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Free registration at the forum removes this block.the global economy is ripping apart tech stocks since the start of the year.On October 7 Go Pro hit 98.00. Today its 9.98.
A business built on "one-and-done" is hard to sustain, especially when you now need to appease shareholders over customers.
In other words, if someone buys a GoPro they might be indeed be a customer but they aren't ordering every month.
On October 7 Go Pro hit 98.00. Today its 9.98.
A business built on "one-and-done" is hard to sustain, especially when you now need to appease shareholders over customers.
In other words, if someone buys a GoPro they might be indeed be a customer but they aren't ordering every month.
evernote is also a perfect example they failed to diversify.I do understand that GoPro was insanely overvalued.. but it's just like any other business with 1 prominent product.
What do you think about Beats Headphones? It's more or less the same type of business, "one-and-done", people don't order a Beats Headphone set every month. Yet Apple still acquired the company for over a billion.
Ubes, you're pretty close.
Here are the real numbers to your grand plan.
You will notice that without having to should the carry costs and the acq. and disposition costs the NPV of completing these these improvements
is significant.
Therefore, it would be better approached as a performance contract, vs. an asset play. Unless you have a revolver from Wells or B of A you would be better off playing sponsor with a institutional JV partner on a contingency basis.
MK
I do understand that GoPro was insanely overvalued.. but it's just like any other business with 1 prominent product.
What do you think about Beats Headphones? It's more or less the same type of business, "one-and-done", people don't order a Beats Headphone set every month. Yet Apple still acquired the company for over a billion.
You're in Ohio?
Why not put PACE projects to work.
Poof.
Side-lined investor money flies into projects that result in 10% - 35% IRR's.
PACE is the best thing in real estate right now since land.
PACE - stands for Property Assess Clean Energy
First, I appreciate the recommendation, and not saying it's not a good one. But, I can't figure out this math (and I'm familiar with PACE)....
You purchase a property for $20M. You spend some amount (let's say $500K financed with PACE) to make the property more energy efficient. Then you sell the property for $23.5M (the $23M sale price and the $500K financed upgrades paid through the tax bill).
I'm very familiar with adding value to properties (I've written books on the topic), and for a $500K investment in energy upgrades to generate $3.5M in additional equity (i.e., 7:1 value to cost) isn't realistic in my experience.
PACE - is growing throughout the nation.
PACE - is often the topic of conversation at the White House.
PACE - allows both commercial and residential property owners to upgrade their homes with energy efficiency type upgrades. Dozens of initiatives - from LED lighting to HVAC to solar and renewable technology, controls, window film, roofing upgrades... - apply.
PACE - stands for Property Assess Clean Energy. The amortization lengths are 15 - 30 years, depending on the region (32 states are currently PACE eligible, with more on the way).
PACE - is structured as a tax assessment on the property.
Therefore, it is not like traditional debt financing.
The financing, in essence, stays with the property after the sale.
So, you take a $20,000,000 office building.
Increase its value to $23,000,000.
15% increase.
Take 3 - 9 months to do with, with a PACE project.
Depending on your lease structure with the tenants, you can pass back the costs to them.
Sell the property for $23,000,000.
That's for both residential and commercial.
First, I appreciate the recommendation, and not saying it's not a good one. But, I can't figure out this math (and I'm familiar with PACE)....
You purchase a property for $20M. You spend some amount (let's say $500K financed with PACE) to make the property more energy efficient. Then you sell the property for $23.5M (the $23M sale price and the $500K financed upgrades paid through the tax bill).
I'm very familiar with adding value to properties (I've written books on the topic), and for a $500K investment in energy upgrades to generate $3.5M in additional equity (i.e., 7:1 value to cost) isn't
realistic in my experience.
I don't think that housing is in a bubble. It has taken a medium drive along the path of recovery. It may falter a bit but the big run-up has not occurred. Apartments seem to be in a bubble though.
You think this will affect the real estate market as well?
I have expressed my concerns. I like "value add" deals. My comfort level allows me to leverage and double my money in 3 years or less. This includes all costs associated with the project including cost of sale.@JScott @SteveO @JustAskBenWhy @G_Alexander @Chitown @biophase (all you real estate geniuses) help me work thru this, it seems interesting and Uber as always has something here, (He's a smart dude, just ignore all the Harry Potter/Robert Green/Matrix take over the world kick a$$ stuff).
Has anyone put on one of these deals or been involved, what is your experience, and if you have any spreadsheets on the pro-formas would love to see. I may have a couple of potential deals similar to this in the drawing board buy I am still kind of "spitballing' my way, so any input would be appreciated.
It's seems doable but only if: asset is in a PACE district, potential for deep savings as a result of an energy retrofits, full service gross leases with liberal pass thru language must be in place and ... the big one? Why would a first lien holder (Wells/Bof A/Met Lifeor a CMBS conduit) allow subordination and if they did I would think you would need to have either a pretty significant equity (low LTV) or a great track record or be willing to accept an added recourse carveout to the first trust deed???
The part about needing 500K is not applicable, from my understanding, this is a zero down, no fee program. The ROI is imediate it starts day one or when the retrofit is complete, maybe day 120??
