, or anywhere in between. We are in the midst of a seismic shift in the evolution of the workplace. Now, more than ever. It’s clear that the most important asset of a building is the people. Commercial real estate leaders recognize that tenants and employees want new kinds of spaces, services, and amenities to support having the flexibility to work from anywhere.

Workplace engagement solutions that connect hybrid working people to buildings, no matter where they are, have become a major differentiator as buildings compete to retain current tenants and attract new ones. HILO empowers building operators to meet this challenge. To learn more about HILO and schedule a demo, visit hiloapp. com. 

DA: And now I’d like to welcome back to the show, ND, Chief Operating Officer at NNN Pro Group. Again, really enjoying the conversation and thanks for being with us. So, you know, we’ve talked a little bit about technology and certainly about experience starting to hint at the fact that experience is becoming a pretty important factor in commercial real estate across the board. We, of course, are very focused on, you know, workplace engagement, and I think that’s uppermost in everyone’s minds, particularly as we continue to understand what this new hybrid work world looks like. And also how it impacts on the multifamily side as well with people, you know, living and working in their in their suites and not even leaving during the course of the day.

So just curious again through your lens of the industry and what you do every day with a focus on again continuing to meet the evolving needs of people in buildings. What technologies, if any, are you seeing that are gaining traction in helping to contribute to the way in which either buildings are being transacted and or people are having experiences.

ND: On the on the transaction side, I don’t think as far as kind of just the buying and selling, we’re seeing too much of an impact. I think in our space in particular, where we’re seeing a lot is on the research side on the knowledge side and kind of how prospecting is going to. You know, I’d say now more than ever, definitely we’re seeing a huge growth in the private market and even, you know, mom and pop type of buyers who are subscribed to a lot of the same different MLS systems or databasing systems that we use that everyone else in the industry is using to source information to find opportunities to find listings to buy, to find transactions to see what the property traded for several years ago, what treated down the street what just leased up and, you know, I’m seeing more and more people have a Costar account on the private side than I ever seen.

And then at net lease side I would use correct see a lot too, but. Now, we even see some just buyers. It’s only a few properties using different salesforce plugins and different things too. So it’s really interesting from that perspective as we try to see people search for knowledge to make themselves more educated buyers and actually go through things. I’d say more particular to net lease is kind of two prong on the, on the prospecting side, which advises are using a lot. There’s a ton of programs that have come up to try and figure out, you know, who the sponsor is behind something, even if it’s a private company, who’s the biggest shareholder in something, when on a public side, when corporate debt’s coming due, where are their bonds trading. So, it’s really interesting as people have been doing that and then to just, you know, using a lot of we’re 1 of the few people in our space who go and visit every single property. We’re selling in or buying, which means a lot of frequent flyer miles, which is, which is great. We get to see a lot of the US too, which you think is a bit underrated and not realizing how diverse and interesting everything is so it’s nice from that perspective, but at least when we’re doing the initial underwriting can do so much online now from reviews and everything else and using 3 different programs to measure the lot yourself and figure out how big the building is when you don’t have a serving on hand or whatever it may be.

And then 2 on the kind of operator side and the landlord side using different programs for either managing their portfolio on the landlord side, or on the lease admin side, there’s a variety of different new companies some that are only a year old. That people are using on the lease admin side, or trying to figure out the new accounting standards with how they to record their leases. It’s been really interesting to see how much how much has come out. And then lastly, too at net lease in particular, there’s a big emphasis on how a business may be performing at the location. You’re buying a lot of the times. At least we’ll have financial reporting, but a lot of times it won’t. That’s probably where we’ve seen the most growth in, like, the last 18 to 24 months.

For programs that are using, you know, the same way we would on the development side, try to figure out what’s a good site to to operate from cell phone pings or geotags or whatever it may be businesses. These companies are using it to estimate sales for, you know, what might be on the corner. How many patients this doctor may be seeing just made a lot of the investors more knowledgeable in our space, and it’s also made a lot of successful brokers and advisors more so than when, you know, you’d have to go down to the county to figure out who owns the property and then search their phone number, get 30 of them in LexisNexis and whatever it may be.

So we’ve, we’ve seen a pretty big boom in, but I’d say it’s a very finite amount of times, the last two to three years kind of max. As people have tried to get more educated, and I do think it’s revolved a lot around kind of the education side for us. 

DA: Well, it sounds like within the broader CRE universe, there’s some opportunity, and it sounds like there has been, but maybe even still going forwards for some specialized technology within your specific segment, and that’s exciting.

You’re already starting to see some of that so thanks for sharing. We didn’t touch on this earlier, but by the sounds of your comments at one point, I think obviously I didn’t ask, but I guess you’re, you’re, you’re national, you’re, you’re servicing clients across the country. 

