For accredited investors, First National Realty Partners provides a unique opportunity to build your commercial real estate (CRE) portfolio. Investors can choose to purchase grocery-anchored real estate assets without the hassle of managing tenants.
While investing in grocery stores might sound strange, it’s an exciting niche that offers tremendous upside potential and stability during volatile economic periods. Just think about it for a moment: Grocery stores provide essential-needs goods for consumers. Everyone, whether there’s inflation or economic uncertainty, still needs to eat. These national brands capture that need through their consistent foot traffic as individuals come to purchase their food.
This means investors could benefit from a relatively stable asset class that serves as an excellent way to hedge against inflation. Further, it experiences contractual rent increases and price appreciation over time.
If you’re intrigued, read our First National Realty Partners review to learn how it works and determine whether this investment opportunity has a place in your portfolio.
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First National Realty Partners Overview
Founded in 2015 and headquartered in Red Bank, New Jersey, First National Realty Partners is a private equity firm that aims to make institutional quality investments available to everyday accredited investors. Its co-founders, Anthony Grosso and Christopher Palermo, focused on a hyper-specific subset of commercial real estate investing—grocery and essential needs-anchored investments—to help provide superior risk-adjusted returns to its partners.
At the time this article was published, First National Realty Partners had a portfolio of 56 grocery and retail properties valued above $1.4 billion. More than 2,000 investors have invested with the platform, and average annual returns range from 12% to 18%
First National Realty Partners practices a fully integrated business model they call FNRP 360—an investment approach that differs from other real estate firms. While most sponsors outsource much if not all of the process, First National keeps every aspect of the investment, management and disposition processes in-house, which allows FNRP to move faster, builds internal expertise and allows for a tighter control over costs.
|Specialty in Grocery-Anchored|
|Personalized Investment Approach|
|Trailing 3-Year compound Total Returns|
|*As of 2Q 2022. Past performance is not a guarantee of future results.
**Source: NAREIT (from 2Q 2019-22)
The firm does this to provide greater maneuverability and to assure investors they handle the investment property with the utmost care while being fully aligned with investors in both due diligence and asset management. Finally, in-housing every function passes along savings to the investor and enables the First National Realty Partners team to secure more value in properties they acquire.
Who Can Invest in FNRP Real Estate Deals?
First National Realty Partners real estate deals are available to accredited investors only. While you won’t need to share proof of your accredited investor status to open an account, you will need to share it before you make an investment. To become an accredited investor, you’ll need to meet certain requirements outlined by the U.S. Securities and Exchange Commission (SEC). The investor must fall into one of eight categories, most noteworthy of which is the “net worth standard.” From the SEC:
“The individual must have a net worth greater than $1 million, either individually or jointly with the individual’s spouse.”
The SEC lists some provisions, of course, including that the primary residence can’t be counted toward calculating net worth, and generally speaking, “debt secured by the primary residence (such as a mortgage or home equity line of credit) is not counted as a liability in the net worth calculation if the estimated fair market value of the residence is greater than the amount of debt secured by it.”
There are other ways to be considered an accredited investor. For instance, you would qualify if you have annual incomes exceeding $200,000 (or $300,000 with a spouse or partner) for two consecutive years, with expectations of an equivalent or higher income for the current year. You also might qualify if you hold certain financial professional licenses or have a trust or minimum investment portfolio of $5 million.
Real Estate Investing With First National Realty Partners
While some commercial real estate platforms focus on things such as office or apartment buildings or some combination of options, FNRP focuses solely on grocery- and essential retail-anchored properties. It owns and operates real estate in primary and secondary markets across the U.S.
Acquisitions include retail shopping centers with necessity-based space that’s occupied by large, established national brands. First National Realty Partners is incredibly selective about its deals, focusing on acquiring market dominant properties. All its purchases meet rigorous investment criteria, which include:
- Shopping centers that are either grocery-anchored or home to another major essential-needs retail store.
- Investment of at least $15 million.
- Average household and individual incomes within a 5-mile radius are at least $100,000 or $65,000, respectively.
- Investments are in growing markets.
If you decide to move forward with an investment, you can choose to invest via wire transfer, check, 1031 exchange, or using your IRA or another type of retirement account via a self-directed IRA custodian. Holding periods vary from three to seven years, so investors should consider these properties a medium-term investment. If you’re considering investing with FNRP, be sure to keep that time horizon in mind.
How to Invest With First National Realty Partners
First National Realty Partners lets you invest in two different ways: individual deals or FNRP’s Opportunity Fund.
For each individual property, FNRP offers a deal webinar discussing the details of the investment opportunity. During the webinar, you have the opportunity to learn about the property and ask questions. Participants can attend and choose to invest through their “Deal Room” via the webinar, or access the “Deal Room” directly through email or website to commit capital.
