Alternative assets: The rise of nontraditional investments

A relatively new practice in the investment sector, alternative assets are characterized by the focus on absolute performance, the use of leverage, their low liquidity, and their low dependency on overall market conditions. As opposed to traditional assets, alternative assets generally pose higher risks, thus requiring managers who are highly expected to deliver returns in all market conditions.

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The four most important alternative assets identified are:

1. Real estate assets that are primarily investments in land property including farmlands;

2. Private equity from unlisted companies and startups including venture capitals;

3. Hedge funds that are more popular and visible; and

4. Institutional infrastructures.

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With its global data coverage, a recent Preqin report highlights that alternative assets under management expanded to $6.9 trillion at the closing of 2014, marking an increase from $6.2 trillion in 2013. As private equity and venture capitals reach new heights, there have been reports of investors deploying higher allocations in alternative assets since the start of 2015. The higher risk-return trade-off projected for alternative assets make such investments very attractive despite the initially perceived underwhelming performance.

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By bringing qualities to portfolio construction through diversification, reducing risks and increasing returns, and performing well over the long term, investors are encouraged to increase their exposure rather than cut back their provisions for alternative assets. As the Preqin report surmises, those that continue to innovate with new products and solutions while listening to investor demands for better alignment of interests may well be winners in 2015.  

Trinitas Partners LLC is a private equity investment company specializing in identifying superior investments within sectors characterized by favorable supply and demand dynamics and involve hard assets and real property. Learn more about the services the company offers here.

REPOST: Managing Commercial Real Estate Investment Risk

Commercial real estate investment can be profitable, but it can also be risky. Broker W. Grayson Powell offers the following advice to effectively manage the risks associated with buying, holding, leasing, and selling property: 

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Owning commercial real estate is an investment. Like any investment, there are risks associated with buying, holding, leasing and selling property. This article is intended to emphasize the importance of understanding the risk associated with commercial real estate investing and to highlight a few key tactics to effectively manage that risk.

Always review the fundamentals 

While there are many variables that can and should affect investment strategies and decisions, there are some fundamental considerations that should always be evaluated prior to every commercial real estate investment. There are really too many to cover in this article, but to give you an idea, a few core factors include:

• The quality of the lease and terms
• The stability of the tenants
• The condition of the property
• Estimated after-tax cash flow
• Vacancy – today and projected
•  Interest rates – today and projected

Always start your pre-investment analysis with the fundamentals. If they look solid, then the other secondary factors are just icing on the ROI cake.

Diversify your portfolio

Practically anyone that has money invested in the stock market will agree that the best way to manage against risk is through portfolio diversification. It’s no secret that diversification protects the investor because if one type of stock tanks, it probably won’t affect the others. Well, guess what? That same principle applies to developing a commercial real estate portfolio. Just like in the stock market, it is generally not a good idea to put all of your real estate investment eggs into one basket.

There are different diversification strategies available. For example:

• Property type – an investment portfolio could include a diverse mixture of land, office, retail, industrial and residential properties.
• Geographical region – a portfolio could include properties in different cities or states.
• Up-front risk factors – a multi-tenant retail property offering short-term leases to local businesses may carry a higher risk than a property with a single national tenant with a long-term lease. A diverse portfolio may include a combination of both.

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Consider this … investors who focused all or most of their investment capital on office properties in the Wilmington area before the 2008 financial recession probably suffered significant losses in the years immediately following the recession. While the recession hit us all pretty hard, office properties in Wilmington were hit particularly hard. We’ve just begun to see office properties in our area begin to bounce back in the last year or so. Sure, all investment losses sting, but had these investors hedged their risk by choosing a more diversified portfolio, the sting would have been less painful and easier from which to recover. For instance, office properties in Raleigh and Charlotte suffered too, but they did not completely die, and they had a much faster recovery than they did in Wilmington. This is because Wilmington is considered a tertiary market and it typically takes smaller markets a longer period of time to bounce back – smaller markets tend to lag behind the larger markets.

Look at today and project conservatively

A realistic assessment of an investment opportunity comes from an effective combination of looking at the way things actually are today and projecting the way things will be in the future. I had a prospective client that owned an older retail property in downtown Wilmington. He was trying to sell the property for a price that, in my opinion, was not feasible. At the time I got involved, the property had 0 percent occupancy. On more than two occasions he walked me through the building telling me what the building could be, trying to convince me it could easily have 100 percent occupancy and be worth every penny that he wanted.

“If you just fixed this and added that, then this will be a great property,” he’d say. So, I told him, “If you fix this and add that, then maybe the property will be worth exactly what you want, but it is not worth that now.”

You don’t buy property based on what it could be, you buy it on what it is. If you can turn it to something better, great – but don’t buy on imaginings. My father used to say something has stuck with me. He’d say, “You make your money when you buy, not when you sell.” Projections and forward thinking are important, but if they are being used in the buying decision, make sure they are based on facts.