The weighted cost capital today is somewhere between 7-8% (@Ubermensch help me out here you probably have a recent term sheet) and it amortizes to match the useful life of the improvements. e.g., 5 years for low level LED replacement or 20 year amort for full MEP/envelope upgrades.
So in essence this strategy insulates you somewhat from any cap expansion, if you bought at a 6 CAP but sold at a 8 CAP years after 5 years you would still benefit from TMV standpoint in that even though the reversion CAP is lower that the entry cap, with the NPV of increased cashflow on day 1 and the tax and utility benefits, along with standard depreciation benefits there would still be a positive delta and a decent IRR.
You can see in my spreadsheet attached that it could work as an asset play (buy the asset and put the strategy in play) but it works better as a third party contractor by proposing this concept to a CRE owner. Because even though the PACE programs has no initial outlay, the money needed to secure the asset (as owner) 30% of purchase price and he broker fees on both sides of the deal buy/sell hurt the IRR.
Any thoughts? Sorry for any typos, I can't find my god dam glasses.
I have expressed my concerns. I like "value add" deals. My comfort level allows me to leverage and double my money in 3 years or less. This includes all costs associated with the project including cost of sale.
The caution should be around current valuations, time for project completion, and time to get rents where you want them.
It is very difficult to negotiate a deal when real estate is so desirable. Most people are trying to sell at future values based on YOU raising rents. This does not happen so much when commercial real estate is in less demand.
Also, values are hot right now so I would want to be able to turn quickly. The faster, the better. Don't get caught in the "musical chairs" situation of holding the property during a slowdown.
Well said, thanks for the feedback.I have expressed my concerns. I like "value add" deals. My comfort level allows me to leverage and double my money in 3 years or less. This includes all costs associated with the project including cost of sale.
The caution should be around current valuations, time for project completion, and time to get rents where you want them.
It is very difficult to negotiate a deal when real estate is so desirable. Most people are trying to sell at future values based on YOU raising rents. This does not happen so much when commercial real estate is in less demand.
Also, values are hot right now so I would want to be able to turn quickly. The faster, the better. Don't get caught in the "musical chairs" situation of holding the property during a slowdown.
I'd be wary of using the DC/MD market as a case study (not saying you are, but just in case)...
I live in this area now (Howard County, MD), and in terms of real estate, MD/DC/NoVA is a different beast than what I've seen in other parts of the country. DC appears to be very insulated -- not surprising, given that very powerful and influencial people come and go every 4 years -- and prices here generally don't reflect what's going on elsewhere in the country.
During the 2008-2012 housing downturn, MD/DC didn't see a tremendous drop in values, and in the ensuing few years since 2012, it hasn't seen the crazy run-up that much of the country has seen -- though it's certainly seen a run-up. I think it's true that there is some short-term opportunity in MD/DC real estate, but I wouldn't generalize that to places outside of here (necessarily).
Basically, all I'm saying is that MD/DC appears to me to be a different beast than most other major real estate markets around the country. What happens here can be very different than what happens elsewhere...
Because???? Do you have any way to substantiate your claim?Dow Jones will hit 20,000 before it crashes.
Bringing this thread a little up.
How will Brexit affect economy?
I mean other currencies, stock values, even the time of collapse etc?
DJAI heading down to 15k level been riding this mofo since 18,100.....same with oil pending shorts all back down $28 a bareel much mich later on but DJ is going to be a killerI tend to agree... and the leading indicators in 2000 were subtle job layoffs in the tech sector, which we are just starting to see now.
So for those who operate on Slowlane principles and hold big stock positions, you can prepare and be wrong, hence losing out on a 3-6% gain.
Or not prepare and be wrong and lose 50%.
The choice is yours.
Where do you think the money is transferred when public stocks go up or down?
For example, a public company with 10M shares outstanding goes down $1 in price (e. g., one person paid $1 less than the previous person for a single share of stock). A few bucks changed hands for that share of stock, but the market cap of the stock just went down $10M...
Who made $10M if that $10M wasn't wiped out?
You have a good point but it's only money on paper. Unless you sell the asset at that exact moment then the current value of the stock is just on paper. So, to say it's wiped out isn't 100% accurate. It's just not currently selling for what it was valued in a prior period.
Where do you think the money is transferred when public stocks go up or down?
For example, a public company with 10M shares outstanding goes down $1 in price (e. g., one person paid $1 less than the previous person for a single share of stock). A few bucks changed hands for that share of stock, but the market cap of the stock just went down $10M...
Who made $10M if that $10M wasn't wiped out?
Yes, that is true. Your statement above that I replied to earlier was not true.
Then I'll ask the question again that you didn't answer above...
Let's assume a stock that has 10M outstanding shares goes down $1 because one person purchased one share at a dollar less than than the previous market price. By definition, the market cap (i.e., value) of that company has just fallen by $10M.
According to you, that $10M wasn't "wiped out" -- it has been transferred somewhere else. Who *specifically* saw a $10M increase in their net-worth based on the $10M drop in market cap?
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