0:00:04.8 Jeffrey Bell: Welcome to an episode of Just Questions Podcast where we ask people with their experience and their know-how.

0:00:11.0 JB: Today, we have a special guest, Kayvan Mehrbakhsh, who is a commercial broker. We're going, today, find out what's the difference between a commercial broker and a regular real estate realtor. So let me introduce you to Kayvan Mehrbakhsh.

0:00:28.1 Kayvan Mehrbakhsh: Hi, good afternoon, Jeff. Good to be here today, and good to see you again. My name is Kayvan Mehrbakhsh. I'm a commercial broker for K&M Commercial. I've been in commercial real estate for, gosh, about 22 years now. Just to give you a little background about myself, I actually started out in IT, and my background was data centers. I used to build data centers for MCI, and which is how I kinda got into commercial real estate. I basically went around the country and found locations, and put a data center together for MCI, and those were mission-critical sites. And the last one we did was in Amsterdam. And as you guys know, MCI got bought out by WorldCom, and that's another story. And eventually, MCI, actually, WorldCom went through bankruptcy because of what their CEO did and got bought out by Verizon.

0:01:40.6 KM: So the day I left MCI, I wanted to do something different, and I knew real estate, and it seemed like it was a perfect fit for me. After doing real estate for a while, I got my CCIM designation, which is Certified Commercial Investment Member. Top 10% of commercial brokers in the country have this. And I basically was with Sperry Van Ness, which is later on, I had my own franchise of Sperry Van Ness in Northern Virginia for about, gosh, about 10, 11 years. And a while after that, I just felt like I don't need the franchise anymore, and it was always K&M Commercial. So here I am. And business has been good, it had its ups and had its downs. But everyday is a challenge and you learn something new everyday. So that's a little background about me.

0:02:47.8 JB: So what locations, cities, geographical locations do you work in?

0:02:53.3 KM: Well, this is the beauty of commercial real estate. I'm actually licensed in Virginia, DC, Maryland and North Carolina. But we do deals all over the country, and I have done deals in Milwaukee, Wisconsin; Akron, Ohio; Dearborn, Michigan, all over. And my specialty, we're actually based in Herndon, Virginia, and our focus, we try to focus in Northern Virginia area, Maryland suburb, and so forth. It depends, really, it comes down to, it depends on what type of property it is, and so forth. If it's primarily just leasing type of transaction, we try to stay local within our geographical area, which is about, probably about 50-mile radius. But if it's a investment sales, or a larger transaction like a shopping center, or retail-type properties, or specialty type of property, and specialty could mean a lot of different things. It could be anything as like a marina. It could be anything like a hotel. And believe or not, one time in my career, I have even sold coal mines in Kentucky. So it really depends on their property and what it is.

0:04:25.6 JB: Where do you see the market going right now?

0:04:31.0 KM: The short answer would be, it depends, which portion of the market. And as the market change, as everything changes, with COVID, basically, a lot of things changed, a lot of people came up to different conclusions. So for example, when COVID hit, initially, the groups that were doing really bad, number one, was the hospitality sector. Number two was the retail group. Now, retail group has different categories. We have the higher end, which is closer to like shopping mall, they were doing really bad. And then the lower end, which is local strip centers, which are in neighborhoods, they were doing fairly okay, and those are already the ones with the grocery stores and so forth. The next sector was office. And office was not doing well. Next sector was industrial. Industrial was still okay. And believe it or not, the best sector that was doing really well was self-storage.

0:05:43.1 KM: Now, going forward, the ones that gonna have issues are some of the same ones we're starting to see, for example, hospitalities; we're starting to see projects that are conversions. And taking an old hotel and basically converting it to either a multi-family or retirement home. There is one in auction right now in Maryland, in Baltimore. As far as retail, what we're starting to see are big boxes like old JCPenney stores or old anything that required a lot of real estate for one tenant. And some of the landlords are having some difficulty filling those, but they're trying to do conversion. And the conversions could be anywhere from converting a old retail, which is about 40,000, 50,000 square feet or more, and converting it to either self-storage or something like a Amazon distribution center, really depends on the property.

