Summary

In this conversation, Chihiro and guest David Kotter delveinto the concept of hybrid debt funds, exploring their structure, benefits, and the unique opportunities they present for accredited investors. David explains how these funds blend traditional debt with equity upside participation, offering developers a simplified capital stack while retaining depreciation benefits. The discussion covers the criteria for borrower selection, the investment structure of the fund, and the associated risks in commercial real estate. David emphasizes the importance of timing and discipline in lending decisions, as well as the focus on specific asset classes. The conversation concludes with insights on future growth and the potential for investors to achieve attractivereturns.

Sound bites

"We take 30 to 35% of the upside economics."

"We project 11 to 13% net IRR for investors."

"Discipline in lending decisions is essential."

Takeaways

Hybrid debt funds offer a blend of debt and equityparticipation.

Developers benefit from simplified capital stacks andretained depreciation.

Borrowers must have a proven track record and financialstability.

Closed-end funds provide stability and predictability forinvestors.

Investors can expect 11-13% net IRR with downsideprotection.

The fund focuses on multifamily, industrial, and strategicretail assets.

Timing and market cycles are critical in commercial realestate investing.

Discipline in lending decisions is essential to avoid marketpitfalls.

Investors should understand the risks associated withcommercial real estate.

The fund aims for growth and future fund offerings.

Chapters

00:00 Introduction to Hybrid Debt Funds

03:05 Understanding the Hybrid Debt Fund Model

06:09 Benefits for Developers and Borrowers

08:57 Criteria for Borrower Selection

11:59 Investment Structure and Fund Details

14:50 Navigating Risks in Commercial Real Estate

18:01 Asset Classes and Market Focus

21:00 Fund Operations and Investor Returns

24:00 Future Plans and Fund Growth

26:54 Philosophical Insights on Market Cycles

Keywords

Hybrid Debt Fund, Commercial Real Estate, InvestmentStrategies, Accredited Investors, Real Estate Financing, Debt Funds, Investment Opportunities, Risk Management, Fund Structure, Market Cycles

Summary

In this episode of Beyond Stocks, host Chihiro Kurokawa interviews Garland Benton from Direct Equity Source, who shares insights into the self-storage investment sector. As with many asset classes, in an industry of this size, not all self storage facilities are the same. Garland's firm specializes in Class-A self storage, meaning newly-built facilities with features like climate control and technology amenities. By contrast, Direct Equity Source doesn't do value-add or conversion projects intended to make improvements to existing facilities.

Their business model involves raising capital for new self-storage developments, and selling those assets to nationally recognized brands such as Public Storage or CubeSmart.

As the capital partner for a developer called AAA, Garland's job is to find investors to help fund these projects.

Takeaways

1. Self-storage is a strong investment sector due to its resilience during economic downturns.
2. Direct Equity Source's model involves significant sponsor investment, aligning interests with investors.
3. The company focuses on building Class A facilities to attract institutional buyers.
4. Investors receive a 12% annual fixed dividend, providing consistent returns.
5. Market saturation is a key risk in the self-storage industry, requiring careful site selection.
6. The fund structure allows for diversification across multiple properties.
7. Garland emphasizes the importance of understanding past performance when evaluating investment opportunities.
8. The company has a strong geographic focus on Texas, with plans for expansion in other states.
9. Investors have liquidity options after a 24-month hold period, unlike traditional syndications.
10. The self-storage market is expected to benefit from reduced new construction in the coming years.

Chapters

02:45 Understanding the Investment Model

05:18 The Resilience of Self-Storage in Economic Downturns

08:27 Diversification and Fund Structure

11:02 Market Dynamics and Consumer Behavior

14:03 Building Class A Facilities1

6:47 Liquidity and Investor Returns

19:25 Risks and Market Saturation

22:19 Geographic Focus and Growth Areas

25:09 Conclusion and Investor Engagementself-storage, real estate investment, private equity, economic resilience, investment model, diversification, market dynamics, liquidity, investor returns, risk management

A conversation with Haroon M. Cheema, a seasoned international tax attorney, discussing the complexities of cross-border taxation, investment structures, and tax incentives. He's done many deals, so he has thoughts on what you should look out for when considering an investment. Haroon shares his journey from New Jersey to Dubai and back, offering valuable insights into the world of international tax law.

Takeaways:

• Investment structures can significantly impact tax outcomes.
• Tax incentives vary greatly by jurisdiction.
• Understanding tax treaties is crucial for international investments.
• Legal and financial expertise is vital in tax planning.
• Tax credits are generally more valuable than deductions.
• Entity structure affects tax liabilities and benefits.
• Due diligence is essential in tax-related transactions.
• AI can assist in finding primary tax sources but not in analysis.
• Tax law is constantly evolving, requiring continuous learning.