Tuesday, November 21, 2017
Business

Tampa broker is big on real estate investment trusts, including his new one

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TAMPA — Want to invest in real estate?

The hard way is finding and buying the properties yourself, maintaining them, paying the taxes and insurance, then hoping you can make at least a few bucks from renting or selling them.

Then there are real estate investment trusts, or REITs. Put simply, you invest your money with a company that finds the properties and pays you dividends from the rents it collects.

Generation Income Properties of Tampa is a new REIT. It also was the first REIT in the nation to file with the Securities and Exchange Commission to take advantage of Regulation A+, a 2015 SEC regulation that enables small companies to raise up to $50 million from the public.

So far, Generation Income has raised about $3 million from more than 100 investors and is under contract to buy its first property, a building near the White House in Washington D.C. whose sole tenant is a 7-Eleven.

By year's end, the trust hopes to have several more rent-producing properties in some of the nation's largest cities, including Tampa, and start trading shares publicly.

Generation Income is the brainchild of David Sobelman, a veteran commercial broker in Tampa who has managed and overseen more than 1,000 net lease transactions worth over $10 billion. (A net lease is one in which the tenant is responsible for taxes, insurance and maintenance).

Sobelman, 45, recently talked with the Tampa Bay Times about his REIT, his investors, and his forecast:

What was the genesis of Generation Income Properties?

I have a private fund that actually does the exact same thing, and I was investing for my own account and with partners through this fund since 2006. I went back to the fund investors and said, "Would you rather do a second fund or (pursue) this idea to ha a publicly traded REIT?"

Why do you like REITS so much?

The benefit of these types of assets is that you can realize the appreciation of the asset during your ownership of the asset as opposed to waiting until sale occurs and getting profits from that. The assets I'm purchasing are triple net lease investments but I'm only purchasing in the top 20 highest density cities in the country so New York, LA, San Francisco, Atlanta, Washington etc. Tampa is No. 20; I decided to do that.

What kind of properties are you looking for?

Office, industrial, retail, could be health care. The gist of this is single-tenant, typically free-standing but not always, and investment-grade tenants for long periods.

Why only properties in big cities?

That is really important to the model. We are able to quantify that these cities have the highest probability for property valuation. This one asset we have under contract is occupied by a 7-Eleven. They have an S&P AA- credit rating, signed a 10-year lease with options to renew, and it really is a great example of the type of assets that the REIT will be putting in our portfolio.

Any other examples?

The fund that is the precursor for this REIT has a Tampa asset in its portfolio, the Sherwin-Williams building on South Howard. Sherwin Williams signed a 10-year lease and have options to renew. That (property) increased in value from when I bought it to a year later by 9 percent. That is the gist of what we are accomplishing through REITS with well-located properties… that have grown in value while (we are) collecting rent.

Can anyone invest in Generation Income? How much to get in?

There technically are not minimum amounts other than that one share is valued at $5 but most people are investing well above that number. Yes, anyone can invest. The regulation we are using allows you to take investments from non-accredited investors, but I feel it's important that people do have some substance to their personal portfolios so I haven't gotten any $5 investments.

Are most your investors from the Tampa Bay area?

If I had to guess, I'd say 60 percent are local — doctors, lawyers, bankers, both men and women of all professions. What resonates with them the most is that the investment is fairly stable (and) there is a very conservative undertone to the underwriting of each asset so they like the fact there are assets backing this investment. It's not like a tech company investment where you're hoping this works out and is accepted by hundreds of millions of people but you're actually purchasing an asset that provides income.

Any dividends?

We would pay dividends every quarter just like most other REITs and that's important to this model to make sure the investor knows the regular dividend part of this.

What are your goals, both short- and long-term?

Our goal is to have between five and seven properties this year. We'd like to close our fundraising and started trading (shares) this year. On my board currently is Jamie Graff, head of real estate investment banking for Raymond James (Financial) and he estimated the second round of funding to be in the $300 to $500 million range. (To do hat) we would go beyond the Reg. A +. We are using the reg exactly as it was intended to be used: to start a public company in the most effective and efficient way possible in order to grow it to a point beyond the $50 million threshold. Our goal is to have a $1 billion capitalization by 2020.

How will the public trading of shares work?

As soon as I close the fundraising portion of this, we will hire a transfer agent and the transfer agent will transfer those dollars that people have invested into shares and the shares would be held in the individual accounts, then traded initially on the OTC. I've already had conversations with the New York Stock Exchange. They've reached out to me twice and said, "We've been watching you." That was flattering to me.

Contact Susan Taylor Martin at smartin@tampabay.com or (727) 893-8642. Follow @susanskate.

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