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Welcome to the West Side Investors Network, WIN, your community of investing knowledge for growth. This is the Real Estate Professionals Investing Podcast. For Real Estate Professionals by Real Estate Professionals. This show is focused on the next step in your career....... investing.
Welcome to the Westside Investors Network. WIN, your community of investing knowledge for growth. This is the real estate professionals investing podcast for real estate professionals by real estate professionals. This show is focused on the next step in your career, investing. Thank you for listening.
Intro speaker:And please, if you like our content, rate us on your podcast provider. Just a quick disclaimer. The views and opinions expressed in this podcast are for educational purposes only and should not be construed as an offer to buy or sell any shares or securities, make or consider any investments, or take any other action.
Trent Werner:Welcome back to another episode of the deal deep dive segment on the Westside Investors Network podcast. I'm your host, Trent Werner. In this segment, our future guests will share their unique stories on a specific deal they've invested in. We will dive deep into finding the deal, financing the deal, writing an offer, and the due diligence. Do us a solid and smash that subscribe button, leave us a rating, and share this episode.
Trent Werner:And now let's dive deep. Welcome back to the Westside Investors Network podcast. I'm your host, Trent Warner. On today's deal deep dive episode, we're joined by Tilden Moschetti. Tilden is a practicing lawyer as well as syndicator based out of North Carolina.
Trent Werner:Tilden has done deals from medical office to multifamily apartment complexes. Today, we're gonna talk about a deal out of Los Angeles, California that was a medical office that he bought in 2018 and ended up selling in 2023. Now let's welcome Tilden Musketti. Alright. Welcome back.
Trent Werner:We're joined by Tilden Musketti. I hope I got that name right. I had to practice it a couple of times before we started recording. Tilden, thank you so much for joining the show today. We're gonna dive into a medical office that you worked on here a little bit later.
Trent Werner:But before we do that, I wanna hear about how your law career has transitioned and added another facet into real estate syndication. So talk to me about your your law career and how you ended up getting into being a sponsor of syndications.
Tilden:Absolutely. Thanks, first of all, for having me on your show. I'm really, really happy to be here. I love it. So it's great to get to be invited as a guest.
Tilden:My law career started about twenty years ago. I actually went to law school in order to be a developer. So as I looked around at other people, I saw that there were a fair number of lawyers that were also developers. And so I thought, oh, okay, that's a good idea because obviously these things work on laws, so that's probably what I should do. I went there, I focused primarily on property in those kinds of rules, business transactions, financing, things like that.
Tilden:I took a short detour because I was in an advocacy program that focused on trial skills, because I thought it would be a good skill set to have when talking to potential investors or just talking to cities about what I was working on. And that took me a little off course for a little while. After law school, I became a litigator. I worked in the district attorney's office, and then I went and hung out my own shingle, doing primarily real estate litigation as it related to like any fight over property. I did that for ten long torturous years.
Tilden:Litigation is not a world for fun or happiness. So after a while, was getting really burnt out. And that's sort of how I came across real estate syndication. I was kind of at my wits end, and a partner of mine showed me a deal. And it was a nice single tenant medical office in Alabama.
Tilden:And he said, look at this deal. I said, yeah, that looks that looks really good. And he said, yeah, we should syndicate it. Not even really knowing what syndication meant, I said, yeah, let's do it. So I quickly learned taught myself how to syndicate.
Tilden:Fortunately, I had the legal background to do it. Took a little bit longer, learned a lot of lessons along the way, but got that deal. That was really great. It was wonderful. We made money.
Tilden:Investors made money. So I we did another one together. And then I started just doing a few deal, few more deals on my own. I soon saw that I was really good at the the legal side of it, and it only made sense to wind down my litigation practice and go full time on helping people put together, syndication deals. So that's what I do now.
Trent Werner:I have to imagine that your litigation skills help with negotiating, you know, presenting the deals to potential investors. How does your law career and expertise work when it comes to analyzing these deals and finding deals for yourself and your syndication company?
Tilden:Yeah. I actually had a finance a real estate finance professor who told me that the best thing you can ever do is become is to litigate for a while, that you'll become very, very methodical. And that's what it's done. So I am very, very methodical in terms of when I look at a deal. I need it needs to meet certain benchmarks for it to to check off for me.
Tilden:Not necessarily even on I mean, on the underwriting itself, but it's gotta feel right. It's gotta have a good story. It's gotta be something that you know, if you could think of it as that I'd be able to present to a jury and sway people's opinion on, that's what it should do. So it certainly honed that part of it and made, I mean, really much of my what I do and what I preach is, you gotta have a story behind it, which is really at the heart of litigation. What you're always trying to do is line up facts to a story.
