September 12, 2022

JF2930: The Key to Acquiring Triple-Net CRE Deals ft. Ben Kogut

Ben Kogut got his start in the commercial real estate space as a broker in 2004. He pivoted to syndications in 2017, joining HJH Investments. Today, Ben is a partner and the Director of Investor Relations at HJH, which specializes in triple-net, cash-flowing investment properties including shopping centers, office buildings, industrial, medical, and QSR.


In this episode, Ben compares and contrasts triple-net commercial real estate syndications with multifamily syndications. He also discusses the two major components of management, and the strategy he and his team use to take down one deal every month.


Ben Kogut | Real Estate Background

  • Partner and director of investor relations at HJH Investments, which specializes in NNN cash-flowing investment properties like shopping centers, office buildings, industrial, medical, and QSR.
  • Portfolio:
    • GP of 80 acquisitions, totaling $500M in AUM
    • LP of 10 deals
  • Based in: Austin, TX
  • Say hi to him at:
  • Best Ever Book:  Man’s Search for Meaning by Viktor E. Frankl
  • Greatest Lesson: Relationships are the most important part of business! Relationships with our investors, lenders, brokers, vendors, etc.



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Slocomb Reed: Best Ever listeners, welcome to the best real estate investing advice ever show. I'm Slocomb Reed and I'm here with Ben Kogut. Ben is joining us from Austin, Texas. He is a partner and director of Investor Relations at HJH Investments, which specializes in syndicating triple net cash flow, in properties like shopping centers, office buildings, industrial, medical and quick service restaurants. Their current portfolio includes 80 acquisitions totaling around 500 million in AUM. He's also an LP in 10 deals. Ben, can you start us off with a little more about your background and what you're currently focused on?

Ben Kogut: Sure. Slocomb, thank you for the honor of being on the show, first of all.

Slocomb Reed: Of course.

Ben Kogut: And to your question, I've been in the commercial real estate space since 2004, started as a broker, and then as a broker I got to invest in a commercial real estate syndication with HJH back in 2017, and then pivoted, got an offer I couldn't refuse to join the company as a partner, and more or less help with investor relations, raising capital and that kind of thing. It's been the best thing I've ever done.

Slocomb Reed: Nice. Remind me again how long you've been in this?

Ben Kogut: I have been in commercial real estate since 2004, but in syndication in particular since 2017, and full-time capital raiser for the last five years.

Slocomb Reed: Nice. 80 acquisitions - you were telling me before we started recording you guys are doing about an acquisition a month. A couple of things come to mind here... It sounds like you guys have your fingers in a lot of commercial cookie jars when it comes to shopping centers, industrial, medical, office, probably some single-tenant stuff in here, too. Ben, I don't know how often you listen to our show; I'm an apartment owner-operator based in Cincinnati, Ohio. When I think of syndication, and when the majority of our listeners think of syndication, they think of value-add apartment deals. That's where the majority of commercial syndication happens. And it happens in that value-add space where you have rental space that is rentable, but you also have the opportunity to force some appreciation through adding value... Is your model similar in the triple net space? Are these value-add syndications? What does that look like?

Ben Kogut: They're similar in some ways, and dissimilar in other ways. Our criteria for acquisition primarily is commercial real estate is occupied by high credit tenants, with long-term leases already in place. And we typically try to buy them better than a nine cap. So that has allowed for us to be able to cashflow our investment properties on day one.

And to compare it to multifamily, as an example - typically, those are opportunities where you're not going to see as much cash flow on day one, because you're going to hold that cash flow back in order to reinvest it into the property to fix up the bathrooms, or the kitchens, or whatever. We don't have those issues, because we don't have little tenants. We have big, long-term, high-credit tenants that are responsible for their own interiors, and things like that. As a landlord we're really responsible for the exterior - for the roof, the structure, the landscaping and things like that. But ultimately, those are expenses that we pass through through the triple net expenses, we pass this through to the tenants. So it allows for us to buy assets that are cash-flowing, that have that stability. Occasionally we'll buy a property that has some vacancy, and that is an opportunity for us to add value by obviously leasing out that space.

