F2498: 5 Net Lease Benefits Multifamily Doesn’t Have with Dan Lewkowicz

As a commercial real estate broker specializing in multi-tenant leases, Dan Lewkowicz has knowledge of many different asset classes. Today, we talk in depth about the differences between a net lease vs. multifamily and the pros and cons of each, absolute triple net leases vs. double net leases, net lease benefits as opposed to multifamily, and why you should become a commercial real estate broker instead of residential. 

Dan Lewkowicz Real Estate Background:

 

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TRANSCRIPTION

Ash Patel: Hello, Best Ever listeners. Welcome to the Best Real Estate Investing Advice Ever Show. I’m Ash Patel, and I’m with our guest today, Dan Lewkowicz. Dan is joining us from Oak Park, Michigan. He has 15 years of experience and is the director of investments at Encore Real Estate Investment Services. Dan specializes in medical office buildings, industrial fulfillment centers, quick-serve restaurants and automotive repair shops.

Dan, thank you for joining us. How are you today?

Dan Lewkowicz: Doing great, absolutely. I really appreciate you having me.

Ash Patel: Great. Before we get started, can you tell us a little bit more about your background and what you’re focused on now?

Dan Lewkowicz: Sure. So as you mentioned, I’ve been in the industry for about 15 years, I got my start with a company called Disability Made Easy, which was a barrier-free home modification company. I managed the sales and marketing for the company, but really that’s where I got my start, because I was able to witness the transformation of properties, taking them from being functionally obsolete to completely barrier-free and handicap accessible, which really springboarded me into my career in investments in single-family home purchase renovation and resale. And then over time, I got involved in commercial brokerage. I’m a net lease investment sales broker, which means that I sell commercial properties that are typically leased out to major national tenants like Starbucks, Walgreens, Rite Aid’s, quick service restaurants like McDonald’s or Taco Bell or Wendy’s. I also sell a lot of shopping centers, automotive repair stores and industrial products as well.

Ash Patel: Very unique asset classes. How did you get thrown into those? Quick serve restaurants and automotive and medical and industrial – that’s pretty wide net you’re casting.

Dan Lewkowicz: Yes, I was recruited by a brokerage that specialized in net lease, and that’s how I first got my feet wet. And basically, I just started working with owners of properties all over the country. Those were the ones that spoke to me. Quick service restaurant, I believe, is a fundamentally sound asset class within net lease; those properties typically are recession-resistant or recession-proof. In fact, during downtimes in the economy, they typically do better; as they’ve proven to be, they’re pandemic proof. They’re open for business, even when most places were closed in the country; they have drive-throughs, their sales have been incredibly resilient during the pandemic. So it’s an asset class that is very sound, very secure.

In terms of medical office, I kind of stumbled into that asset class by virtue of the fact that clients of mine who I was working with selling shopping centers also owned medical office buildings and developed medical office buildings for large regional healthcare systems. That’s really how I got involved in that asset class. And then my background is as a business development executive at Amazon, so I’ve always been fascinated by e-commerce and its impacts on the economy, as well as on industrial real estate. So that’s been really just kind of a nice natural transition for me in the commercial real estate space.

Ash Patel: Can you define net lease?

Dan Lewkowicz: Absolutely. So net lease, essentially, we can define it based on its name. So if you would contrast it with something like multifamily, with net lease, the actual rental income is net to the investor. So if we look at your boilerplate absolute triple net lease property, what that property means is that the owner actually has no obligations whatsoever to maintain the property. In fact, the tenant pays for the taxes, they pay for the insurance, they pay for any maintenance, repair to the roof structure, parking lot, etc. They’ll pay for any management, any grounds keeping, every type of expense is actually on the tenant. So that rent is actually net to the landlord, that’s where it gets the name net lease.

So you can contrast that to something like multifamily, where you will have a certain rental rate and that’s a gross rent, that’s a gross income that the property produces. However, there’s going to be expenses, right? There’s going to be insurance, taxes. There might be some utilities, there might be management fees, vacancies, capital expenditures, repairs, maintenance, etc, etc. So that’s really what sets net lease apart from other assets. And we’re typically dealing with large national tenants that have hundreds, if not thousands of locations. So that tenant that signs on the lease, even if that location starts performing poorly and they decide to vacate that location, they’re actually guaranteeing the lease based on their entire company. So the relative level of security is incredibly strong with net lease properties.

