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Show Summary
In this episode of the Investor Fuel podcast, Olivia interviews Nicole Daeila, Director of Capital Markets at MAG Capital Partners. They discuss the intricacies of industrial real estate, focusing on the sale leaseback strategy, the importance of networking, and the challenges faced in real estate investments. Nicole shares her experiences with tenant defaults, the transition to institutional capital, and the significance of building genuine relationships in the industry. The conversation emphasizes the need for due diligence and risk management in real estate investments.
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Investor Fuel Show Transcript:
Nicole Daeila (00:00)
Yeah,so we actually had a helicopter manufacturing parts tenant on a sale lease back and
they ended up being in litigation because there was a faulty helicopter part that caused a fatal helicopter crash. And so that caused a lot of turmoil for us and not knowing what the future held for them. What ended up happening was they continued to pay rent even through filing bankruptcy. And so we were untouched in terms of cash flow and we sold the real estate without a tenant.
And
just because of the market that we bought the real estate in and the due diligence we did with the real estate, we were still able to give investors about 11 % IRR, which is incredible.
Olivia (01:58)
welcome to the Investor Fuel podcast. My name is Olivia and I am joined here today by Nicole Daeila. She’s Director of Capital Markets at MAG Capital Partners.Nicole Daeila (02:11)
Thanks for having me.Olivia (02:13)
to have you here. I think our listeners are really going to take a lot away from you, the way you’re approaching today’s game and the investments. And so first off, for people who may not be familiar with your world, please give us the short version of what your main focus is these days.Nicole Daeila (02:30)
Sure. SoI work for a syndicator called Mag Capital and we’re focused on industrial real estate and mainly sale lease back. So me and Olivia talked earlier about how development in real estate is so much different than, you know, strategy like sale lease back and how it’s difficult to group together all of commercial real estate as a whole. And so our main strategy is sale lease back on long-term leases for
tenants who are in US manufacturing. And so we work with investors and looking always for new acquisitions and that is our main strategy and focus.
Olivia (03:06)
I love it. And what caught my attention was that the way you’ve been able to just be really focused on keeping your network growing, having all of the expertise. I guess what’s been keeping the machine running smoothly for you?Nicole Daeila (03:24)
Yeah, I’d say as a group, you know, we’re definitely very friendly. Last week we were at the Waste Management Phoenix Open and had brokers and banks and investors.And people from all edges of our community come in and we just have fun together, but at the same time, we’re putting deals together. And when I look back, even our groups with family offices, events with art galleries, so it could really go from all angles. And the fun part is the people and the relationships.
Olivia (03:58)
Absolutely. Now, I wanted to ask you, not every operator I know has a moment where things got real. Maybe a deal that went sideways or a time that they had to pivot fast. Would you mind sharing one of those moments for you?Nicole Daeila (05:00)
Yeah,so we actually had a helicopter manufacturing parts tenant on a sale lease back and
they ended up being in litigation because there was a faulty helicopter part that caused a fatal helicopter crash. And so that caused a lot of turmoil for us and not knowing what the future held for them. What ended up happening was they continued to pay rent even through filing bankruptcy. And so we were untouched in terms of cash flow and we sold the real estate without a tenant.
And
just because of the market that we bought the real estate in and the due diligence we did with the real estate, we were still able to give investors about 11 % IRR, which is incredible.
Our goal was, I believe, 15 % plus. And so it was less than desired.
That’s the beauty of real estate is that, you know, a lot of times the real estate itself holds value. So when you add on, you know, the, the credit of a tenant, it adds like this double package. So when you go to sell the real estate with a tenant, you know, adds even more value, but without it, proven that you can still sell the real estate and have value if you’re, you’re looking at it through a fine lens.
Olivia (06:20)
to come out on top with that one.Nicole Daeila (06:22)
Right?Yeah. You know, that was one of our worst or first defaults, worst situations. And I would say, you know, first default that we’ve had with the tenant. And that’s over 120 acquisitions. So when you look at industrial real estate as a whole, the default rate nationally is a lot lower than a lot of other asset classes and commercial space.
But if you’re looking at industrial real estate and sale leaks back and the strategy being, you know, which is what we’re doing, tenants who’ve been around for a very long time and are in the manufacturing space specifically, they’re a lot more hardy. So they’re a stickier tenant and it’s harder to lose them. so over, you know, 120 acquisitions having one default that
that resulted in profit, I’d say, you know, I wouldn’t call it a miracle because it’s a lot of due diligence and the strategy to like get there. And we cover a lot of bases. And but still incredible. I will say that.