ND: Yep. So the benefit of net lease is that, you know, there’s, there’s good real estate everywhere and it’s not all, you know, it’s not all in coastal coastal towns and cities or, or urban areas, but it’s, you know, I think we tend to kind of think it’s, it’s all over and that’s really the benefit of net lease is that again, you’re collecting a check, the tenant’s responsible, you know, you still visit your property every once in a while, make sure the lights are still on and they’re running it which we do, but yeah, we we’re national, we transact all throughout the U. S. You know, we’re headquartered in Manhattan, but we do the least amount of in kind of all the states or cities. In Manhattan, interestingly enough, so it’s a lot of a lot of travel on the road, people specializing in different things. And then a decent amount of international too, you know, net lease kind of transcends just the U. S. we do a lot in Canada, Mexico, and then a handful in Europe and South America and variety of things now.

So it’s, a bit more transferable. And again, it’s, you know, it’s, it’s sophisticated in the sense that we’re underwriting a lot of credits and financials and everything else. So it’s complicated from that end. But it definitely is easier to, to underwrite than a lot of the other kind of commercial real estate specialists that are out there and investors where they have to, you know, drill down to that specific block to know what the market rent is and what the vacancy rates are gonna look at. So it’s a little bit easier to underwrite on the net lease side and, and transact to different countries. 

DA: Amazing. Very cool. I really enjoyed this conversation and again, learning about a part of the business that I wasn’t as familiar with. So thank you for not only sharing your story, but educating me and our listeners as well.

Our closing speed round is an opportunity to get to know you on a personal level a little bit better. The first question already scares me a little bit, but what do you enjoy doing when you’re not at work? Which we already know is a problem for you. 

ND: Well, I’m also, I’m working remote all the time so it’s everywhere it’s work. But it’s definitely time with my kids and my wife spending time. I don’t I’m doing what I love anyway, while I’m working and doing everything else. So my, my free time definitely goes to them. 

DA: Okay. That’s fair. What is your favorite drink or beverage of choice? 

ND: I don’t drink a lot of different things, right? Different things. So it’s definitely water unless we do coffee as a close second, but it should probably be water. 

DA: Okay, which is a good choice. Again, probably not a lot of downtime, particularly with a new baby at home, but any favorite movie or current TV series that you’re watching or binging on? 

ND: What am I currently watching or binging on? I’m not binging on it, but unfortunately, because it’s made my life miserable, a diehard New York Jets fan and hard knocks started last week. So that’s definitely going to be probably the thing that I’m squeezing in on a weekly basis to watch and have Aaron Rodgers give us some hope, hopefully, for this year.

DA: All right. 

ND: One way in which technology has improved how you live or work. I would say that I probably do 75, 80 percent of what I’m doing from my phone, which has been the biggest thing. And, you know, I think. In our space in particular, just because too, we have a lot of our investors are on the go and they’re looking at their phones. A lot of the different programs do have apps on the phone, and they’re and they’re mobile conducive to what we’re doing.

That’s the, that’s the biggest thing for me being able to, you know, from a prospecting standpoint or pulling up Salesforce or, or running through just our database ourselves and how our, how our internet works is really meaningful from a, you know, true, just kind of everything that we’re doing. We use we use Yardi a lot, which is a variety of different things from, you know, accounting, managing the investments, managing the brokerage and doing everything else.

And it’s pretty dramatic from that end we use Crexie a lot. But I still think it just has to be that that kind of shift to the importance of having a mobile app component to it, or readily mobile usable. A lot of these different things has been the most impactful that allows me to travel to where I’m traveling in the middle of nowhere to be able to still work.

DA: Yep. Agreed that that mobility is certainly a pretty powerful in this new world. Your personal choice for days spent in person working with colleagues or working from anywhere.

ND: Definitely. I prefer being in the office and being around all my colleagues is what I like to do. I think as we’ve had more and more people come in different generations, they probably don’t agree with me, but that’s definitely, that’s definitely where I like to be and kind of where I’m the most efficient.

DA: I think we’re still in a world and an environment where we’re trying to figure that out. I don’t think it’s definitive. I don’t think what we’re seeing necessarily is what we’ll see 3 or 6 or 12 months from now. I think it’s very much an evolving extension of this experiment. And I think it’s going to be exciting to watch. I think that we know that flexibility is certainly what everyone desires. And as long as we keep that in the back of our mind and focus just on doing great work, wherever that might be. I think we’re all going to be a lot better off. I agree. Yeah. Nico, thank you so much for joining me today. I’ve learned a lot.

I’ve really enjoyed the conversation. Hopefully this will be the first of more to come and wishing you continued success and let’s stay connected. 

ND: I appreciate it. It’s a lot of fun. All right. 

DA: Take care, Nico. Take care. Be well. I want to thank ND for joining me on this episode of 10 and for contributing to the global conversation around buildings, being part of a robust ecosystem, helping to build great companies that they are vital in the effort to cultivate and support great people and teams.

The future of the workplace will likely take many forms. And we will continue to explore what that looks like together. Subscribe to TEN for more conversations with leading CRE industry professionals and experts who all have something to say about tenant experience and the future of the workplace. We love hearing from you.

We love hearing from you, so if you enjoyed this episode of TEN, please share, add your rating and review us through your preferred podcast provider. If you or someone you know would like to be a guest on a future episode, please reach out to me directly at david@hiloapp.com. And until our next episode, I wish you all continued success in building community where you work and live. Thank you.