Thread Reader
Blake Nucci

Blake Nucci

Jan 22, 2023
11 tweets

Here's what we learned from our real estate deal that just returned us $50 million cash profit on our $2 million cash investment over an 11 month holding period. A primer on the (i) capped downside & (ii) asymmetric upside profile of "covered land"...

We vetted 100s of deals during 2021 to find properties that fit within a Venn diagram of (i) 10x+ return potential and (ii) stable downside protection. We found a 60K square foot underperforming shopping center in Durham, NC...
The retail tenants generated a cash yield that provided a "floor" on the property's value - even during recessionary scenarios. However, we looked beyond the 60K sf shopping center and saw potential for a 2M sf life science and residential development site across its 10-acres...
By reimagining the "story" of the site - from a dilapidated shopping center to a mega development site - the valuation framework could change from (i) a multiple on the low existing retail rents to (ii) the land value of the largest urban development site in Raleigh Durham...
A few execution steps were needed - e.g., terminating the leases of the retail tenants, engaging the City for development planning, etc. - but none required deep technical expertise, or even a team to execute. We were able to execute from our office 500 miles away.
Even better, the existing retail cash flow could secure us non-recourse debt, which enabled us to acquire the property with less than $2 million of cash. And this eliminated the need for us to dilute our ownership by syndicating equity. We were able to hold 100% of the equity.
The heart of the strategy was (i) buying from an inefficient channel where our competition was looking at the property as a Class C shopping center and (ii) selling/monetizing into a deeply competitive channel of best in class global mixed-use developers.
The part of the value chain that we owned was monopolistic - i.e., we owned the largest urban development site in one of the hottest markets in the US (i.e., there were no substitutes). But we then sold to a very competitive part of the value chain that competed on price alone.
Our exit generated a 25x equity multiple, and required no development - or even entitlement - risk...
DMs are open. Happy to share more of our learnings, successes, and failures to help others in their journeys.
Renderings are on my company’s website
Blake Nucci

Blake Nucci

Managing Principal of Canvas Investments. Former investment head at Tishman Speyer, a $50B+ AUM real estate investment company.
Follow on Twitter
Missing some tweets in this thread? Or failed to load images or videos? You can try to .