So there's certainly similarities and dissimilarities. I agree with you, I find that 80% or more of the people that are syndicators are buying apartments. And that's great. We took that idea and we applied it to commercial real estate, and there is a tremendous amount of appetite for people that want to diversify their portfolio by having pieces of great commercial real estate. And that's what we've been doing, and that's why we've been growing so fast.

Slocomb Reed: I don't introduce myself as an apartments guy... The triple net space is something that our listenership and I are fairly familiar with, at least on a conversation, and I've listened to a few podcasts level... What I'm having trouble wrapping my head around, Ben - you said before we started recording that you guys as a firm are taking down about a deal a month right now. Commercial high-credit, big tenants with long-term leases already in place, day one better than a nine cap; that nine cap is the number that stands out to me the most. I'm having trouble targeting my question here... Where are you finding these deals? And how many markets do you have to be looking in to be taking down a deal a month at a nine cap based on actuals with high-credit, long-term lease commercial tenants?

Ben Kogut: Yeah, so how do we find deals is really the question I'm hearing right there... And the short answer is we have an acquisitions team that looks at between 800 and 1,500 deals every week... And they're looking for what fits in our box, our criteria. And out of that amount, that large funnel, on average, about 16 properties will fit in our box every week. So we make approximately 16 offers a week on assets around the country, although most of them happen to be in the Midwest, is where we've been finding a lot of success. We are geographically agnostic, and oftentimes what we're finding are the best locations in secondary and tertiary markets, which is how we're able to achieve those cap rates.

And let me add a little bit on top of that for your listeners, to kind of talk you through some of the ways that we've been successful at winning deals. For example, number one, when we make an offer, we don't send a letter of intent. We send a signed purchase contract. And along with that, we'll preemptively send a list of references - sellers, brokers, investors, whoever. "Hey, call these people and ask them about HGH and how we do business, because they're all going to tell you we do we say we're gonna do." And then number three, we promise them that within two weeks of being under contract, we will personally be on site.

And then the other thing is, usually if it comes on the market, we've made an offer on it within 24 hours of hitting the market. So we're generally speaking the first offer in the door, and for some reason, I'm not really sure why - psychologically, there's got to be a reason - we win deals that way, just because we're the first offer. So those are just some ideas for your listeners to potentially win some more deals.

Slocomb Reed: Ben, I hope you have some advice that's a little more scalable than win deals by having an acquisitions team that can review 1,500 properties per week... That's a lot; and while our listenership is sophisticated, I don't know that most of us, myself included, have that kind of scale. Let me ask, how big is that acquisitions team?

Ben Kogut: We have a couple of guys that all day long they're looking at deals across the country. But yeah, scaling is relative, right? We're doing a deal a month; if you want to do a deal a year, then just scale that back down. If you want to crank it up... But the point I'm trying to make is we know exactly what we're looking for. We are very focused; we believe in the one thing. Gary Keller wrote a book called The One Thing, and we know, triple-net, long-term lease, high-credit tenant... And if it comes out on the market will make a 9, 9.5 cap offer, negotiate it somewhere in the 9 cap range, and move forward.

And the best advice I could give you is make offers, because you really never know what the sellers motivation is. And sometimes just being at the right place, at the right time is what's going to allow you to get a really great deal. And frankly, I think a lot of people just get in their own way. They overanalyze things, and all that. It's like, no; just make the offer. So really, we make a really quick offer. Once we have the contract, we're going to slow down and really dig into the due diligence, and all that. So to your question, make offers, and if you want to scale it up, look at a crapload of deals, and if you want to scale it down, look at however many deals you can. But at least know your market and know what you're looking for. That's what I'd say.

Slocomb Reed: That's, of course, valuable insight, Ben, and very good advice, to drill down into what your criteria are. And I think it's helpful for our listeners to hear, especially the active investors and people in acquisitions, that you guys are making as many 9 to 9.5 cap offers as you can on the properties that meet your criteria. And also, I want to point out, you said where you guys have found the most success - not only shout-out to the Midwest and shout-out to Ohio and the Cincinnati area, where you were telling me you acquired some stuff; we can come back to that. But you're finding main and main deals in secondary and tertiary markets, where you still have the high volume of traffic that you need to have quality commercial space; you're just doing it in markets that are smaller, so they're attracting less attention from major players.