Ash Patel: Now you’re talking about the holy grail of real estate investing, right? There’s a lot of multifamily people that when they hear retail, they think, “Oh, no, we’re not doing retail” but then they look at triple net or net lease and they think “I would do that.” What are some of the downsides of a net lease property?

Dan Lewkowicz: Some of the downsides would be that, number one, the cap rates are relatively low compared to other asset classes. Now, that is changing. If you notice across the country, we’ve really witnessed a cap rate compression of epic proportions in the multifamily space. So whereas you might have previously been able to get higher returns on a multifamily property, in many markets, the cap rates are actually similar, even higher for net lease properties. So that used to be a big downside, but I would say it’s becoming less and less of an issue as multifamily cap rates have continued to compress across the country. And that’s probably the only major downside.

The only other thing that I would say is that the valuation of the properties are different than other properties insofar as we’re looking specifically at the cash flow, right? So we’re looking specifically at really a few things. We’re looking at the net operating income, which in an absolute triple net lease is just going to be the rental income, because there are no expenses. And in order to get our valuation, we’re going to utilize whatever that cap rate is for that specific property.

Now, as the lease term decreases – so initially, you might have a 10 to 15 to 20-year lease, as there are years that are burned off those leases, the cap rate will actually go up. So one of the downsides is that over time, generally speaking, the value of the property can actually decrease as the lease gets shorter and shorter. Now, there are ways to compensate for that. Number one, most of these leases have built-in rental escalations to hedge against inflation. So that can increase your net operating income.

And number two, as a lease gets later on in its term, the landlord and tenant can do what’s called a blend and extend. Now what that is, is that’s an opportunity where the tenant actually gets a reduction in rent, which is a little bit counterintuitive, because you’d think that would lower the value of the property. However, they also agree to an extension of the lease. Now, when that lease is extended, that’s going to significantly impact the cap rate and significantly lower the cap rate.

So in many cases, when a lease is a short-term lease, somebody will buy it and the real reposition or value play there is to do the blend and extend, lower the rent, increase the term, now the cap rate goes way down, and the actual value of the property increases.

Ash Patel: Okay, so if you have a Starbucks on a 10-year lease, do you go in there in year eight and do the blend and extend and renew it? Or do you wait till nine or 10?

Dan Lewkowicz: Usually it would be sometime in the last, let’s say, 14 months. Typically, the tenant is going to start reaching out in the last six months of the lease, but a landlord can get proactive with their tenant. I would say, really, within a year and a half prior to lease expiration, that’s really when you would start those negotiations. Anything prior to that I think would be too premature.

Ash Patel: And that’s the ideal time to sell your asset when you have a fresh five year renewal?

Dan Lewkowicz: Yes, or even [unintelligible [00:07:51].27] lease. They might agree to not even just that renewal, as you mentioned, but they might say, “Okay, we’re willing to sign a brand new 15 or 20-year lease,” in which case, that’s the gold standard. That’s the type of lease that you want in terms of maximizing your value.

Ash Patel: And the real big risk is if that location goes dark, if the Walgreens decides they’re going to not renew their lease and leave; then you’re stuck with very expensive dark.

Dan Lewkowicz: Yes, in many cases, you’re right. I can give you a perfect example. I’ve got a deal I’m working with right now, year and a half left on the lease, and the tenant has already reached out and said that they’re going to be vacating. But what’s great about that deal is that they’re paying significantly below market rent. So we’re actually in the process of working with other comparable tenants, who would be paying potentially double the amount of rental rate per year.

So in that case, if there’s another opportunity for value play – because you can, again, get a new tenant to come in… There’s going to be some considerations you have to make, you might have to spend a little bit for tenant improvement allowances to renovate the property… However, if we can get a new tenant in there with a new long-term lease, the cap rate is going to be lower because of that long-term lease. And if your rental rate is higher, now your net operating income is higher. So we’ve just played with the two factors that are the most impactful, really the only two factors, right? Net operating income, which we’ve increased with the new tenant, and cap rate, which we’ve decreased by having a longer lease term.

Ash Patel: Good point. Dan, if you look at a Panera or Starbucks at a sub 5% cap rate, what kind of financing do investors typically put on that?