If you prefer diversification over investing in individual properties, FNRP also offers its Opportunity Fund. The Opportunity Fund lets you invest in a diversified portfolio of properties instead of just one.
What Type of Returns Can You Expect?
First National Realty Partners’ targeted average annual returns are between 12% to 18%, but returns might be higher or lower depending on deal performance. For instance, one property on the platform yielded a total internal rate of return of over 45%.
While investors earn returns from the price appreciation of a property once they exit the position, they can also collect quarterly cash distributions from rental income when they invest in FNRP properties (assuming positive cash flow), providing ongoing income for as long as they hold the asset. Every real estate deal is different, but FNRP targets average annual cash distributions of 5% to 9%.
(Note: While investors can receive quarterly cash distributions from cash flow positive properties they invest in, they cannot exit the deal until First National disposes of the property to an outside investor. At this point, investors who participated through the FNRP deal can either roll their proceeds into another deal through a 1031 exchange or take their return.)
The company also rigorously pursues value creation initiatives such as “leasing-up” the vacant real estate space (rapidly bringing in new, durable tenants to raise occupancy), increasing the value of the property and the return received by investors.
How Does First National Select Deals?
FNRP selects deals in a few different ways, which we’ll explain below:
- Dragnet Acquisition Model
- Triple Net Leases
- Tenant-Centric Approach
Dragnet Acquisition Model
First National Realty Partners coined the term “Dragnet Acquisition Model” to describe its rigorous deal identification process. Its proprietary technology analyzes properties across the United States, applying filtering criteria (like we mentioned above) to identify potential deals. It then looks at its list of potential investments and considers hundreds of data points before selecting deals that align with its objectives. In addition to the criteria listed above used to source quality deals, FNRP looks at:
- Grocery-anchored retail centers that are the No. 1 or 2 center in a submarket, with the No. 1 or 2 grocer in that same submarket
- Strong anchor tenant sales
- Minimum capitalization rate of 6.0%
Employing technology to analyze properties helps the FNRP team identify optimally located commercial assets fairly quickly.
Triple Net Leases
FNRP focuses on “triple net lease” properties. This means that not only does the tenant pay rent—they also contribute to 1) real estate taxes, 2) building insurance and 3) maintenance costs.
Triple net lease real estate opportunities are attractive to investors in part because they’re more predictable than traditional models—the real estate owner is simply collecting rent and doesn’t have to worry about variances in costs such as taxes or maintenance.
Not only that, but these types of properties typically attract established retailers, making the tenants less of a credit risk. Also, many triple net lease properties require routine rent increases, establishing a baseline of potential growth for investors.
In addition to serving as a partner for investors, First National Realty Partners also takes a tenant-centric approach to its investments. The team dedicates its time to building and maintaining relationships with the biggest grocery store and retail chains in the nation, which can make it easier for them to fill vacancies in newly acquired retail shopping centers.
FNRP has partnered with major chains including Aldi, CVS, Giant, Giant Eagle, Harris Teeter, Kroger, Panera, Publix, Walmart and Whole Foods. These connections give First National management unique industry intelligence that enables them to pick what they deem to be the advantageous properties from the start.
What Does It Cost to Invest With FNRP?
First National Realty Partners makes money by charging investors small fees for using its platform. For instance, investors will pay an annual asset management fee of between 0.5% and 1.5%. They also might pay an acquisition fee when a new property is acquired, a disposition fee when a property is sold, and a property management fee to help cover maintenance. If you’re considering investing with First National Realty Partners, be sure to ask about fees and review the offering documents to determine which fees you’re required to pay.
First National Realty Partners Customer Service
Our interactions with FNRP’s customer service team have been nothing but positive. Based on this site’s experience, they offer highly responsive and effective customer service for investors.
Representatives are available by email and phone at:
- (800) 605-4966
FNRP offers several educational webinars as well as an in-house tax specialist to assist with 1031 exchange questions. And prospective investors can attend live deal webinars to learn about new acquisitions.
Overall, customer service and investor relations teams are accommodating, helpful and responsive.
What Is the First National Realty Partners Opportunity Fund?
In addition to offering individual properties, FNRP offers an Opportunity Fund. It’s a real estate fund that allows you to invest in several high-credit tenants, rather than one deal. This can be useful if you’re looking to diversify and build a portfolio of commercial real estate properties. Targeted annual returns for the Opportunity Fund range from 12% to 18%, and targeted annual cash distributions are around 8%. The average IRR for its three most recent dispositions is 23.1%.
First National Realty Partners Alternatives
1. Equity Multiple (Individual Commercial Real Estate Properties)
- Minimum Investment to Start: $5,000
- Type of Investor: Accredited Investors Only
Some platforms like Equity Multiple allow you to invest in individual properties, specifically commercial real estate. Others allow you to invest in real estate property portfolios.