Another point of comparison for our listenership between your business model at HGH and what we are most familiar with, like you said, 80% of syndicators or 80% of syndications are in the apartment space - you're looking at almost always a three to seven-year hold plan, with a preferred return and a targeted IRR. If you guys are buying the stuff that has the 9, 9.5 cap cash flow day one, what does the business plan look like from there?

Ben Kogut: So the plan is depending on the deal... So if it's a multi-tenant shopping center, then the opportunity to lease up any potential vacancy is first and foremost the priority. If it's just a single tenant absolute triple net deal, we're just going to own it, enjoy the cash flow and take care of the tenant's needs as they come up. But generally speaking, the tenant just takes care of themselves.

We structure our deals to pay out monthly dividends to the investors after the first month, because as a landlord, we're already receiving rents, so we might as well start to turn around and pay the investors. We're very focused on the cash on cash returns, as opposed to IRR. IRR is a very important metric, but it really takes into consideration what you're guessing the exit is going to be at some point in the future. And given the volatility in the stock market, rising interest rates, blah, blah, blah, nobody really knows what you're going to exit 3, 5, 7 years from now. So we really like to focus on being able to provide a solid, consistent preferred return to the investors, and that's why we've been able to grow so fast, is people come to us because they're looking for monthly distributions that's backed by these high-credit tenants of long-term leases.

So that's it - we have all the systems in place, we take care of investors, we provide them with quarterly updates on what's happening with the properties; that includes the latest cash flow statement balance sheets... And then regarding management, I'll share another way that we have been able to scale that I think your listeners could benefit from, which is management is something that has two major components. And most people combine the two. We've separated them. And what I mean by that - there's the physical management, the roof leaks, and landscaping, and lights, and all those kinds of things... And then separate from that is the financial management - collecting rents, paying expenses, taxes, yadda-yadda-yadda. So what we've been able to do is we will hire a local third party property management company that will just handle the physical side of management, and then we have built an in-house accounting team that handles all the financial management. And frankly, a lot of these managers - a lot of them don't like the financial side of things, dealing with all the tenants. So we just take that, we take control of it, and it allows for all of our reporting to be the same throughout all of our portfolio. Instead of having our own relationships locally, we can leverage third party management companies with their roofing contractors and landscapers or whatever, and it's really been a great way for us to expand.

Break: [00:14:04.02] to [00:16:02.07]

Slocomb Reed: With management having two major components, physical and financial, I'm not disagreeing with you; apartments are different. And I will preface this, I very much enjoy operating at a third-grade reading level. Within my own thought leadership, I find that a lower reading level just makes things a lot easier, more relatable, especially for people who are new. So I'm an owner-operator, I have my own management company, I have my own general contracting company, and I break everything down into three components. Everything involved in the management of property comes down to one of three things. Buildings, the physical, money, the financial, and people - the resident relations, the tenant relations and the leasing. I imagine the majority of that, in your case, as your tenants are businesses - a lot of that comes down to the financial. And I do all of my own leasing in-house; of course, with apartments that's pretty regular. I imagine for your leasing you are using brokers. Are you using the same brokers who bring you these deals for the leasing?

Ben Kogut: No. Sales brokers are a different skill set than leasing brokers. And I agree with you that there's a third component to it, leasing. We don't actually [unintelligible 00:17:15.28] leasing into the management side of the business, but I completely agree with you.

Slocomb Reed: Sure.

Ben Kogut: We will hire local third-party leasing companies, which is separate from management; they are focused on building relationships with the local tenants in that market, commercial tenants, and more specifically, if it's a shopping center, then there are specifically leasing agents for shopping centers, office buildings, industrial... They're very specialized. And typically, what we've found the most success with are leasing companies that have a junior broker as well as a senior broker. And oftentimes that junior broker is the one that's hitting the phones and trying to crank out the business. And then once they find a lead, then the senior broker comes in and closes the deal. So that's been another recipe for success for us.