While we’re talking about projections, here’s another good tip for managing risk … always make your projections conservatively. In many aspects of life it’s great to be a “glass half full” type of person. However, when it comes to investment projections the smarter mindset is “if the glass fell below half full, would I still be okay?” So project things like occupancy, profits and gains on the low side; and things like vacancy rates, taxes and interest on the high side. Always make calculations using after-tax figures. If the investment still looks like a good one, even in the context of conservative projections, then it probably will be – and it’s likely to pleasantly surprise you when the real numbers come in better than your projections.

Find an agent you can trust and be transparent

If you’re having health issues and you go to the doctor for an exam, the last thing you want to do is keep secrets or be deceitful about symptoms, habits and behaviors that may impede the diagnosis. I realize that many people are private about their money. Some people may not want their real estate agents to know the details of their finances, like what tax breaks they may be getting, but the only way for the agent to provide the best property investment advice is by having all the facts. Transparency provides agents with the best opportunity to meet the specific needs of their investor clients. That’s why it’s important for investors and commercial real estate agents to build relationships based on trust.

In the world of commercial real estate, there are a lot of things that make up a successful risk management strategy. Basing decisions off of accepted fundamental considerations, portfolio diversification, conservative projections and financial transparency with a trusted adviser are definitely a good start to a rock solid strategy.

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Trinitas Partners LLC has extensive experience in private equity and real property investing. Visit its official website to know more about its services.

Intrinsic value and long-term growth: Hard assets vs. intangible assets

Assets are among the many ways that people are hedging against currency devaluation, gaining popularity during times of economic uncertainty when the value of currency is expected to fluctuate unpredictably. Unlike currency, certain assets maintain or even double their worth over the passage of time, making them a good way to preserve or grow wealth in the face of uncertainty.

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There is a wide array of assets to choose from; from real property to patents, documents, and brand recognition. Hard (or tangible) assets are among those that are identifiable even to the neophyte investor and layperson. Hard assets include land, commodities, or equipment. These make money either through intrinsic worth (which can go up or down depending on supply and demand, maintenance, rarity, and other factors) or through the ability to generate long-term income.

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Intangible assets comprise a number of non-physical items such as brand names and logos, patents, and knowledge that have a long-term potential for profitability in spite of being non-taxable. This makes them particularly valuable for publicly traded companies, though they are a lot more difficult to quantify and grow. They are known as soft assets when taken together with human resources (a kind of tangible asset not counted among hard assets).

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Hard assets and intangible assets have long-term profitability tied to them. Hard assets are normally directly profitable because they are capable of producing revenue directly whereas intangible assets influence how businesses perform and flourish. Both play an important role in growth from the perspective of entrepreneurs and business executives, whose profitability hinges both on production, innovation, and brand image.  

Trinitas Partners focuses on investment opportunities in fields where hard assets and real property play key roles. Visit this website for more on the company, its history, and its management.

REPOST: Best Buy Cities: Where to Invest In Housing In 2014

Buying properties in places “where the prices are still low but with a lot of growth potential” is the key to investing in real estate. Forbes.com lists down this year’s best U.S. cities for real property investment in the article below:  

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Forth Worth-Arlington,Tex.

Buying a home can be a great investment, as investors gobbling up properties over the last few years–when prices and mortgage rates were at the bottom–well know. Now, with homes prices and rates ticking steadily back up, investors are backing away from the market, leaving more room for the rest of us.

Perhaps you fear you’ve missed the best time for buying housing. Prices were low last year, but there are still deals to be had. The good news is that less competition for housing and an overall less-crazed market than in 2013, as I wrote about in Housing Outlook 2014: 10 Predictions From The Experts, can make for fairly decent timing for smaller-time investors. The key is to buy where the prices are still low, in cities with a lot of growth potential.

Whether you’re looking to get into a first home that you’ll live in for a few years, or simply buy a fixer-upper that you can rent out right away, there are still plenty of cities where your money is a fairly safe bet. We teamed up with Local Market Monitor, which tracks home prices and local economic factors in more than 300 housing markets, to put together a list of the Best Buy Cities–the top 20 housing markets to invest in for 2014. To come up with this list, Local Market Monitor pulled data for the largest 100 metropolitan statistical areas (a geographical designation used by the U.S. Census) with populations of at least 575,000. From there, the choices were ranked primarily on four factors: population, home prices, and the local jobs economy. Each of our Best Buy Cities have high population and job growth, relatively low home prices, and are still considered under-valued (although in every case except Virginia Beach-Norfolk, Va., home prices have gone up). This makes them fairly low-risk investment opportunities for buyers who are smart and know not to overpay.

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Forth Worth,Tex.

