Maximizing living and working experiences in real estate can deliver outsized risk-adjusted investment returns.
Equity markets remain volatile and appear to be poised to deliver significant losses. We all know that during downturns, Investment Advisors face tough questions at best and outright hostility at worst. How do you answer the question, “what should I be doing now?” when you’re facing day after day and week after week of equity market declines.
Most investors don’t like to hear “stand pat, it always comes back”, particularly if they’re close to, or in, their retirement years. After all, they’ve hired you for a reason.
So, what do you do now? It’s a great time to consider recommending alternative investments, moving a portion of your client’s portfolios away from equities and bonds while you wait for signs of recovery in those markets. Real estate investments, when managed well, can be a diversification play that delivers favorable real returns. Once your clients experience what a well-run real estate investment can do for them, they will likely want to keep this as a regular part of their investment profile.
JLAM has experience in rolling out sequential investment opportunities that have delivered highly consistent returns with surprisingly low volatility through a number of economic cycles.
It takes a differentiated philosophy.
Our philosophy might be described asdelivering a differentiated living and working experience.
Across our three active investment strategies, For-Sale Residential Land Development, Multi-family Development, and Core-Plus Office Acquisitions, we’ve identified the factors that matter to maximize value. This approach has been honed through decades of hard-won experience. What we’ve come to realize is that making investments in places people are proud to lead to better financial returns for our investors.
When people are first exposed to one of our properties, we’re looking for a psychological response, the ‘aha moment’ where they realize that what they’re experiencing is just not available elsewhere. In an apartment, they might feel the spaciousness of higher-than-average ceiling heights or the convenience of walk-in closets in every bedroom. In a business setting, it might be an ideal balance of accessibility via multiple modes of transportation and all of the supporting amenities that make doing business not only possible but a pleasure. Homeowners aren’t just looking for a house, they’re looking for a lifestyle that may include walking trails through native forests, serene water features, or architectural amenities that leverage existing structures built long ago that create character available nowhere else.
In some cases what’s driving that response may not be readily apparent, but rather an intangible sum of imaginative design elements, and high-quality construction.
When businesses are looking for a new home, or people are looking for a new place to live, our goal is, at the end of their day of looking, they say, ‘remember that place that…’. When we know we’re getting that reaction, we know that properties will sell or rent quickly at a premium to the comparable market.
When we’ve done our job right, people who live and work in our properties are proud to tell their friends where they live or work. From the first impression on approaching a property to the internal fit and finish, we deliver oohs and ahs. This emotional trigger breaks down friction in the sales and rental process and ensures that our properties sell out quickly at high margins or stay occupied at higher rates than competing properties. The result is that investing in our projects delivers superior ROI at lower risk.
How do we do it?
You can’t understand a real estate market and where the opportunities are from a distance. It’s extraordinarily difficult to shape new projects or understand the value of existing projects, without real hands-on regional experience developed over an extended period of time.
The first step in our investment process is Discovery.
Because we focus regionally, in many cases, we’re aware of the commercial real estate properties that we’d invest in and have tracked them over several years. In other cases, we’re boots on the ground using our ingenuity and experience to identify opportunities that others will miss. This might entail hours of driving and observing how a property is utilized, or it might involve using satellite imagery to see where undeveloped tracts are and what existing geographic features might be leveraged to the advantage of a development project. In some cases, our extensive local real estate network that knows what we’re after will bring an opportunity, but we often approach an existing owner with a transaction opportunity where we see potential to capture unrealized value.
The next step is Analysis
This step takes a combination of creativity and imagination, coupled with hard-nosed business realism. We walk properties and begin to see what potential is revealed and what experiences might be shaped through the creative application of land planning or architectural design. We also build out a realistic view on the economics of the local market, transportation access, quality of schools, and all of the myriad things that fold into a decision to rent or buy, generated from a mosaic of data-driven analytics and qualitative input from our network. The result is a comprehensive quantitative financial analysis, a clear product positioning strategy, and thorough diligence of all physical and market-related considerations.
Then We Move to Planning and Project Management
Only when we’re comfortable that we have something that could be truly special, AND the numbers work, do we move on to planning and project management.
We’re known for looking farther ahead than our peers, using a variety of strategies to manage downside risk and take advantage of upside opportunities. Having a more local focus than perhaps better-known national firms means that we know the local regs, the local zoning players, and the best designers, engineers, and contractors to get a given project done.
Because of our sophisticated approach and proven returns, we’re in a favorable position of having access to a variety of flexible capital sources to execute projects. This means that we can bring to life visions that others in our region simply can’t, creating more distance between us and those that would try to emulate us.
The Results
We feel that we’ve created the ideal portfolio diversification platform for these times and beyond. Our team has invested and developed across economic cycles and across asset classes. Through hard-won experience, we’ve developed a sixth sense for real estate, and a deep intuition that investors value.
Over the last two decades, we have deployed more than $300 million of capital, delivered several thousand lots, and hundreds of apartments, and invested in over 1 million square feet of commercial space…with zero losses.
If you want to learn more about differentiated real estate, schedule an appointment with us today.
All investments involve the risk of potential investment losses as well as the potential for investment gains. Prior performance is no guarantee of future results, and there can be no assurance, and clients should not assume, that future performance will be comparable to past performance. Metrics updated as of June 30, 2023. JLAM does not provide tax, legal, investment, or accounting advice. This website has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, investment, or accounting advice. You should consult your own tax, legal, investment, and accounting advisors before engaging in any transaction. Any third-party information contained herein is from sources believed to be reliable, but which we have not independently verified.
