Our Investment thesis
In light of recent market events, we feel the opportunity for strategic investments is becoming more and more prevalent each passing day. The panic created by Coronavirus has had a very large effect on local, national and international markets. Due to this event, many speculation based investors have found themselves in a cash crunch. It is this which has and will continue to create opportunity within the market.
Cadia Capital Group is about cash flow, forced appreciation and emerging markets. By focusing primarily on affordable multifamily property investing, we are able employ a multi-faceted approach to investing.
Our criteria for investment begins with an asset's ability to create cash flows substantially over and above its cost to own. Healthy cash flow, not only creates immediate returns for investors, but also ensures sustainability in any market cycle. Unlike more traditional methods (mutual fund, 401k, stocks, bonds and CDs), cash flow provides financial benefits in the present vs. only in the future. In our current economic downturn, affordable housing will not only be the least effected, we project it will actually experience increased demand over time. As we're experiencing in our current affordable housing portfolio, rents are not affected and occupancy is actually increasing. A demand for affordable housing will generate healthy cash flow and will ensure sustainability in any cycle.
Forced appreciation is about maximizing a property's potential and therefore maximizing a property's value. By identifying cash flow properties with current operational inefficiencies, we are able to turn these oversights into tangible benefits for our investors. For every $1 increase in annual profit, a property's value can be increased by a multiple of 10-20 times. This powerful rule of forced appreciation allows investors to maximize a property's operations (Optimize Revenue, Minimize Expenses) and greatly increase the property's value as a result.
Some of the opportunities to increase revenue include; raising rents to market rates, renovating units, passing utility costs to tenants, adding laundry, adding storage, improving the building's overall appearance and adding amenities to provide more value to tenants.
Some of the opportunities to decrease expenses include; resolving leaky faucets, installing efficient lighting, removing inefficient heating and air units, adding insulation, replacing ineffective management, reducing insurance bills and contesting tax assessments.
Lastly, our goal is to purchase assets in emerging markets, hold the property for five to ten years, and then sell or refinance in more mature markets. Our definition of emerging markets are those markets that have traditionally been stable to declining, but are experiencing job growth, population growth, early outside investment, and progressive governmental leadership. By doing so, our assets enjoy increased rents, an improved tenant base, and natural appreciation. The net effect, when combined with a strategy of improving the Net Operating Income (NOI), is exponential property value increases and superior returns to investors.
When you combine ongoing cash distributions, forced appreciation, natural appreciation, and the tax benefits, it's hard to imagine a better investment vehicle.
We are currently targeting to hold properties for a 5-10 year period. During this time investors can expect to receive periodic distributions from cash flows as well as equity upside in the overall asset. Depending on each property's unique business plan, the exit will come in the form of a sale or refinance.