Dan Lewkowicz: Good question. So there’s a variety of options. Sometimes, first of all, investors will pay cash for a property, so they’ll just not deal with financing whatsoever. In other cases, they’ll get—typically, it depends on the asset and it depends on the lease term, but typically, your investor is going to want to look for financing that has a long-term amortization, maybe a 25 or 30-year amortization. And the reason for that is that the longer the AM or the amortization, the lower the monthly payment; and the lower the monthly payment, the bigger the spreads,  so the more cash flow that the investor will have. So typically, even though rates have gone up significantly since the middle of the pandemic, actually have gone up at the fastest rate in recorded history, however, they still are relatively low. They’re still actually at historic lows.

So the opportunity to secure solid financing with long-term amortization at very low rates — right now lenders are very eager to lend on good quality commercial properties, so there’s definitely opportunity there.  There are other plays that people would make, something called a zero cash flow deal, where the investor is actually just borrowing money, not cash-flowing significantly or at all on the property, but building up equity over time while they’re paying down their principal.

Break: [10:28] to [11:28]

Ash Patel: So they build up equity and also get a negative tax consequence each year.

Dan Lewkowicz: Exactly. You got it.

Ash Patel: A huge tax consequence.

Dan Lewkowicz: That’s right.

Ash Patel: Have you seen interest-only loans on these deals?

Dan Lewkowicz: Yes, they’re possible. There’s a lot of different products that are available. At my brokerage, we have an in-house lender, so every deal that I do, I’m able to bring a quote and amortization tables and cash flow analyses with our in-house lender to let them know what options are available. So there are a lot of different financing options that are available to investors for net lease properties.

Ash Patel: Does your brokerage focus on fully leased properties, or do you also do value-add?

Dan Lewkowicz: Typically, on the single tenant net lease side, the vast majority of our sales are cash-flowing assets, as we’ve talked about a little bit. Really, these are basically bonds that are wrapped up in sticks and bricks. I myself have sold a number of multi-tenant shopping centers; some of them do have the value-add component of vacancy, I’m going to be bringing a portfolio of stores to the market next week, some of which have as high as 50% vacancy. So definitely value-add there. We do sell some vacant properties; again, the majority would be occupied and cash flowing. But especially in the multi-tenant shopping center space, we do quite a bit of value-add sector as well.

Ash Patel: In multifamily but not in retail?

Dan Lewkowicz: In multi-tenant retail.

Ash Patel: In multi-tenant, sorry. Okay.

Dan Lewkowicz: Yes.

Ash Patel: So Dan, I’ve heard people that are fanatical about only investing in single tenant net lease and others that want multi-tenant. And the argument is if your single-tenant leaves, you’re now cashflowless. If you have a multi-tenant strip mall, if a couple leave, you’re not killed; you’re still bringing in revenue. What are your thoughts on the differences between the two?

Dan Lewkowicz: Great question. So first of all, if we focus on single tenant net leased assets, keep in mind that even if the tenant goes dark, even if they vacate the property, they’re still on the hook to pay that lease. So as long as that tenant doesn’t go through bankruptcy and the bankruptcy court doesn’t absolve them of their obligations to those leases – which again, these are major national tenants, many of them credit rated… So regardless of what happens, they’re going to be obligated to continue to pay rent, even if they cease operating at that location. In fact, I’m working on some assets right now that have 10 or 11 or 12 years left on the lease, and the tenant is paying even though the building has been dark for a number of years. So that’s something to keep in mind. I think that maybe is a common misconception for single tenant net lease.

I do agree with you that in multi-tenant there is an opportunity to have some diversification. And when I am underwriting multi-tenant deals, I’m concerned about a variety of factors, several of which are the diversified lease rollover. So I want to make sure — especially with multi-tenant, the lease terms are typically much shorter… So I want to make sure that if I look at the rent roll, there’s a diversified lease rollover, and not all of the units are rolling over at the same time, for a variety of reasons. Number one, it’s going to be much easier to fill one vacancy than it is to fill many, it’s going to be much better for my bottom line and my cash flow, and then the third reason is that when you’re going to get a tenant, it’s much easier to get a tenant to fill one bay in a large shopping center than it is to get one tenant and have 40% or 50% vacancy; it just doesn’t show nearly as well. So definitely an important aspect to keep in mind.

Ash Patel: Yes, that is a great point. I’ve had strip malls that are half vacant at purchase, or office buildings that arefully vacant, and it’s very hard to get the first tenant into an empty space, or overcome that allure of a dying strip mall.

