Where commercial real estate investment is concerned, Miami’s time has come.
That was the conclusion of my recent guest Jean-Louis Guinchard, a Senior Managing Principal of Silver Portal Capital LLC in San Diego. He was in town recently to scout opportunities for the firm’s clients, and he was impressed by what he saw.
“I’ve been in Miami for a couple of days, and it’s truly remarkable what we’re seeing in this city,” he said. “This looks like a city that has an impeccable, incredible future.”
Guinchard was particularly excited about the prospects for international investors, many of whom have their money parked in CDs and other low-yielding investments. The Miami investment climate offers them the opportunity to invest in Delaware Statutory Trusts, NNN properties, and other vehicles.
DSTs
DSTs are a staple of Silver Portal Capital, a boutique investment and merchant bank that is now helping Inland Real Estate Group find accredited 1031 exchange investors for its growing DST practice.
“For individuals looking to effect a 1031 exchange, this is something that represents a turnkey solution to most investors that are looking to find a replacement properties within a specified period of time, which is very, very difficult to do in today’s environment,” he said.
The DST, Guinchard said, is a major step up from the usual Tenant-In-Common deal. It’s still common-owner real estate, but the investors have a beneficial interest in a trust. It qualifies for 1031 exchange and provides a quality sponsor that has the responsibility for managing the asset.
The DST is especially attractive to yield-hungry individuals and institutions, he said, and can provide cash-on-cash yields of 5.5% to 6.5% and tax equivalent yields of 8.5% to 9%.
Crowdfunding
Guinchard said Silver Portal Capital is also exploring ways to apply to so-called “crowdfunding” phenomenon to commercial real estate investment. Now, this wouldn’t be available to just anyone, he said, but it might be useful for accredited investors.
Guinchard said he believes the next generation of investors will be buying their real estate online much in the same way that investors now buy mutual funds online. This approach would provide access to same quality properties that institutional investors now enjoy and provide the opportunity to invest alongside them in different parts of the capital stack.
More about Miami
After the 2008-09 market crash, Guinchard said, a lot of serious money fled markets like Miami for destinations like Boston, New York, L.A., San Francisco. Now those areas are very expensive, and Miami is looking like an excellent value.
“This town is really starting to show us some signs that it’s going to be not only speculative growth but real serious growth and infrastructure that’s going to be here for a lot of years to come,” he said.
The institutional investors are executing some very large shifts in asset allocation toward real estate and infrastructure, Guinchard said, and Miami is a huge beneficiary of that shift.
Institutions, like individuals, don’t really like volatility and uncertainty. They have obligations that they need to meet reliably, so money will continue to move into commercial real estate, he said. Many institutions have gone from a 7% commercial real estate allocation to 15% and higher.
Guinchard and I covered a lot more ground relating to new trends in commercial real estate investment and capitalization, including some words of caution surrounding DST investment, crowdfunding, and other common-owner real estate investment vehicles.
Click here to listen to the full interview with Jean-Louis Guinchard of Silver Portal Capital LLC.
