Real Investor Radio

Episode 44 | Dennis Cisterna – Commercial Real Estate, Undervalued Opportunities, Investment Strategy

May 7, 2024

Episode Summary:

In this episode of the Real Investor Radio podcast, Craig Fuhr and Jack BeVier are joined by Dennis Cisterna III and Fred Lewis from Sentinel Net Lease. They discuss the current state of the office market and the opportunities in net lease investments. Sentinel focuses on office, retail, and industrial properties, with an emphasis on single-tenant net lease deals. They look for mission-critical real estate secured by long-term leases. Despite the negative sentiment around the office sector, Sentinel sees undervalued opportunities in the market, particularly in the Midwest and Southeast regions. They prioritize properties with newer construction, single tenants, and long lease terms. In this conversation, Dennis Cisterna III and Fred Lewis discuss their investment strategy in commercial real estate, specifically in the office, industrial, and retail sectors. They highlight the opportunities they see in the current market, including the ability to acquire properties at a significant discount and the potential for long-term income. They also discuss their approach to financing, which involves leveraging relationships with lending institutions and regional banks. Additionally, they introduce their new fund, Sentinel Opportunity Fund One, which allows investors to participate in a diversified portfolio of commercial real estate assets.

Overview of Episode 44

In this episode, Craig Fuhr and Jack BeVier speak with Dennis Cisterna III and Fred Lewis from Sentinel Net Lease. The team discusses the current office market, revealing insights into their approach to net lease investment and real estate opportunities.

Sentinel’s Strategy in Net Lease Investment

Sentinel Net Lease focuses on net lease investment in office, retail, and industrial properties, with an emphasis on single-tenant deals. This net lease investment approach allows tenants to cover most operating costs, reducing management burdens for Sentinel.

Identifying Opportunities

Despite the challenging outlook on office spaces, Sentinel seeks undervalued properties with mission-critical tenants and long-term leases. They find promising net lease investment opportunities particularly in the Midwest and Southeast, areas showing stable job and population growth.

Cap Rates and Market Conditions

Cisterna explains that higher cap rates are essential in today’s market for a strong return on net lease investment. Sentinel has seen cap rate increases in office properties, adjusting their purchase criteria accordingly to maintain cash flow and minimize risk.

Office Sector Challenges and Net Lease Investment Adjustments

With rising interest rates, office sector investment has slowed, but Sentinel believes demand will rebound. They focus on properties with long lease terms, betting on office occupancy recovery and a stabilized market.

Regional Bank and Non-Recourse Debt Partnerships

For financing, Sentinel pursues regional banks and life companies to secure non-recourse debt, preserving capital for long-term net lease investment stability. This rigorous selection allows Sentinel to focus on properties that meet strict risk-adjusted return requirements.

Fund Launch: Sentinel Opportunity Fund One

Sentinel introduces its new $100 million fund, the Sentinel Opportunity Fund One, to streamline net lease investment for investors. This fund allows Sentinel to capitalize on promising deals swiftly, providing stability and strong returns in a diverse property portfolio.

Conclusion

This episode offers valuable insights into net lease investment strategies, as Sentinel focuses on stable, income-producing properties with favorable financing. Above all, their disciplined approach reflects the changing real estate landscape and the potential for strong returns in commercial real estate.