Dan Lewkowicz: Exactly.

Ash Patel: Dan, if you had to invest your own money – you’re familiar with a lot of different asset classes, so where would your money go?

Dan Lewkowicz: Great question. So I get I’m very excited by these value-add development deals. My background is as essentially a house flipper, so I’m used to buying something that has potential value, but needs something to be done to truly unlock that value. So I’m a big fan of these short-term deals that potentially I could go ahead and do that blend and extend. Or, for example, a deal I mentioned to you a few minutes ago, where we’ve got a tenant that’s paying significantly under market value, the tenant’s going to be vacating, it’s a short term lease, buy the property, put in that tenant improvement allowance, get a new tenant that’s paying higher rental rate, and get a lower cap rate because it’s a longer-term lease, and then flip the deal.

I really love that concept of adding value, so to speak, rehabbing a property. The cool thing with net lease is that you can almost in a certain sense rehab the lease, you can do things to the lease with a new tenant , a new length of lease, new rental rate, to make the property worth significantly more.

Ash Patel: Great point. Dan, when you have investors looking to acquire property, let’s say you have somebody who is not an experienced investor, but something is appealing about what you’re doing. How do you convince them that retail or automotive or medical is a great place to park money?

Dan Lewkowicz: First of all, I always live by the motto of “add value and everything else follows”. So when I’m consulting with a client, I always give them the advice that I’d want to have somebody give me. I always give them advice that’s going to be best for them in their specific situation, keeping in mind that everyone’s situation is different. I love conducting myself that way, because it’s very liberating. I’m not focused on a paycheck, I’m not focused on the closing, I’m focused on adding as much value as possible. So there’s no cookie-cutter answer to that. What I have to do is speak with the client, get to know them, talk to them, see what their goals are, because many clients have many different goals. So I like to get a feel for what they’re looking for.

And then the next thing I do is just put a lot of deals in front of them. Because believe it or not, a lot of people who are getting into the industry, they don’t necessarily know what they want. They have to really see it and feel it and touch it and look through those offering memorandums and talk to me on the phone and walk through the underwriting. And then they say, “Yes, I think I want this. No, I don’t want that. Okay, I would like this, but it needs to be a little bit longer lease term, or a little bit higher population density, or a little bit larger traffic count,” or something like that. And through that process, I really take their feedback that I’m able to fine tune my selections and get them in the asset that is as well suited for them as possible.

Ash Patel: Here’s a scenario for you. You’re at happy hour with your buddies, and somebody is trying to convince you that multifamily is the way to go. And you being the retail commercial guy, you’ve had a couple of beers in you, what’s your argument?

Dan Lewkowicz: Such a good question. I speak on a lot of multifamily podcasts, and I almost hesitate because I don’t want to knock multifamily, because I love it, it’s a great asset class. But here’s the reasons that net lease maybe has some benefits as to investors that multifamily doesn’t.

So number one, it’s that certainty, right? You’ve got a lease that’s guaranteed by hundreds or thousands of units from a sometimes creditworthy tenant, or major national company; the likelihood of them going under is very, very slim. And again, even if that property goes dark or they vacate that location, they’re still going to be obligated to continue to pay you the lease. That’s number one.

Number two, the terms are outlined in stone, in writing, in the lease upfront, which means I know exactly what my rent is today. I know that for example, next year, I’m going to get a 2% rent bump, and the next year, I’m going to get a 2% rent bump. I know what all the terms are. That’s very important.

Additionally, it’s the passivity of it; it’s genuine mailbox money. It’s a genuine coupon clipper. I have absolutely no obligations whatsoever. If there’s a leak, it’s not my problem. If the grass needs to get cut, I don’t have to deal with it. So the passivity is another major component that’s very important.

And then again, along those same lines I mentioned before, is that surety, right? I know when I’m collecting them; there are no surprises. I don’t have to worry if, “Oh man, this year I have a $40,000 roof repair that I have to take care of,” or, “Oh, vacancy is significantly higher now, so therefore my net operating income went down.” I don’t have to worry about evictions, I don’t have to worry about lease up, all those different things. So from that perspective, I just think that the surety and the stability, and the passivity are all aspects of net lease investment that make it incredibly appealing to investors.

Ash Patel: Yes. And there’s no eviction moratoriums on commercial tenants… You’re dealing with business owners versus residents.