0:06:49.4 KM: Now, everything I'm saying, these are all general because once you get into the specific properties, things have to work. For example, you can't make just about any JCPenny to a Amazon distribution center because they may not have the right doors to be able to get in, roll-up doors, or ceiling heights, and so forth. So it may not be cost-effective. And what we're seeing in the office sector are as the leases are coming due in larger sectors, so like for example, Washington, DC, the law offices or some of the defense contractors that were occupying, for example, 15,000, 20,000 square feet, they're coming down to somewhere like in our area, Herndon, and they're going down to 5,000 square feet. Basically, a conference room and couple of offices, and nice reception area. 'Cause a lot of the folks are gonna be working from home, still. And they just need a location, and they're trying to keep their costs down. And they don't need to be in DC anymore or Arlington where the rents are much higher.

0:08:05.8 JB: A word from our sponsor. The Just Question Podcast can't be possible without a podcast delivery system like Anchor. It has been 10 years since I produced a podcast, but I'm glad Anchor is here today. It makes it so easy to upload and track your listeners. It has everything you need to start a professional-appearing podcast today on the Internet. If you haven't heard about Anchor, it's the easiest way to make a podcast. Let me explain, it's free. There are creation tools that allow you to record and edit your podcast right from your phone or computer. Anchor will distribute your podcast for you, so it can be heard on Spotify, Apple Podcasts, and many more. You can make money from your podcasts with no minimal listenership. It's everything you need to make a podcast in one place. Record that audio and be sure it's handled property by Anchor. I know my Just Question Podcast is in good hands. This is Jeffrey Bell for the Just Question Podcast. Back to our interview.

0:09:05.3 JB: When a client comes to you, how do they prepare? What do they need to do?

0:09:10.9 KM: Well, alright, that depends on the type of client. Let's assume they're coming in for investment sales. And we have some of those type of clients, where if they're interested in purchasing, number one, we try to understand their objective. And their objective, is it to literally just park the money there and have a return and be completely hands-off? Or are they looking for a value add to turn this thing around and make a higher return? But they gotta get their hands dirty. The things that we ask them, obviously, number one, is: What is their objective? And we check, see their source of funds, or how are they going to finance it? 'Cause a lot of times, they haven't even really thought about that. Have you talked to a bank? Is it all cash? And what are your plans?

0:10:06.3 KM: Other type of groups is for leasing. And for leasing, it really comes down to: Why they need the space for what they're trying to do. For example, if their group comes to me and says, "Listen, we wanna do a bakery." I say, "No problem. What demographic are you going after? Where do you want to be? Do you realize... Are you gonna need a hood, for example, as a restaurant space, or do you not?" Bakery typically doesn't, but a restaurant needs a hood, and hood is... It's a large expense, so they just have to factor that in. All of those things, we literally have to interview them and really understand their need, what's happening. Then once we have a little better clear understanding, we basically give them explanation of the cost of what it's gonna take, and show them some comps. And then they realize, "Okay, based on my budget, this is what I can afford, this is what I can't afford," and then we go forward.

0:11:06.0 JB: So in that case, is leasing or purchasing a building a better move for a business at this time?

0:11:13.0 KM: Well, in my opinion, real estate market for commercial, luckily, has not been as hot as residential market. It's still moving pretty fast, things are moving. So I think right now is the best time to purchase. And the reason is you can get the best rates right now, and if you're thinking long-term. You have to think, you know, number one, number one thing that you should always ask yourself when you're buying a commercial real estate, and this is what's very different than residential, you have to think of your exit strategy. "How long am I keeping this? Is this for my business for five years, 10 years?" I know every time we go buy a house, "Oh, yeah, I'm just gonna buy this and just retire in here." But that's not how we look at commercial.

0:12:09.2 KM: Commercial exit strategy is critical to know, "Alright, I'm going to," for example, "Buy a shopping center and hold it for 10 years, and I'm gonna depreciate it, and I'm gonna do these investment, and this is how I'm gonna turn around. And I'm buying it out of," for example, "A five cap, and I'm gonna get the tenants up, and sell it at a higher rate. And depending on the cap rate, what it is." And what is a performer cap rate? And so there's a lot of variables that you have to keep thinking, but you're thinking more of the future. You're looking at the future of this. Yes, you're looking at current cash flow, but where you're really gonna make money is in the future.

0:12:50.2 JB: You brought up a subject of residential. What's the difference between a commercial broker and a real estate agent?