Trent Werner:And how how does how does your law experience help with finding deals and and getting your deal flow to where you want it to be?
Tilden:So it helps in terms of you know, I certainly know where things are at in terms of the the legal process. So I know, you know, I know where I have time and know where I don't. Syndication is always there's always something happening in terms of either getting the deal closed or finding more money or, you know, making deals with partners. Certainly, the partner end of it has been huge and being able to negotiate, you know, terms that work well with both me and the partners that I work with so that everybody's happy and everybody works together. That's probably the biggest biggest impact there.
Tilden:But also just seeing deals. Right? I see about a 100 deals a year for my clients and then on top of my deals. So I it's like I get the experience of of running a whole bunch of deals all at once, which kind of leapfrogs a huge, a huge value for me.
Trent Werner:Absolutely. And there's been plenty of people that have come on and and talked with me about, syndication that started in some sort of finance background. I I think you might be the first one that is an active practicing lawyer and syndicator at the same time. Is there any other skills besides the ones that we've talked about that you think your law experience has has helped with syndication?
Tilden:Well, certainly the finance piece of it is also, you know, is major for me. So when my component of of litigation, it was always about analyzing value. Value was always important. Cash flows underlying the the financial instruments underneath it all really mattered. And so that's added a lot.
Tilden:I went back and got a CCIM to get a little bit more. I've gone through two of the tests for the chartered financial analysis training just because I wanted more heavy, like real finance background. That's all important. And then just good, you know, in real estate and especially in syndication, you're working together matters so much. Not being a deal killer is is paramount.
Tilden:And so, like, that putting that forward is also the like, the key thing of how to keep a deal going, how to keep it together, how when things are getting messy, how to, you know, not lose your head and, yeah, keep going and get it done right.
Trent Werner:Absolutely. And how many deals have you personally been a sponsor of or your, you know, your partnership group? How many deals have you guys sponsored?
Tilden:I think I'm at 15.
Trent Werner:Okay. And are they all office commercial?
Tilden:No. None. No. Just a couple of those. I'm very agnostic when it comes to per asset type.
Tilden:I've done a few multifamily. I've done, you know, medical office. I've done office. I love retail. Retail's very interesting and exciting to me.
Tilden:My first real estate mentor came from retail world, so that's like an especially, you know, attractive piece to me. I've never done a hotel, and I'd like to. I've done flex. So, pretty much done everything.
Trent Werner:Very nice. And the deal we're talking about today is based out of California. You're all the way across country in Carolina, North Carolina. Do you have any specific regions or areas that you're looking at or are you open anywhere?
Tilden:I'm pretty open. This deal was actually while I was in California. So it was local at the time, but I my first deal that I did was in Alabama. So I I like good markets with lot lots of population growth. That that's like one of my baseline criteria.
Tilden:Gotta have good population growth. I don't go to places that where it's shrinking.
Trent Werner:Okay. So let's talk about this this California deal. You said it was a medical office. What were what were the metrics behind it and how did you find this Yeah.
Tilden:So the deal came to me when a, a broker friend of mine, a real estate broker friend of mine showed me this deal that he was trying to get the listing on. And when I looked at it, it looked okay. Wasn't stellar. It was just like, okay. That looks like a regular kind of deal that you might see on any information exchange.
Tilden:Nothing too outrageous. There wasn't nope. There was no pop there. And so I was just like, I I don't know. It it looks okay.
Tilden:And he wanted to syndicate it with me. And so I I just didn't see it. But he's like, oh, just trust me. Just look at the look at the financials. And so I looked at the at the rent roll and it started looking a little more interesting.
Tilden:So a lot of medical tenants can be really good. A lot of them tend to sell their practices rather than move around a lot or close shop when they move. So that was pretty appealing. And then I noticed a line item for that it had a cell tower attached to it. And so I think most of the people were thinking that it was just a well, this is a great way we can, you know, it just adds to the cash flow.
Tilden:My my game plan pretty quickly turned to, okay, let's sell those cell towers after buying it Because the technology of of those the tower that was actually there was I was getting worried about. It was I don't think it was gonna be able to support four g at the time, as it came on. And so and I knew that the Verizon carrier was changing the way they were doing it. So I thought, okay, let's sell those cell towers, get some cash back to our investors immediately. And now we've got a pretty good deal.
Tilden:So now we've got a reason to buy. We can we can get in, get some cash quickly back so and then have some really good returns. And now here's a word from our sponsor.
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Trent Werner:Selling cell towers that are attached to a deal. How does that Yeah. Process work? And I guess, what it how much was the deal when you guys saw it to buy?
Tilden:It was 2.7. Okay. It had small deal.