Dan Lewkowicz: Yes.

Ash Patel: It’s a night and day difference. I want to deep dive into triple net leases. I’ve had some where if the roof goes out or it needs to be replaced, I would pay for it, but bill it back to them over X number of years. Is that typical, if it was a Starbucks or Walgreens or Panera, or do they pay for it upfront?

Dan Lewkowicz: No, they’re very uncommon. In fact, most absolute triple net leases require the tenant to handle everything. For example, the tax bills those go straight to the tenant, the insurance straight to the tenant; any maintenance is dealt with, specifically by the tenant. Now, there are some deals where the landlord will pay for the repair and then be reimbursed by the tenant, but they’re less common. But in terms of that reimbursement taking place over a long period of time, I would say that’s incredibly rare.

Now keep in mind, there are other forms of, sort of speak, net lease investments, like the double net lease, in which the tenant is still responsible for things like taxes and insurance, but they’re not responsible for things like roof and structure or maybe roof structure and parking lot. So it’s important to distinguish if your lease is a true absolute triple net lease or a double net lease that might call for the landlord to be responsible for things like roof structure and perhaps parking lot.

Ash Patel: Okay, so absolute triple net versus triple net – there could be some distinctions. And that’s why it’s important to read—

Dan Lewkowicz: Yes.

Ash Patel: …line by line, the entire lease, and figure out reimbursements, landlord responsibilities, can bill backs.

Dan Lewkowicz: Yes, absolutely. I don’t even use the term triple net, only because in certain parts of the country, brokers have this nomenclature that associates triple net with a property that still has landlord responsibilities for roof structure, and maybe parking lot. That’s why I just take that triple net category out of it and I call it absolute triple net, to denote that we’re talking about a property that has absolutely no landlord responsibilities whatsoever. And then the next category I discuss is the double net, which in some cases is roof and structure responsibility with landlord and in some cases, roof structure and parking lot.

Ash Patel: What’s your biggest challenge as a commercial broker?

Dan Lewkowicz: Ooh, that’s a good question. I think my biggest challenge is in the personal dynamics, dealing with my clients. Again, going back to what I said before, I really believe that I advise based on what is best for the client. I don’t consider myself a broker, I consider myself an advisor. And I think that sometimes, especially investors with maybe a little bit less knowledge or experience in the field, don’t necessarily even know what’s best for them. So one of my biggest challenges is conveying—I was on a phone call yesterday for an hour and a half at [11:30] at night time, talking with a client, saying, “Look, we’ve achieved absolute top of the market pricing, we have set a record with this property, we have an incredibly well-qualified buyer, we’re managing the financing, I know that the financing is coming through, there’s absolutely no doing any better than this.” And the seller is still scratching his head saying, “Oh, well, I would love to have an extra month of rent credited to me.”

So the challenge of being able to explain to someone that, “Hey, look, I’m a broker, but I’m also an advisor, and I’m here to explain to you and conduct myself in a way that’s in your best interest.” So that to me is sometimes a challenge. I think that most investors, we don’t have that issue because they’re thinking about it from a business perspective. But I do occasionally run into that. And I think that thankfully, based on my reputation, people understand that I’m advising them for what is in their best interest. But for me, it’s hard for me to see an investor who may potentially walk away from more money than they would ever get for this property in their lifetime, based on a misconception that we’re trying to overcome.

Break: [22:46] to [23:22]

Ash Patel: Dan, the difference between a commercial broker and a residential broker?

Dan Lewkowicz: Okay, great question. So, in theory, there’s no difference. There’s absolutely no difference in licensure. So the residential agent takes the same residential class and passes the same residential exam just like I do, which is interesting. There is actually almost no formal training whatsoever to be a commercial real estate broker, which brings me to an interesting point. So because of this [unintelligible [00:23:48].07] of education in our industry, I actually created a course that’s designed to train commercial real estate brokers to give them all the tools, the tips, the tricks, the skills, everything they need to know to become a top commercial real estate broker, specifically because there is no distinction and there is no additional training, and really everything that we do as commercial real estate brokers, we learn on the job. So we wanted to really step in and solve that problem and add that value in that’s why we created our CRE Pro course.

Ash Patel: And if I’m a residential realtor, why do I want to become a commercial realtor?