Olivia (07:26)
So let me ask you this, what are you most focused on solving or scaling next? What’s the next real goal for you?Nicole Daeila (07:33)
Yeah, as a firm, we are pivoting to institutional capital and not to say that we’re not still raising from high net worth individuals, but you know that that was really our investor base for the last decade. And, you know, it’s been incredible how fast small checks can add up when you have a good reputation and, you know, people will bring in their friends and family. sousing capital that way has been incredible, but to really get to that next level where every check writer is anywhere between one to 10 million.
that can be, it’s been a bit more of a challenge to pivot to that. And it’s been great, it’s just a slower process. So we have the tools in hand to enable to do that, getting on the right platforms for them. There’s a lot of due diligence involved and all of that takes time. But we’re slowly but surely getting there.
Olivia (09:05)
feel like that next move can either compound things or create chaos depending on how things play out.Nicole Daeila (09:12)
Definitely.Yeah, I’m certain that it’ll be just fine. It’s just getting in can be the most difficult part. And then retention is based on track record. I don’t have any, you know, don’t have any hesitations about that not being up to par.
Olivia (09:33)
I love the confidence. Sounds like you have a really good team too on your hands.Nicole Daeila (09:35)
Thank you.Olivia (09:42)
So now I know a lot of people that are listening are either earlier in their journey or they’re looking to level up. And I think that they’d benefit from hearing this. When it comes to building relationships and growing your network, what’s the biggest difference for you?Nicole Daeila (09:57)
⁓ I would say, lot of the people that I talk to on a daily basis are, you know, it’s outside of work. and, and that’s about 90 % of the conversations I’m having, that are leading to, you know, either great investor, relationship given that I’m on the capital raise side or whatI’m seeing from my peers, which are great relationships with banks or brokers who are bringing in deals for acquisitions team. so I’d say my advice for everyone would be, you’re having true friends in the industry. It goes a lot further than, let’s just scratch each other’s backs and get the job done. Because you can do both, but having a real foundation will get you a lot further.
Olivia (10:42)
Absolutely, our relationships are everything in this space. Was there anything that we didn’t cover that you’d like our listeners to know about your partners in capital market today?Nicole Daeila (10:53)
Definitely. I’d say, you what comes up is I talk to a lot of investors and lots of times I hear horror stories about, you know, investing in real estate or like multifamily has come up in recent times. And, you know, people getting crushed by floating debt rates in 2001 and 2021 and 22.And what that brings up for me is, you know, making sure your bases are covered when you’re going in with a syndicator.
know, blind trust based on track record sometimes isn’t enough. And you really want to hypothesize and think about worst case scenario. You know, what if the rates go up or what if there is something out of your control that could happen when, you know, a tenant or building has needs a roof repair and like who’s paying for that? And is that going to take away from your revenue? Is that going to crunch your margins? So
That’s something that I’d say we do pretty well with fixed debt, an absolute triple net lease. And I think those two factors make a world of the difference when things don’t go as planned because it does happen. And…
And I’d also say that a lot of real estate and opportunities can be cyclical. So sometimes you’re in the right part of a cycle and it’s looking great. And then, you know, that cycle has to come to an end and kind of recycle itself. And so looking at.
what’s really resilient ⁓ over time. And I think this is a strategy that a lot of family offices or pensions have is just how can we not lose money? There might be lot of growth opportunities and strategies, but.
being overly exposed to those is a recipe for disaster often. So what is the most stable way to compound capital and without getting into an overly risky zone where you can.
risk losing your principal because it’s happened. really does. Even the real estate holds value. A lot of times I hear about people investing in syndicators and losing their principal. just really do your due diligence and pay attention to what’s trendy versus a good long-term investment.
Olivia (13:58)
Alright, well before we wrap things up, if someone wanted to reach out with you, connect with you, maybe collaborate, or just to learn more about what you’re doing, what’s the best way for them to reach you?Nicole Daeila (14:10)
I’d say go on our website. It’s ⁓ www.magcp.com and magcp.com. And otherwise, you you can always look me up on LinkedIn. I’m happy to connect and have conversations about what I think, you know, in the market or what I’m seeing in our, you know, in our very niche strategy and path.And anyway I can help, I’m always happy to.
Olivia (14:37)
Well, listen, I appreciate your time and your perspective and all your knowledge on the expertise here. And we definitely need more people in this space who are doing it the right way. Thank you again for being here.Nicole Daeila (14:50)
Thank you, thanks for having me. I very lovely to meet you.Olivia (14:53)
Likewise. And for those of you tuning in, if you’ve got value from this, make sure you’re subscribed. We’ve got more conversations just like the one I’ve had here today with Nicole, who are out there building real businesses. And we’ll see you on the next episode.