Trent Werner:And it had cell towers. So how do
Tilden:you how
Trent Werner:do you go about doing that?
Tilden:Yeah. So there's actually people out there. There were brokers that sell buy and sell cell towers. And so ultimately, I I had known about these people because I had talked to them before and it sounded kind of intriguing and just put it in the back of my mind in case I ever needed it. But when I saw cell towers and saw what was going on on this deal, I called them and said, what do you think?
Tilden:And they said, yeah, this looks like a pretty good lease. We can we can sell that cash flow to to ultimately a REIT that ended up buying it. And so, yeah, we sold off the the, the lease on the on the cell towers.
Trent Werner:Remember how long the lease was for?
Tilden:It had seven years left and was about to go into this renewal period after those seven years of where it was every year they had the right to cancel, which was a huge deal because I thought, okay, technology changes, they're just gonna cancel this thing. That's what what really kinda scared me about the the lease. And so when, you know, I was happy to sell it because then we weren't using that that anymore. The REIT obviously knew what it was doing. It was happy and it had more, you know, a new a new new tower under its control.
Tilden:I think we sold it I think we sold the towers for, boy, a lot of money. I I could be wrong, but I think it was around 700,000 that we sold it for. So we ended up getting essentially the building with the cash flows, but not the cell towers for about 2,000,000.
Trent Werner:And how much did you have to raise for this deal?
Tilden:I did it all cash. So I'm excited. It was it was it was actually really fortunate because I bought it in 2018 and that's right, you know, right before COVID. So it was very nice when, you know, people stopped paying rent to not have a loan outstanding to to make that work. So fortunately, that worked out really, really well.
Trent Werner:And what was what was your plan? I guess, let me backtrack. Was there one is this a one tenant building or were there multiple tenants?
Tilden:No. It was five tenants. Yeah.
Trent Werner:All medical?
Tilden:They were all medical use. Yeah. So it was zoned for it. We we were kinda under park, but it was it had just enough. It had grandfathered in with what we had.
Tilden:That was kind of one of the other things considering, well, if I change one of the units out, be non medical, am I gonna lose am I gonna lose that parking that ability to put a medical tenant in? Ultimately, it's all it's been pretty well occupied. And then towards the end, it lost one tenant, but that that was that needing to be replaced.
Trent Werner:And one thing that I know about medical offices and areas is they tend to refer people back and forth to each other. I have a client that's owns a medical practice, and the parking lot's filled with physical therapy, you know, or whatever. There's four just medical people that constantly are referring patients back and forth. So it typically helps their business out if there are multiple medical tenants in there.
Tilden:Totally. And if if they have a good sense of community and you just don't see them ever leave. And so we saw two of the practices sell to other other physicians. So that was good.
Trent Werner:And what was your what was your plan you for this deal? I know you said you bought it in 2018. Obviously, you you sold the the lease for the cell towers right away. We're able to get some capital back. What was your plan in terms of hold time?
Trent Werner:Were you planning on, you know, pulling capital out with a refi? Talk about that for a little bit.
Tilden:Yeah. I was planning on no. I was never planning on doing the refi because I I was a little what I had sold this investor what the I had sold the investors on is how safe this deal was. So and I really used the fact that it was gonna be all cash like heavily in it. And you know, certainly now I would re refi it.
Tilden:With rates where they're at, would be terrible. Even when rates were low, it just it just didn't seem to make sense for the investors to get it out. Because what are they gonna do with the cash? There wasn't, like, another deal I wanted to put them in at the time. So no.
Tilden:We just, my plan was just hold it for ten years and then sell it. And they ended up selling it at 5.
Trent Werner:And do you remember what you sold it for?
Tilden:3.5.
Trent Werner:So, I mean, conservative investment, safe, and you were able to to capitalize on it in half of the amount of time that you you projected. So it sounds like a good deal.
Tilden:Yeah. Oh, it was definitely a good deal. Yeah. That one turned out to be I mean, there was we had a tenant that wanted to sue us. And yeah, they have their usual things that go, you know.
Tilden:And we had COVID, that was kept it interesting. But it was a it's a good building. I always thought that there could be more of a value add to it. But at the end of the day, it just the numbers weren't making sense on like putting in an elevator or putting in changing out, you know, like the atrium or, you know, refacing the building. It just none of it ever I couldn't see in in the huge add value component that actually would have made money for people.
Trent Werner:So when you when you underwrote this deal initially, you were looking from a pure cash flow standpoint on this deal. It wasn't, and, I mean, I guess, raising rents and stuff like that, was there any any, I guess, rent increases or anything that you were able to do to improve the NOI?