Dan Lewkowicz: Oh, man, a lot of reasons. So number one, we’re dealing with very similar fee structures. So traditionally, the fee structure in residential is 6%, which is going to be split, listing agent and buyer’s agent, and then you’re going to have to pay your house whatever split you have. On commercial real estate, the fees are very similar, maybe 4%, 5%, 6%. But instead of dealing with a $300,000, $500,000, $700,000 house, I’m dealing with a $3 million, $7 million, $10 million, $20 million dollar building. So I’m doing a lot of the same work, but my feet could be 10, 20, 30 times larger than the residential few, which to me, I would rather be in that commercial space. That’s number one.

Number two is just exposure. A typical residential agent is going to be selling properties within maybe 20 or 25 miles of their office. I sell properties in all 50 states, so I have that ability to work nationwide, which residential agents just don’t do.

Another interesting and important fact is, how many times does a residential agents sell a house and then their client calls them up and says, “Oh, by the way, you did a good job. I’ve got 10 or 15 or 20 more houses for you to sell”? It just doesn’t happen, unless you’re dealing with an [unintelligible [00:25:22].06] inventory. But in our world, if I sell a property for an investor, chances are they might have 10, 20 or 30 other properties that I can sell for them. So that’s very important.

Another factor is that, I would say 80% or 90% of my deals, I double-end them, which means not only do I represent the seller, but I also represent the buyer; that almost never happens in residential real estate. And I think the final factor for me that’s very important is I can do my job from anywhere. I have complete flexibility. Because I don’t meet my clients, typically, I don’t go to my buildings, I don’t attend my closings, I can work remotely, I can work from really anywhere in the world, which is definitely not something that most residential agents can say.

Ash Patel: I’m going to add one more to that, if that’s okay?

Dan Lewkowicz: Sure.

Ash Patel: It’s that the buyers are typically professional investors and not first-time homebuyers. So rarely does financing fall through. They’ve already got their ducks in a row. These transactions are much smoother.

Dan Lewkowicz:  Yes.

Ash Patel: Less variables. And on a $3 million building, if there’s a roof leak, some cosmetics, it’s not a deal breaker; whereas residential, it’s, “Oh my god.  This has got to get fixed or I’m walking away.”

Dan Lewkowicz: Yes. And the emotions don’t come into play nearly as much, because it’s not someone’s home that they’re attached to or someone’s home that they’re going to be moving into. People aren’t getting emotional about paint colors or about the style of tile and the kitchen backsplash. These are investments, right? So when I sit down with my investors, I’m talking dollars and cents, I’m talking cap rate, I’m talking rental escalations, I’m talking lease term. So like you said, we’re dealing with it from a much more analytical and less emotional perspective.

Ash Patel: Yes, great distinctions. Thanks for sharing that. I want to ask you the question that so many people have is, what’s your take on the big box stores that are going vacant?

Dan Lewkowicz: I wrote an article about this right before the pandemic hit, and I called it The Retail Rightsizing. So prior to the pandemic, we were seeing a lot of changes in retail real estate. But it wasn’t necessarily that retail was dying. So long as guys like you and guys like myself have a dollar in our pocket, retail is always going to be alive. It might change, it might be a little bit different, it might have some more experiential components to it, but it’s still going to be alive and well.

So what we’ve noticed is that you’re 40,000, 50,000, 60,000 square foot boxes – those are seeing higher vacancies, those are seeing a lot of closures, but that there’s a lot of retail actually opening. And in fact, what’s interesting is in the last year, over 50% of all retail stores that have opened have actually been discount stores, like dollar stores. And those are typically smaller format.

So we’re seeing a big migration from the typical big box of 15,000-20,000 square feet or higher to a much smaller concept. So if you look across the retail sector, for example, an area I specialize in, quick service restaurant, every single retail concept in quick-service restaurant in 2021 has a prototype that has a significantly smaller footprint. So for example, Taco Bell is going from an approximately 2,400-2,500 square foot prototype to 1,350 square feet, and they’re not the only ones. It’s really across the board.

So what we’re seeing is a shrinking of the typical retail storefront, which is very interesting. We’re seeing a lot of emphasis on things like drive through or curbside pickup. So many of the new concepts will have double or triple drive through lanes and are more equipped to handle customers not only coming into the store, but items being delivered or items being picked up at the curb.

Ash Patel: And Dave, has the consumer behavior changed, attention spans changed, to where you don’t see a lot of giant strip malls or shopping centers being built, you see a lot of four-unit or smaller units?