Slocomb Reed: That makes a lot of sense, and it's interesting that you point that out. I know a lot of brokerages that are structured that way, and I know a lot of brokerages that have the in-house sales team and the in-house leasing team, and those two teams are completely separate. I also know a lot of junior brokers that get frustrated that they have to hand everything off to the senior guy as soon as they generate the business.

The other thing here I wanted to ask about - you did not mention in your acquisitions that you target properties with vacancy, but of course, filling vacancy is one of the first things that you do... And then when I asked you about the business plan, your response was something along the lines of "Own the property, enjoy the cash flow, start paying dividends in the first month." That doesn't sound like the value-add play that leads to a sale. I know in your triple net space your cap rate is often very strongly influenced by who your tenant is... So if you move from a mom and pop tenant base in a shopping center, for example, to having more nationally-recognized, national brand-backed high-credit leases that you can reduce that cap rate. That's not what you're saying, though. I'm not hearing you say "We buy at a 9.5 to be able to increase the NOI and sell at that cap rate, or reduce cap rate due to higher tenant quality." You guys are just buying and holding for the long-term?

Ben Kogut: Yes. So there is, depending on the deal, many opportunities to add value through that strategy you talked about - finding higher-credit tenants, increasing rents, providing tenant improvement allowances in exchange for higher rents... There's a lot of different strategies to do that type of value-add. The real value-add - and maybe this is a little controversial - is we're simply buying these at a steep discount. And why? It's because we're sending out so many offers that we find sellers that are motivated to sell at a discount. Why? For a variety of different reasons. And then typically, there is going to be a cap rate compression. Oftentimes, if we wanted to just go ahead and flip the property and take our time filling out the market, we could probably do that. But that's really not our strategy. Our investors - they like that monthly dividend, and that's what we like to provide.

So back to your question - our intentions on how long we're going to hold it... Our mentality is let's hold this for seven to 10 years. But if someone comes along and they want to pay us a stupid amount of money for the property - yeah, sure, we'll sell it. That's -- stupid is not probably the right phrase.

Slocomb Reed: We all know what you mean, yeah.

Ben Kogut: What I'm trying to say is, whatever makes the most sense for our investors. Because our mission that we take very seriously is to protect, and then grow our investors capital, with an emphasis on protect. So whatever makes most sense in alignment with that mission, then that's what we're going to do.

Slocomb Reed: Ben, as much as I'd love to continue this conversation for another hour., that's not the Best Ever podcast. I've got a couple more points that I feel like I need to get to though before we have a good comprehensive understanding for me and for our listeners of what it is that you guys do, and the value that we can gain from listening to you in this conversation.

Seven to ten-year hold period, not targeting any particular sale metrics, and making sure that you're protecting your investors' cash flow. Again, there's a disclaimer at the beginning of the episode, but no offers to investor are being made in this conversation. That being said, what is it typically that your investors are looking for, or what kind of return is it that you're projecting with this business model?

Ben Kogut: So the answer of course is "It depends." When you asked me what kind of returns, are you talking cash on cash? Are you talking IRR? Because these are two very different metrics. I think I mentioned earlier, as far as cash on cash returns are concerned, we publish on a quarterly basis every single deal that we have done; we publish what we had proforma-d it to be, and what the reality of what those returns have been. So if anybody wants to see that list, we are completely transparent and w publish that. I don't think a whole lot of syndicators are updating that information, what do we think it was gonna be, and what's the reality. And then when you look down at the list, what's the average? It's just shy of a 10% cash on cash return?

Slocomb Reed: For your investors.

Ben Kogut: To the investors, that's correct.

Slocomb Reed: Gotcha. It sounds like your business model is not as IRR-focused as typical apartment syndications. Is that a metric that you guys focus on? Is that something that's important to you guys?