0:12:58.0 KM: Well, residential, let me see if I can kinda explain it based on my understanding. In my opinion, residential agents, in some ways, their job is a lot tougher because they're trying to get you into a property to... And you're under a time constraint, extreme tight time constraint. You have to have a place to live. You have to find a location, and your deals get done within 30 days, in and out. You find a location, you show a few places, you put contracts in. And these days, it seems you have to put a lot of contracts in, and they get refused, and you just go all in. And the responsibility of the agent is to accommodate their buyer or their owner to close the deal quickly and smooth as possible with everybody knowing what it is. And there is the documentation and so forth are very straightforward. The contracts are very straightforward and so forth. The difference between commercial real estate, sometimes, we have to create the deal. And let me explain to you what that means.

0:14:25.7 KM: So for example, some deals are cookie-cutters, and basically, for example, if you were trying to buy a Dollar General store, which a few months ago, they were still selling out 6.75 cap rate anywhere in the country. And you say, "Okay, I'm looking for a Dollar General location," which you know, and their standard is 9,000 square feet, 1.2 acres of land, and 15-year triple net lease, with five-year escalations, and so forth. So they try to make it all the same. But most every other property out there, it's going to be different. So for example, we may find an office space, for example. And the buyer comes to me, "Hey, I wanna buy this as an investment." Well, the owner, once, if... Depending on owner, they either want to keep it and lease it out themself, or they want to sell it. And basically, at that point, they have to make a... Sometimes, we have to find the tenant and put it all together, and then it finally becomes investment-grade property. This could be a shopping center, this could be just an office space, and so forth.

0:15:52.0 JB: Do you specialize in any type of office space or buildings?

0:15:57.0 KM: It seems like for a while, we were specializing in medical-type building. And we were working with a lot of dental clients. I actually had some ophthalmologists we were working with, some chiropractor. We did sell a building close to Leesburg Hospital. We did some leasing there, and so yes, I did sell a building in Tysons Corner, which was all medical, primarily. And yeah, so it seems to be for office, specifically, we do a lot of medical. And there's a lot of demand for medical, especially smaller spaces here. Bigger spaces are gonna be contractors, and so forth, and they're a little bit more challenge, but they're doable.

0:16:50.0 JB: Share some of your success stories.

0:16:52.8 KM: Oh, boy! You want the complicated stories, or the fun stories?

0:16:57.0 JB: Whatever. Whatever you wanna tell.

0:17:00.0 KM: Okay. I'd tell you a really interesting story. It was one of the stories beginning of my career, actually. This is about 2007 time frame. It was a really interesting deal. I just got my CCIM and I was a franchise with Sperry Van Ness, just signed up with Sperry Van Ness, and so forth. And I remember a group from California, from Irvine, called me up and they were specifically looking for Sperry Van Ness and CCIM. In those days, 65% of Sperry Van Ness folks were CCIM, so they were like the top of their game. So the gentleman literally went through, he had a list of all the CCIMs, and he was going down the list, and he was telling me about all the different shopping centers that he had, and he wanted to sell. Now, these shopping centers were not your regular shopping centers. These were literally dead malls, and they were shut down. These were probably 1.2 million square feet of mall sitting on about 120 acres of land. And he told me about three of them.

0:18:22.7 KM: At that point, I was working with... Actually, I had a listing down 95. It was for a piece of land, it was about 10 acres of land that I had a group. It was basically a Chinese investor that came and they wanted to build a retail strip. And specifically, they wanted to build for furniture reselling. These were furniture manufacturers. They wanted to have multiple stores, and they wanted it to be specifically for furniture. And this is in Fredericks, Virginia. At that time, Silver Company was the big dog down there, and they found out about the folks that were talking to me. And they approached my client, and basically, they presented their product down there. And I think they already had a building location ready. And basically, the Chinese group came to me, I think they liked me at that time, even though they weren't my client, they came to me and said, "Look, Kayvan, they're presenting me this product. And it seems to be better than yours." And I looked at it and their numbers were better, their timing was better. So I just said, "Yeah, their information is better. They're ready to go, you can be operational much quicker." And I think at that time, their project was like $30 million to be operational.

