Peregrine Private Capital Corporation is very proud to have a roster of long-time clients who focus on shared decision-making and transparent investing.
Like distance running, a successful alternative investment portfolio should be realistic and pragmatic, it should be based on long-term goals and common sense.
Though his competitive running career was brief, Robert Smith was among an elite set of athletes who ran with legendary Oregon distance icon Steve Prefontaine. Like “Pre,” Smith was rigorously molded under the exacting influence of renowned coach Bill Bowerman. As a result, he developed a strong discipline and a work ethic he carries with him into the professional realm today.
Smith knows good financial representatives will, with a laser-sharp eye, focus on consistency and discipline on their clients’ behalf to ensure that strong, solid investment decisions are made.
Under Robert Smith, Peregrine Private Capital Corporation has placed more than $250 million in equity in tenant-in-common (TIC) and Delaware Statutory Trust (DST) properties. Robert S. Smith is a licensed Representative with Concorde Investment Services, LLC; Member FINRA/SiPC.* Robert is also a member of the Alternative & Direct Investment Securities Association (ADISA), the National Ethics Bureau, and the Rental Housing Alliance Oregon (RHA).
At some point, nearly all landlords may reach the physical and emotional give up point. This being said, they may still be comfortable with real estate as a known asset class and loathe to leave it and pay years, sometimes decades, of accumulated capital gains tax.
This is where DST properties come in. If suitable, it allows individuals to segue out of active management and its incumbent burdens into a truly passive ownership role.
Differing structures of DST programs also provide investors with the opportunity to affect a clean exchange by exactly matching their debt/equity replacement requirements. Hence, no taxable boot.
We believe this demographically driven demand for DST properties is organic. In our opinion as a natural outgrowth of societal aging it should continue to grow. Therefore, income property investors are well advised to come up to speed ASAP.
In doing so, it’s critical to understand there are two components to DST: the objective and the subjective. The objective deals exclusively with the property itself and its underwriting; meaning what it is, where it is and what purpose it serves. More specifically, it’s age, construction quality, occupancy, cash flow potential, competitive environment, surrounding demographics, etc. Taken together, all these factors contribute to price paid for an asset and what future expectations may be in terms of potential cash flow and appreciation.
All this information and more is provided in the Private Placement Memorandum (PPM) which must accompany each offering. This document encapsulates all the due diligence a buyer would normally do himself/herself before purchasing a replacement property. Ideally, everything knowable about the property, good, bad or indifferent is available here. This is part of DSTs full disclosure requirement.
The second and in many respects, in my opinion, most important part of the equation is almost entirely subjective. This is comprised largely of who is bringing the property to market, what their track record is in terms of DST offerings (assuming they have one) and what they do when things get tough.
The latter is particularly important because we have been in a big bull market for real estate (along with just about every other asset type) since 2008 *. This is because all interest rates have done is go down. When interest rates go down asset prices go up. However, when this process reverses itself, asset prices will come down.
Unfortunately, many property sponsors active in the DST space are post 2008 creations. This means they may not have been tested in the fires of recession. We believe this may have consequences for investor equity and cash flow potential.
When DSTs started nearly 20 years ago, there were three companies present. The first two are still us and are dominant players in the industry with a combined market share approaching 80%.
Sadly for investors, most of these new additions to the DST sponsor mix were opportunistic with little background in real estate. The properties they brought to market to satisfy investor demand for return were below investment grade. When crunch time came and the economy tanked, they stopped performing.
Investors lost both cash flow potential and equity while property sponsors simply disappeared. This is why it’s imperative to understand fully the subjective component of DST; the agency, reality and truth about the individuals bringing this product to you. They in large part will be responsible for its success or failure.
In our view, good management has the potential to fix a challenged property. Bad management runs the risk of ruining a good one.