Following the purchase, RealNet Investments sold a portion of the property to one of its clients, who was looking for an investment as part of a 1031 exchange. "Being able to identify a property in 45 days and then to close on it within 180 days is a real thorn in everybody's side," Scott Fouser, the managing partner of RealNet Investments tells GlobeSt.com.
After RealNet Investments purchases a property, it leases it on a triple net basis and sells portions of the holding to investors. It guarantees a return ranging from 8% to 9.5%. The Arizona Department of Corrections occupies the entire building at 363 N. 1st Ave.
"Because the properties are master leased on an 'absolute triple net' basis, the owners need not be concerned about daily operations, management, maintenance, vacancies, reserve accounts or even performance," Fouser says. "This is truly an excellent opportunity for the conservative real estate investor seeking a less management-intensive property."
RealNet Investments makes money when the company can manage the building for a greater return than it will pay in the master lease. Most often, it also retains an ownership portion in most of its purchases, including the 1st Avenue buy.
The Downtown Phoenix property is located at the northeast corner of Van Buren Street and 1st Avenue. RealNet Investments opted to purchase a property in Phoenix because values are good and its clients were interested in acquiring Valley properties.
"The values are better than in our own market," Fouser says. "There was a tremendous amount of product down there and lot of our clients are older and they want simplicity and an excuse to get to the warm weather in the off season."
The parcel's value could increase significantly in the coming years if Phoenix follows the trend of so many other cities toward development of in-fill projects, Fouser says."There is something about it to me that says there is opportunity there," he notes. "Eventually Phoenix will figure out that even though there is infinite amount of land, there is a cost for that. Downtown has a lot to offer."
RealNet Investments is looking for office, retail or multifamily properties to buy in the Valley. As much $25 million in real estate will be bought this year, a goal that has reached just about the halfway mark. Next year, RealNet will step up its buying to $40 million. Fouser says the firm is close to securing financing that will allow the company to become more aggressive in its buying. Currently, there are six properties in RealNet's portfolio.
"We want to have a presence," he says. "But we are not going to make acquisitions just to be there. We are going to make acquisitions that are good acquisitions.
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