0:20:08.7 KM: Then I started talking to these guys in California, and basically, he told me about this, the other projects that all over the country. There was one specific project was in Milwaukee, Wisconsin, and basically, it was a mall. And I remember having this thing in my hand, and I approached these guys, the Chinese group, and I told them, "Guys, I have this particular product. This is a mall in Wisconsin. I know you wanted to be close to a bigger market," which Milwaukee was an hour from Chicago, "And on a major highway. And I think we can be operational." 'Cause I remember for their project in Fredericksburg, they still had to build it. The mall in Milwaukee was ready to go. We went, I literally, the first trip, we literally got in a car and drove over there. The second and third and fourth, we flew. But the first one, we drove over there, saw the mall, and it was a big mall.

0:21:19.0 KM: And basically, after a little research, we found out that this was an opportunity zone. So what that meant was the group, anywhere in the country, basically, it was... No, I'm sorry, it was EB-5 zone, which means if each group spend $500,000, them and their family could have got a green card. So what happened was the group ended up buying the shopping center, and it was cheap. I mean that large of a shopping center, they're purchased for about $6 million. Took it back to China, pieced it off, sold it for... It had 160 stores, so it sold it for $80 million. And it was one of those deals, that it was a win-win for everybody because the Chinese group made out, all the manufacturers made out because they all got a store. And they spent only $500,000. They all got their green card. The city made out because they sold a property, and also, for each store, they had to get 10 jobs for each store. And you know, I made out, I made a really, really good commission, and it was one of those deals. It was win, win, win, win.

0:22:51.7 KM: But I remember literally having to go to California, and it was one of those deals. I mean think about this, the broker, which was me, I was in Washington. The property, it was in Milwaukee. The seller was in California. And the buyers were coming from China. So it was just amazing deal. But we got it done. I remember going to California to Sperry Van Ness office and sitting down on the conference room, and the, at 5 o'clock on Friday, they kicked us out. We went to some restaurant and we're still negotiating. And finally, we came to an agreement like 11 o'clock at night, the lights were dim. I pulled out the laptop with the printer, printed the contract right there, got a signature, and we were able to finally close this thing a couple months later.

0:23:42.0 KM: But it was a great deal. I made a full commission on this. And it was a challenging deal, but it was like... I just kept pulling on the string, and I just didn't let go 'til I got all the way to the end. And I didn't know where it was gonna go, but I just keep pulling on the string. And I know there were multiple brokers, national brokers that worked on this, and they couldn't get it done. And my solution was just completely outside the box, and I got it done.

0:24:14.6 JB: You said foreign investors. How many do you deal with?

0:24:17.9 KM: Well, you know, after that, they kept coming. [chuckle] I ended up selling coal mines in Kentucky to a Chinese group. I ended up selling a shopping center in Akron, Ohio. Let's see, what else we did? We sold a lot of stuff. We sold a wash plant. Didn't even know what was a wash plant 'til I had to sell one. And yeah, we sold a lot of properties. And they all had their challenges, and you have to really understand, there's nothing easy and nothing short-term. And you have a lot of these deals, you have every reason for it to fail, and you got maybe one reason for it to succeed, but you get it done.

0:25:07.3 JB: You said "we". Of course, there has to be a staff for you, you know?

0:25:10.9 KM: There is. There is staff, and I really do rely on them, and they're really good people. I have marketing people, I have broker, other agents/brokers, and partners and also, other team members, title companies that I work with and appraisers. And there's so many people involved in a transaction, and they all have to work together to get it done. And I've been blessed and lucky, and I was able to get it done multiple time. One of the things, I don't know if I'm supposed to say, but we use Stewart Title. And the good thing with them, and they work nationally. So anywhere I go, they're there. [chuckle] And they have office everywhere, and that we get it done. And they just make my life really easy.

0:26:10.0 JB: So we've talked about your business, we've talked about your career.

0:26:13.0 KM: Yup.

0:26:13.5 JB: We've talked about what is commercial broker. Now, let's talk about you.

0:26:17.1 KM: Okay.

0:26:17.7 JB: You have any hobbies?

0:26:19.4 KM: Hobbies! Oh, yeah, of course. Let's see, I love cars. My younger days, when I was in high school, I wanted to become an auto mechanic. I even got my AC certification when I was 18 years old. So I like cars. I basically like, and I'll buy them, fixing them, drive my wife nuts, but you know. And there's like six or seven cars, and yeah, I don't know, I like those. I like to travel, hang out with the kids, hang out with the family. But there's only so many hours in a day. But yeah, yeah, that's what I like to do.

0:27:03.0 JB: This has been a Vorlago Audio Production, produced by Kamelia Sacks and Jeffrey Bell.