Tilden:I knew that the, one of the the doctors was leaving. So I knew if he went out, I'd be able to replace him at a higher rent. So that was one angle. He ended up selling his practice, but the lease was coming kinda due, so I was able to renegotiate that lease. Kind of a blend and extend for that tenant, which added some value.
Tilden:Really, it took very little work other than I mean, selling the cell tower has just added huge to our IRRs. I don't remember what the IRR wound up being, somewhere around 20. But, yeah, it was a it was a good, it was a good play.
Trent Werner:And for how you how you funded this deal using all cash, there had to have been a, you know, average annual return or cash on cash return that you were targeting. Do you remember what that target was?
Tilden:I was targeting a 15% IRR. That that's kind of for that kind of property, that's always my my go to target. Ended up getting above, that's why think it was at about 20. So, yeah, it was good.
Trent Werner:Very nice. Is this when you're for your other deals, are you typically funding them all cash or do you do financing on other asset classes that you own?
Tilden:Mostly finance, which makes it challenging today. My next deal that I'm that's still like in the in the exploring stage of whether we can make it work, that will probably be all cash just because I I don't think we're gonna need we're gonna need a good amount of money, but we're not gonna need I I don't wanna bank on it. There's gonna be some development components and I don't want I don't want the time pressure of of, you know, getting a takeout loan or anything like that.
Trent Werner:And what's your what's your typical hold time when you're looking at deals? Is it ten years?
Tilden:No. Mostly it's five to seven. That one will probably be five or maybe longer. I don't know. We'll see.
Trent Werner:Only time will tell.
Tilden:Yeah. Exactly.
Trent Werner:So, Tilden, did did I miss did I miss talking about anything today that you wanted to share about this deal or about your your business?
Tilden:Yeah, I think why this deal was successful and I think why what makes everybody in this business successful is kind of, again, focusing on the story of the deal. And I think that this deal kind of underlines that. Because going into this deal telling investors, hey, we're gonna go in, we're gonna make this a very safe deal for you. Even when we had huge upsets like COVID or a tenant leaving five person place and getting sued, we never lost cash. I never had to do a capital call.
Tilden:I was always making money. It was just safe. And that was kind of gut check, right? That's why we never refi ed it. That's why I never did the add value, the value add components because it was, well, is this safe?
Tilden:Is this the safe deal that I told them about? And relying on that story that I said made it successful and the investors just trust you more for it because, oh, yeah, they did exactly what they said they were gonna do.
Trent Werner:Absolutely. And was I I forgot to ask, but was there a preferred return, in this deal for investors?
Tilden:No. So in this deal, I in the way I oftentimes try and structure my deals is just taking equity off the top. So the raise was for 2.7, but I think I ended up like valuing it at 3,000,000, like taking that additional 700,000 or that additional $300,000 as my share in the the interest. So it dilutes everybody upfront. The reason from a syndication point of view that's good is because you're always gonna get paid.
Tilden:The the land's always worth something. Some investors will question it and the answer always is just, you know, look at this deal, it's a great deal that we're going into. You're going to make money, you might get diluted but it's being undervalued anyway. So I think when I was selling it, it was the idea was it was probably worth 3.2.
Trent Werner:And so when you when you were able to sell the cell towers, did that did that capital get distributed back to the investors right away, did you hold on to that until the end of the deal?
Tilden:No. It went it went to investors immediately.
Trent Werner:Got it. Okay. So that's, you know, that's how they're recouping some of their initial investment during the deal. Got it. Okay.
Tilden:Yep.
Trent Werner:Tilden, where can people connect? Oh, what's that? I
Tilden:said, yeah. They got a nice cash flow, like, immediately. A nice Yeah.
Trent Werner:Where can people find more from you or hear more from you?
Tilden:Find me, online at musketti law dot com. That's m0schettilaw.com. I also have a YouTube channel that has quite a bit of videos. We probably have 120, 150 videos on there just talking about concepts and syndication. So that's youtube.com/@signsyndicationattorneys, I think.
Tilden:Yeah. Syndication attorneys.
Trent Werner:We'll make sure we link it in the show notes so we get it we get it right. Tilden, thank you so much for sharing about your deal with the medical office deal in California and for sharing about how an active lawyer is able to be a successful syndicator all at the same time. I'm sure you got plenty of stuff to work on. So thank you again for for joining us today.
Tilden:Thank you very much for having me.
Intro speaker:Thank you for listening to this episode of the Real Estate Professionals Investing Podcast on WIN, your community of investing knowledge for growth. We hope that this episode has increased your knowledge and added value to your path to freedom. If you would, please take a second to rate us so that we can get more great investors to interview. If you or someone that you know wants to be on, please visit westsideinvestors.com and fill out our form to be on the show. Thank you again, and enjoy your day.