Ben Kogut: Of course, IRR is an important metric, but it really is something that is a made-up number. Until you actually close on it, and you see how much time went by... So it's something that we, of course, with proforma - they often are somewhere in the 20% IRR range, somewhere in there. I don't know, it varies. But I don't personally like to invest that away. I know a lot of people do. But I like to see those checks come in every month.

Back to the start of this conversation - I started as an investor in this company, because that's what I was looking for. And then luckily, I had an opportunity to not do what I get to do. So the answer is it depends. We will articulate what our intentions are for that property on a deal by deal basis. Because we're not a fund. This is a syndication structure, so...

Slocomb Reed: Deal by deal.

Ben Kogut: Deal by deal, yup. All accredited investors.

Slocomb Reed: Before we transition to the last segment of the show, Ben, let me put it this way... Let's say that I am a passive investor, I'm weighing my options, and of course, most of my options are value-add apartments indications. What I'm hearing about the way that you all operate, your business model and what it is that you currently deliver, if I were looking to place my capital somewhere that I knew was low risk, that there will be returns day one, that the projected returns on my capital do not rely upon the execution of a potentially sophisticated business plan, things that could cause delays, renovation, new development, and I'm not as focused on the equity multiple or the IRR as I am having consistent set it and forget it cash flow - it sounds like that is the investor that you guys are working with and for whom your business model makes the most sense. Is that fair?

Ben Kogut: Yeah, I would agree wholeheartedly with what you're saying. We always encourage people to diversify their portfolio. And yes, it's simple. It's really simple, and it's passive, and it's consistent mailbox money. So yeah, that would check the box if that's what you're looking for. Yes.

Slocomb Reed: Gotcha. Awesome. Well, Ben, are you ready for the Best Ever lightning round?

Ben Kogut: Let's do it, Slocomb!

Slocomb Reed: Awesome. What is the best ever book you've recently read?

Ben Kogut: Yes, the best book I've read is called Man's Search for Meaning by Viktor Frankl. Viktor was a survivor of the Holocaust. And one of the biggest lessons that he teaches in his book is not only to live a life of meaning, but to be present along the way. And that is something that I strive for on a daily basis.

Slocomb Reed: Yeah, it's a great book, for sure. What is your best way to give back?

Ben Kogut: My favorite way to give back is to volunteer, to mentor, and I'm involved in several local and international leadership groups as well.

Slocomb Reed: Thus far in your investing career what's the biggest mistake that you've made, and the best ever lesson that resulted from it?

Ben Kogut: Prior to becoming a capital raiser I was putting deals together on my own, and I put up roughly $20,000 as earnest money on a deal I was pursuing. Money went hard. After the money went hard, between that period and the time it actually closed, we discovered some more problems with title, as well as with some other issues... And unfortunately, that money was hard, aka non-refundable... So we lost her money, but we didn't do the deal, so I guess that was the win, finding out that information prior to closing. But I learned a lot of lessons on due diligence. And every time you do a deal, you learn more and more and more, and that's okay. It's just part of the process.

Slocomb Reed: Awesome. On that note, Ben, what is your best ever advice?

Ben Kogut: The best advice is that it's better to copy genius than create mediocrity. So what I mean by that is, if you're someone that's growing, find successful mentors, people that can help you cut through those mistakes that I just mentioned a second ago, and keep you on track and then just surround yourself with really smart, best ever people. And that's what I've been doing, and I encourage everyone to do the same.

Slocomb Reed: And where can people get in touch with you?

Ben Kogut: Yeah, the best way to get in touch with me is through my website, On there we have a free ebook called "Five things to consider when investing in a commercial real estate syndication." It's free. Or any of the socials, my name is Ben Kogut.

Slocomb Reed: Awesome, and those links are in the show notes. Ben, thank you. Best Ever listeners, thank you as well for tuning in. If you gained value from this conversation, please do subscribe to our show. Leave us a five-star review and share this episode with a friend who you know will be interested in this conversation, that we can add value to them through what we've discussed about triple net commercial real estate investing. Thank you, and have a best ever day.

Ben Kogut: Thanks so much, Slocomb.

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