Equity Multiple carries a minimum $5,000 initial investment and comes with a limitation on the type of investors who can participate. Namely, Equity Multiple only allows its individual commercial real estate projects to receive investments from accredited investors.
For those interested in learning more about Equity Multiple, consider signing up for an account and going through their qualification process.
2. YieldStreet (Financial Securities in Real Estate, Art Finance & More)
- Minimum Investment to Start: $2,500
- Type of Investor: All Investors
Alternative investments have become increasingly popular as fintech services open up once closed markets to the individual retail investor. These opportunities have democratized numerous markets and unlocked previously-inaccessible cash flows to pad your income from assets.
Yieldstreet is one such platform leading the charge to provide access to income-generating assets in several asset classes.
Yieldstreet is an alternative investment platform that provides you with income-generating opportunities. These investment opportunities come backed by collateral, typically have low stock market correlation, and span various asset classes. Such asset classes include:
- art finance
- real estate
- commercial finance
- legal finance, and more.
Yieldstreet has been in business since 2015 and has returned over $600 million to its investors since its founding.
Historically, their yields range from 7%-15% and have predefined payment schedules (i.e., monthly or quarterly payments). They may pay principal and interest upon the occurrence of certain events (e.g., case settlement within a legal finance investment).
The durations of investment opportunities range from 6 months to 5 years and have investment opportunities starting as low as $2,500.
Learn more by opening an account now for access to passive income-filled returns on your investments.
Should I Invest With First National Realty Partners?
The natural next question here is “why?” That is, why should someone choose to invest with First National Realty Partners?
Well, there are a few positives to consider.
- First, there’s flexibility with investments—they let you build your own portfolio with individual deals or invest in their Opportunity Fund.
- Second, they offer a novel market niche that’s relatively stable. Given the historical volatility of the stock market, investing in thoroughly vetted grocery-anchored retail properties could offer some peace of mind and help you hedge against inflation.
- Third, these commercial properties offer upside potential in the form of rent increases, occupancy increases, spinoffs and general price appreciation.
However, FNRP might not be for everyone.
First National Realty Partners requires proof of accredited investor status, has a high minimum initial investment commitment and investments are relatively illiquid—typically, it holds properties for three to seven years. Given this, it’s important to consider your cash flow situation and determine whether you can afford to have a relatively large sum of money tied up for that long.
You’ll also want to consider both status and minimum investment requirements for this commercial real estate investment platform. Do you qualify for accredited investor status? Can you meet FNRP’s minimum investment requirement of $50,000 (a high threshold for many investors)?
Commercial Real Estate Investments Risks and Opportunities
While commercial real estate can be a lucrative investment and provide a path toward financial freedom, there are also risks and opportunities to think about before you add CRE to your portfolio.
Here are some things to consider before putting money into any CRE investment:
- Illiquid: As mentioned, First National Realty Partners offers investments with typical time horizons of three to seven years. That means your money will be tied up for a while, so you’ll need to look at whether you’ll have enough/consistent cash flow during that period. Other investments offer more liquidity.
- Credit/Default Risk: While FNRP has a rigorous vetting process for its properties and partner tenants, no business is immune to credit or default risks. If you’re investing in commercial properties, this is an important consideration.
- Macroeconomic Risk: To some degree, necessity-based retail space is protected from macroeconomic risk. However, they can still be impacted by issues like inflation. With consumers tightening their belts, it’s important to think about macroeconomic risks.
- Location Risk: CRE inherently has some location risk, though FNRP’s vetting process does help hedge against this. All prospective deals are located in growing markets, and demographic factors such as income are considered.
- Management Risk: Another potential risk is the management team’s level of expertise and experience. If you invest in a CRE company with poor management, those managers might not be adept at sourcing tenants, negotiating terms, or handling maintenance and repairs.
- Cash Flow: So long as an investment is cash flow positive, FNRP investors receive quarterly cash distributions from rental income.
- Appreciation Potential: In addition to quarterly distributions, there’s also the potential for long-term appreciation. Of course, this is dependent on market performance.
- Tax Advantages: Commercial real estate investments offer certain tax advantages, allowing investors to take advantage of tax breaks associated with modified accelerated cost recovery system (MACRS) depreciation and 1031 exchanges. If you’re a high-net-worth investor, this can help lower your tax bill.
- Potential to Co-Invest With Sponsors: Instead of investing a large sum into a property like you would if you were purchasing commercial real estate on your own, FNRP lets you co-invest in a property. This gives you the option to invest small sums across multiple assets, which can help diversify your portfolio and potentially minimize your risk of loss.