We recently hosted a live discussion with Dominic Sulo of Marcus & Millichaps’ Sulo Group to examine the benefits of investing in Early Childhood Education (ECE).
I first started investing in real estate because I loved the idea of passive income. Making money while you sleep, “mailbox money.” I grew up around construction and real estate, and it became my passion. It’s what I’ve done my entire professional life.
What started as a personal passion project turned into a thriving commercial development business with a team of experienced partners. To help you better understand who CMK Properties is and how we approach real estate investing, here’s some of my story.
From Duplex Renovator to Commercial Developer
When I started my real estate investing journey, I focused on buying fixer-upper duplexes and apartment buildings to rent and later sell.
As I built my portfolio and expertise, I started exploring other assets like commercial buildings and mixed-use projects including condominiums. This brought me to Nashville, which is where I was working when the housing crash occurred.
The significant losses I incurred from the residential crash were very formative, and I was determined to make sure something like this never happened again.
Solid, stable, and predictable investments became my top priority.
Moving forward, I was much more risk averse and also more strategic about eliminating as many variables as possible. This eventually led me to shift away from large-scale condominium and mixed-use projects and toward commercial developments, where we had long term leases with strong credit rated tenants.
Building a Scalable Model
One of the reasons why I love working in real estate is because I have a deep appreciation for design and architecture. When I was working on the renovation of warehouses and factories into lofts and offices, I focused heavily on this, with a special interest in historical preservation — and the tax credits that came with it.
But after the crash, I realized that I wanted to scale more efficiently, and that would require a process that was less custom and more duplicative.
It’s taken time, but today we’re proud to have built a process that combines the best of both worlds: incorporating my appreciation for design into a scalable, process-driven model.
With our preschools and other build-to-suit tenants, we focus on designing prototypes that have great character and don’t require a redesign for each site. That way, we don’t have to do a custom build, but each of our properties is still beautiful and unique. This simplifies our underwriting, reduces costs, and increases returns for our investors.
Development vs. Acquisition
People often ask us why CMK has shifted away from acquisition to focus primarily on development deals.
To put it simply, we saw that it was becoming more and more difficult to generate returns from acquisitions. And because our team has extensive experience in commercial real estate development — from childcare to medical to multifamily to retail to senior living — we felt confident we could handle the additional complexities of development.
When you do acquisition deals in the current economy, you typically can expect to see around 4-5% preferred return and 10% IRR. By doing development, you can increase your return to 7-9% and see an IRR in the mid to upper teens.
Essentially, development allows us to double our returns without doubling our risk, thanks to the methodical process we’ve ironed out over years of investing.
To date, we’ve invested meaningfully and developed projects in nine real estate sectors, totaling $385 million. In seven of those sectors, we’ve had successful exits, and we anticipate successful exits from the other two in the coming three years. We’re proud of the diversification we’ve achieved and are excited to continue growing.
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