The key to coming up with this list is a proprietary measure that Local Market Monitor dubs the “Equilibrium Home Price.” Basically, it tracks what the average price for a market should be, if speculation, weird distortions in local income, and other factors (like the housing collapse) weren’t present in the market. The measure presumes that prices will eventually return to this level. When homes are far under the equilibrium price, investors are getting a good buy and can expect to make a good return. The other important consideration for investors is, of course, a healthy local economy. After all, there is zero point in purchasing a home in a market where the population is fleeing. That’s why Best Buy Cities are places where opportunities are growing.

“We are at a stage in the economic cycle where job growth–and demand for housing–is accelerating in some markets,” says Ingo Winzer, founder of Local Market Monitor. “The types of jobs created are often lower-paying, most suitable for renters, younger people who are willing to move from somewhere else and who don’t want to own a house right now but might have a young family and would like to rent one.”

Fort Worth-Arlington, Tex., and Dallas-Plano-Irving, Tex., top the list of our Best Buy Cities, at No. 1 and No. 2, respectively. Both cities offer homes that would be within reach for middle-class Americans, at $168,383 in Fort Worth-Arlington and $180,645 in greater Dallas. Prices in greater Fort Worth are considered 20% below their actual value, according to Local Market Monitor. Homes in the greater Dallas region are 12% down, so less off, but they are expected to rise more–29%–over the next three years.

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Dallas-Plano-Irving,Tex.

For buyers who intend to rent out their homes, the populations in these cities are growing at a healthy clip: from 2009 to 2012, at 4.9% in Fort Worth and 6.1% in Dallas. At that rate, Dallas is tied for the fastest-growing city on the Best Buy Cities list. It’s ranked fifth in terms of job growth, at 3% as of the latest Bureau of Labor Statistics stats. Driving the demand are companies like Dallas’s One Technologies, LP, an online credit monitoring marketing service that was ranked the fastest-growing private company in the area by the Dallas Business Journal.

“The total eventual returns may be higher in markets that are still under-priced right now–that’s why those are higher in the rankings–but the rental returns should be good in all of them,” Winzer says. “I particularly like the investment markets in Texas and Oklahoma, with their low unemployment rates and ability to profit for years from new shale oil and gas development.”

Trinitas Partners is a private equity investment company specializing in real properties. Learn more about real property investment on this website.

Land investment and development: Risks versus rewards

Investing in real property is no spring picnic, and even the simplest of home purchases often need a team of people to work with the property owner to maximize its eventual long term value and profit projections. While any form of real property investment poses its own challenge, purchasing raw, undeveloped land is a far more challenging situation.

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Traditionally the arena of developers, raw land without any improvements can be an exciting venture for those willing to take high risks; land that is unimproved can become anything, give or take the surrounding conditions that make such a venture economically feasible. Land, without eventual Improvements, however, does not pay for itself. Even land paid for in cash would incur losses to taxes unless somehow appropriated for other purposes.

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The great capital requirements of developing land mean that most people who buy it are already very wealthy (and can shoulder the capital expenditures to eventually monetize their investments in the soonest possible time). Single and even medium-scale group investors, therefore, are encouraged to instead search for already built properties or take on land development on a smaller scale or forego it altogether.

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Ideally, for all but the most experienced or capable investor, real property investments should focus instead on properties that can be monetized within a reasonable span of time after acquisition, either through sale or frequently through rent or business applications, such as agriculture or industry.  

Trinitas Partners offers investment opportunities in sectors that involve favorable dynamics of supply/demand while involving real property and hard assets. Visit this website for more on the company.

Make commercial real estate a hassle-free investment

There's no better time than now to invest in commercial real estate. The last two years have seen the demand for this subsector grow steadily enough to be a great addition to the investment portfolio.

Like any investment, Main Street property comes with risks. But also like other risks, these can be prevented. Steer clear of investment hassles with these tips:  

 

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Talk to the right people. Be it with brokers, agents, consultants or potential investors, make sure you are talking with industry insiders who are backed by years of experience, and have an impressive track record not only in closing hot deals but in maintaining integrity, diligence, and genuine concern. Reputed investment firms like Trinitas Partners value these traits in the investment principals and managers in its employ.  

 

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Evaluate the property. Do some research, making sure the commercial property is in the right spot. For example, among retail spaces, properties accessible to public transport and proximal to the center of commercial activity are the wisest choices. Another bright spot is one that's located on the side that has higher foot traffic, as this boosts the sales of commercial spaces.  

 

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Go for properties in investment hotbeds. Whether for retail, industrial, or office spaces, the best places to look for high-yielding commercial property are established and rising investment-rich hubs. Experienced investors and investment managers flock to these cities because higher demand for commercial spaces and higher rates per square footage mean sweeter ROI.  

Trinitas Partners specializes in identifying and managing topnotch commercial property and other realty investments. Know more about how the company helps clients invest without hitches through this website.