Mid-Month Update December 15, 2013
Here at Altus the last 4 weeks have slowed from a purchase standpoint vs. the previous several months as we’ve begun work on all of the projects acquired last month. It has been a good month though, and we are setting up 2014 nicely. You may notice that the format of this mid-month update is different than usual. Previously we have broken out activities by property type, however, today’s update is broken out by the four distinct business lines that Altus has developed: Opportunity Knocks, Funds, Structured Programs and Hard Money Lending.
Opportunity Knocks: This line of business deals with opportunities that “pop” up. They aren’t necessarily part of Altus’ long term investment strategy but because of our strong network we are fed a consistent flow of good buys. Generally speaking these are shorter term in nature (though not always), often they have very short purchase escrows, and can be any number of types of real investment assets. Altus believes in building long term mutually beneficial relationships with our investors and as a result, Opportunity Knocks deals are offered first to current fund investors. If these investors do not fill up the Opportunity Knocks funding requirements, then the opportunity will be offered to the rest of our database.
This past month we had one Opportunity Knocks deal that was a single family home in Santa Rosa. It is a straightforward rehab with a pretty clear market value. The returns aren’t overwhelming but they are strong considering the associated risks and the expected project length. We raised the investment funds and closed the purchase in 4 business days. We will most likely have two additional Opportunity Knocks coming up within the next few days; 1) A house in Sonoma, CA that needs complete updating and 2) A house in Sacramento, CA that needs very little and will be rented or resold. The house in Sonoma is similar to another project we just sold last week in the same area that resulted in an estimated profit of $65,000 and an investor IRR of 18%, 9% of which was a preferred return. We will have the full accounting of the project next week.
Funds: This portion of our business is Altus’ primary focus. Based on our review of demographic trends and investment fundamentals, our Funds are structured to provide strong long term, risk adjusted returns. Unlike with the Opportunity Knocks offerings, funds’ invested money stays invested and obtains returns consistently over a longer time period, providing better actualized returns. We currently have two funds that are active, both of which are outperforming initial proformas.
We are excited about our new Altus Multi Tenant Income Fund which is focused on purchasing, repositioning and holding multi tenant buildings for long term cash flow and appreciation. We chose this particular area as a fund focus due to the population growth (California added over 300,000 people in the last year alone), lack of construction, and construction costs that are increasing much faster than incomes. In the Altus Multi Tenant Income Fund the investor receives a preferred 8% annual cash return prior to Altus receiving any compensation (this is consistent with all of our fund structures). Total annual returns are forecast to be considerably higher. Additionally, the investors receive 100% of the depreciation associated with the asset purchases, resulting in a large percentage of cash returns being distributed with taxes deferred until the point of sale (at which point it will be taxed at lower tax rate). We are currently meeting with interested investors to present the entire investor package and taking subscriptions agreements. Reservations for the fund are taken on a first come, first served basis and there is a limit to the amount of investment funds we can accept. As a reminder, Fund investors get the first opportunity to invest in Opportunity Knocks projects.
Structured Programs: For investors or organizations with a minimum of $1 million to invest, we work with those investors to develop a holistic investment structure that best fits their particular needs. Variables can include geography, tax considerations, generational wealth transfer, security, equity preservation, cash flow maximization, etc. As an example, we recently worked with a family office on the purchase of an office building in the North Bay. This was is in addition to the current investment structure we already have in place with them focused on single family investments. This new office project is expected to provide a ten year annualized return of over 20%.
Hard Money Lending: Also called private debt, hard money lending has the advantage over other real asset investments in that it provides a secured investment position recorded against a real asset. Done correctly this means there should never be an absolute loss of capital and rarely would there be a loss of any type. The returns are strong based on the risk (7-9% annually on 1st position debt) and in most cases debt investments don’t include the upside associated with equity investments. This past month we provided investors with two debt opportunities, one at 9% on a 1st deed of trust and the second at 13% on a second deed of trust. We will have multiple debt opportunities coming up in the next few weeks, all of which will be distributed as Opportunity Knocks opportunities.
If you do not currently receive our Opportunity Knocks emails with specific investment deals or have interest in discussing any of the above business lines in greater depth please respond to this email or contact our office. We will happily add you to our distribution list and/or schedule an appointment to discuss your investing needs further.
I look forward to working with you on future investments with Altus.
Wishing you and your family Happy Holidays,
Altus Equity Group, LP