Dan Lewkowicz: Yes, there’s been a push to the outparcel, which is traditionally let’s say like a Home Depot parking lot, where they build a three or four tenant strip center, like you’re mentioning. But I think that so long as developers continue to produce product that serves a retail purpose, we’ll be able to drive traffic to these retail centers; they just have to be designed better. We’ve had an over-building over the last 50 years in large malls across the country, and really, we’re seeing an exciting concept of a lot of that space being repositioned to things like fulfillment centers or last-mile delivery centers, which is great, because these are incredibly well-located pieces of real estate.

But my perspective is that the center needs to resemble more of a lifestyle center, where it’s going to have traffic day and night. You might have a bar, you might have a salon, you might have a massage place, you might have a restaurant, you might have a traditional retail, so people are coming and going all the time, and there’s a need for the centers. It’s not just an experience that can be passed up by going to traditional online e-commerce shopping. So I think that that’s really an important aspect for developers to consider, especially today.

Ash Patel: I love how you said that, lifestyle center. Very important. Dan, what is your best real estate investing advice ever?

Dan Lewkowicz: I would say it’s to take massive action. I’ve seen people who like to learn about the space and learn about the space and learn about the space, and don’t take action. And I’ve seen people who do take action and then I’ve seen people who take massive action. And if you look at most incredibly successful individuals in any field, those are the people that they control the inputs, right? Because we can’t always control the results. But we can decide what the processes are that work and then we can do those inputs and do them in massive quantities. So I’m really a believer in the 10x model of just doing more activity and more inputs than anybody else to be successful.

And then in addition to that, kind of going hand in hand, I think it’s very important to have systems and procedures, right? It’s important to not show up every day trying to figure out what to do. I believe that you should spend time refining your systems; they don’t have to be perfect, because over time, you’ll refine them and make them better… But have those systems, have those procedures, so that when you invest the energy, which you’ll be doing day in and day out, you’re investing it in those things that give you the highest return on investment.

Ash Patel: Great advice. Dan, are you ready for the lightning round?

Dan Lewkowicz: Yes, let’s do it.

Ash Patel:  Let’s do it. Dan, what’s the best ever book you recently read?

Dan Lewkowicz: Oh, best ever book – I’m looking at it right now on my shelf, it’s definitely Influence: The Psychology of Persuasion. Absolute game-changing book.

Ash Patel: What was your biggest takeaway from that?

Dan Lewkowicz: Oh, my biggest takeaway from that I think would be the reciprocity principle, which basically states that “if I do something for you, you’re more likely to do something back for me.” So from my perspective, again, I always love to add value; I always come to people with, “Hey, you own property. I’m going to put together a complimentary, no obligation value proposal for you. I’m going to spend hundreds of dollars ordering professional photographs, I’m going to spend countless hours making this thing perfect so that you have this piece of valuable information.” Now, it’s your choice if you want to list the property for me, but I’ve lead with value. So I think that that reciprocity principle is based on leading with value and it’s something that I tried to live my life by.

Ash Patel: Yes, that’s great example. Dan, what’s the best ever way you like to give back?

Dan Lewkowicz: I like to give back by teaching, I like to give back by training and by exposing more people to this world. I am incredibly fortunate to have had excellent mentors and I’m incredibly fortunate to be a commercial real estate broker and advisor, and I give back by exposing other people and teaching other people, so that they can have this life transformative event of becoming a real estate investor, of potentially becoming a commercial real estate broker and creating their own financial freedom.

Ash Patel: That’s great. Dan, how can the Best Ever listeners reach out to you?

Dan Lewkowicz: First of all, you can find me on LinkedIn. First name is Dan, last name is Lewkowicz. I’m also very happy to give out my cell phone number. It’s 248-943-2838. Again, 248-943-2838. If there’s anything I can do, if you own commercial property, you want to know what it’s worth, I’m happy to have myself and my team put together a value proposal for you. If you just want to talk shop and real estate, I’m happy as well. And I just would love to be able to make myself a resource.

Ash Patel: Dan, thank you so much for being a guest on our show today. Your passion comes through in all of your talk about real estate, retail, net lease, how you would invest your own money, your distinctions between residential and multifamily, retail… So thank you for sharing all of that advice today. Best Ever listeners, thanks for joining us, have a best ever day.

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