INVESTMENTS

Real Estate Investments

SBMI Group is a privately held real estate investment firm engaged in acquiring value-add and adaptive reuse assets with a focus on  commercial and multifamily properties. Our investment philosophy is simple: we operate with an opportunistic investment thesis to seize investment opportunities that are backed by rock solid numbers that meet a rigorous, disciplined investing approach. Embracing a fundamental, property level and macro-focused mindset, each opportunity is evaluated based on the value of the underlying asset and the risks associated with correcting the situation to manifest expected returns.

We focus on sourcing properties that have event driven distress or asset level difficulties current ownership may not be able to overcome. Because of our proven track record of identifying and improving investments, SBMI Group has aligned with a network of brokers and lenders that enables us to capitalize on numerous off-market opportunities. We are uniquely positioned to seize opportunities and move quickly while maintaining an institutional mindset. We focus on principal preservation by having a long term investing approach that enables us to lower basis and return principal to capital partners as quickly as possible.

WHERE WE SEE OPPORTUNITY

SBMI group seeks to locate the diamond in the rough and believes that buying at the right price is at the heart of a successful investment. Our entrepreneurial abilities and outside the box thinking fuels our ability us to focus on a vast set of opportunities which have the potential for being very profitable. Some of these opportunities are illustrated below.

“Mimicking the heard, invites regression to the mean”- Charlie Munger.

  • 1. High property level vacancy

    (compared to submarket)

  • 2. Long term/ mature discounted leases

  • 3. Property use re-purpose

  • 4. Extensive capital improvements

  • 5. Excessive lease roll

  • 6. Lack of retrofitting

    (solar, water pressure regulator, grey water system, desertscape landscaping, earthquake retrofit, knob & tube wiring, polybutylene piping, lead, asbestos)

  • 7. Inefficient operational procedure

  • 8. Partnership disputes

  • 9. Trust breakups

  • 10. Inefficient management

  • 11. Ability to acquire below replacement cost

  • 12. Gentrifying submarket

  • 13. Current ownerships inability to refinance maturing debt

  • 14. Mispriced assets due to absentee ownership

DUE DILIGENCE

SBMI Group is very sensitive to principal preservation and has a commitment to our capital partners to maintain integrity, transparency and responsibly pair risk with reward. Our due diligence process is systematic and rigorous with a deep focus on analytics, benchmarking, trends, research and digging deep into the numbers.

  • In-place Leases: We look for future TI commitments, termination options, renewal options, latent rent abatement, concessions and overall lease stagger which can impact investment performance or timing of cash flows post acquisition
  • Estoppels
  • Service contracts
  • Maintenance records
  • Physical Inspection
  • Termite
  • Sibmarket population migration trends
  • P & L audit and benchmarking on historical financials
  • Financial performance stress testing
  • Title: Easements & encumbrances (plat and easement maps)
  • Environmental (Phase I & II if needed)
  • Future Capex
  • Building Systems: Mechanical, electrical, roof, plumbing
  • Immediate vicinity rent surveys
  • Government retrofits and compliance (ADA, earthquake, fire, structural)
  • Insurance loss run
  • Police reports and/or incidents
  • Lead and asbestos

TARGET PROFILE / INVESTMENT RETURNS

SBMI Group invests in supply constrained submarkets with reasonable exit liquidity which are typically in transit oriented, dense and urban environments. While each acquisition is paired with a comprehensive business plan, our general strategy is to acquire, renovate, reposition and manage. We are less concerned with an asset’s cash flow at the time of purchase. Instead, we focus our efforts on putting positive cash-flow in place within 12 months of acquisition.  We also like to see the majority of value created through revitalization and improvement of operations instead of generous appreciation.

IRR: We typically target an internal rate of return between 15-20%

Equity Multiple: We typically target equity multiples between 1.50 to 3.0X depending on hold period

HOLD TIME & PRINCIPAL RETURN

SBMI Group’s business plan is to hold properties for the long term. By focusing on the future we are able to make sound decisions, which manifests the highest potential value for our investors instead of financial engineering. This helps us to overcome the vicissitudes of economic cycles in the short-term. Generally, investments are made to be held with a time horizon of 10+ years while property level strategy is typically crafted to return initial principal to our capital partners within 2-5 years of the initial investment.
We typically achieve these goals through a cash-out refinance once the property is stabilized or over time as economic conditions improve and appreciation takes place. We use leverage conservatively and cap it at 70% LTV on commercial and 75% on multifamily assets. This optimal capital structure gives us the latitude to weather unpredictable economic realities or anomalies.

ACQUISITION CRITERIA

  • Property Types

    Multifamily, Office, Retail, Mixed-Use

  • Asset Class

    A, B, C with a focus on having the ability to reposition the asset into the next tier

  • Location

    A, B, & C submarkets (with a preference on high density suburban & urban atmosphere)

  • Geography

    Southern California

  • Property Size

    1. Multi Family: 10-200 units (10,000 RBA min)
    2. Commercial: 10,000 SF to 100,000 SF

  • Pricing

    $2M to $20M

  • Property Vintage

    1920’s+ for city core and 1965+ in other submarkets (no historic designation)

  • Going in Cap rate/ NOI

    No minimum (property can be 100% vacant)

  • Financing

    Flexible, with the ability for cash to new loan or all-cash purchase.