We mainly focus on three strategies:
1) Developments
2) Distressed
3) Value Add
And since quite a lot of people always messaging me about it, I will also give some examples.
• JVAs: some project control, preferred return 10% pa & 50% profit share; target return 18-25%+ pa
• Mezz: 2nd charge, developers personal guarantee; LTV 70-80%; target returns 15%+ pa
• Senior: 1st charge, developers p.g.; LTV 50-65%; target returns 8%+ pa
Investors focus on buying distressed completed deals via direct equity exposure or buying distressed debt from a previous lender.
This strategy is usually done during an economic recession. Rarely do distressed deals pop up during a boom phase.
• Opportunity to purchase at 25% to 50% discount
• Reposition asset & improve income
• Re-apprise the asset & refinance w/ 50% gearing
• Hold for 5+ years & manage price recovery
• Returns inc appreciation, debt paydown, positive cash flow
We gain exposure to prime grade A luxury single-family assets, which means direct equity with a need for rehab.
Or JVA on multi-family value add in the US. This strategy is usually done during the early+middle cycle & via equity for maximum upside.
Since, we have focused more senior & mezzanine debt (defensive strategies). Now we are focused on distressed bargains.
And co-investment opportunities alongside our family. Get in touch by visiting our website.
theatlasinvestor.com
Alternative asset investing is all about deal quality & selection.
We have four key risk mitigation concepts and we believe if one follows them, 85-90% of all risks will be removed.
1. Vetting of Sponsors & Developers
2. Prime Location Focus
3. Risk Mitigation Strategies
4. Conservative Capital Stack Exposure
I've talked about this before but in essence, you have to make sure the sponsor has a clean (no default) track record and their team/company been in the real estate business at least two business cycles (forget someone who started in 2012).
We don't invest in low-profit margin deals because sponsor's incentives aren't there.
Also, no high LTV deals because mezz debt will be at a high risk of default.
Finally, no sponsors which run many projects at once & have a stretched cash flow position.
• full transparency is a must
• clean multi-cycle track record
• meaningful skin in the game
• proper alignment of interests
• business integrity or honesty is a must
• focus on the long run, relationship building
We almost always choose higher priority capital stack rank, if possible.
We are defensive which means instead of doing an equity JVA, we will take the mezz debt.
It means slightly lower returns, but also it means downside protection is much higher!
Including underwriting, negotiations, relationship building, legal framework and covenants focus, understanding where in the investment cycle we are, knowledge of the local market and its demand/supply and so much more.