REAL ESTATE
STRATEGY
THE OPPORTUNITY
CREATING LIQUIDITY IN THE LARGEST AND MOST ILLIQUID ASSET IN THE WORLD
The biggest challenge in the public real estate arena is to identify assets and sellers that would be willing to participate in a transaction that involves contribution of the asset to a public company in exchange for equities. By serving as a vertically integrated platform, FCMA has established a proven track record of identifying such assets and has completed approximately $ 1Bn worth of real estate acquisitions through putting together an assemblage of extensively financially engineered deal structures that ensure execution around the development, construction and maintenance of the assets contributed while identifying a path to healthy liquidity through public market platforms. This allows to create liquidity in the largest and most illiquid asset in the world.
INVESTMENT THESIS
PAIRING YIELD WITH ACCRETIVE INVESTMENTS
Invest in stabilized assets to preserve dividends
Identify and acquire underperforming and distressed assets with the opportunity to create value
Develop land in a vertically integrated platform to maximize value creation for shareholders and investors
Unlock and monetize value in real assets through public markets
PUBLIC MARKETS DRIVE OUR INVESTMENT THESIS
RESIDUAL VALUE ARBITRAGE
SUPPORTED BY STRUCTURED FINANCING AND EXECUTION
(Real Estate Land Development Asset Example)
Land Acquisition
Entitlements
Construction
Start
Terminal Value
1-Gross Development Value (GDV)
2-Private Net Present Value
3-Estimated Costs
𝚫1-Residual Value Arbitrage (Difference in Public and Private Market NPV)
𝚫2-Residual Value (NPV in Public Market)
Institutional capital has always been heavily concentrated in Class A assets in Tier 1 cities. In the more known channels today such as public exchanges and private equity with institutional based capital, typically only provide access to income producing Class A assets in the Top 10 markets. Class A assets tend to provide lower returns, similar to those of a low risk bond, as the space is highly commoditized. This leaves a wide array of opportunities that never have access to capital in this channel, all the while their returns outperform the Class A assets.
Due to a lack of capital, private development assets in Tier II and III cities are considered highly illiquid and trade at as-is valuations, rather than its residual value. Residual value of a real estate asset is the gross development value less the costs of development. The gross development value is calculated using the income method. These development assets when contributed to public vehicles are appraised and trade at Residual Value under GAAP accounting, leading to a significant residual value arbitrage opportunity. Furthermore, private real estate principals are not equipped with the skillset required for public securitization of real estate and also lack the resources to contribute their assets into public vehicles.
Therefore, due to a lack of institutional capital coupled with a mismatch of skills in the private Tier 2 and 3 development markets, First Capital has stepped in the market. gap to inject liquidity into these development assets and unlock value from the resulting residual values.
HEDGE FUND | PRIVATE EQUITY MODEL
FCMA platform is designed to identify and acquire distressed and/or underperforming public companies, reorganize and restructure such companies to perform as a pass-through for real assets in the capital markets channel which includes the following infrastructures:
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Real Estate Investment Trusts
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Real Estate Operating Companies
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Real Estate Holding Companies
Restructring and Repositioning Public Real Estate Platforms:
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re-brand and introduce to market as a stable, well-grounded and asset backed Alternative Investment
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re-price NAV, shares and market cap to up-list to New York Stock Exchange
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plug-in existing and new shareholder base of Alt Investors in public securities through mergers and acquisitions
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redefine and reconstruct investment strategy to invest in and contribute assets to ensure:
-stable dividend yield to shareholders
-NAV and share price accretion
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identify new board and management with proven track record of performance and execution in real estate and public markets
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capitalize assets through the capital markets channels including retail and institutional capital (if needed)
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develop and manage assets within a vertically integrated infrastructure
