PDS Real Estate Opportunities

Residential

Asking residential real estate investors why they invest, the main reasons are

• Security
• solid returns
• Growth in value of the asset
• Revenue from renting
• tax advantages
• protection from inflation.

Compared to returns on stocks and bonds, residential real estate has proven itself in all economic conditions since 1934.

Residential real estate has decreased in value nationwide a total of three years from 1934 to 2006

Compare this to stocks and bonds…

Stocks have provided negative returns in 23 years, Bonds have provided negative returns in 20 years…

…from 1934 to 2006.

The reason is simple—residential real estate is not subject to the extreme market fluctuations of shares or commodities making it a far more secure investment.  Furthermore, residential real estate delivers rental income which increases in line with the property’s rising value.  This makes residential real estate an ideal protection vehicle from the affects of inflation because inflation works for you, not against you, pushing the value of your asset upwards as well as your rental income.

Five of the major concepts for investing are appreciation, leverage, income, tax advantages, and use of the IRC 1031 tax deferred exchange.   These advantages of residential real estate provides the investor

• the cash flow typically associated with bonds
• the appreciation they could see in a successful year in stocks
• the ability to have somebody else pay for the majority of the investment
• you can declare a loss on your taxes even though the real estate is making money. 

This makes residential real estate the most prudent investment today.

Apartments

Apartments offer a good inflation hedge because

• rental growth tends to move upward with construction cost increases
  (assuming markets in relative equilibrium)
• apartment leases are typically adjusted annually and therefore,
  rental increases are more readily realized.

Apartment performance has been less volatile than most other property types.  Occupancy levels over the long term have rarely dipped below 90% for any significant time period.  Demand for apartments in the coming years will remain strong although the consumer demographics are shifting.

The population is getting older and this will affect the available market for apartment renters. The 18-34 demographic age range is shrinking and the 35-54 range is growing. This means the target rental market will not only be older but also will have more discretionary income and therefore more demand for quality units. Growth in non-traditional households, such as singles, unmarried couples, empty nesters, and single parent homes, will continue. 

Offices

The benefit of investing in a commercial office property includes the way in which the asset is valued. In other words, the amount of income that the property produces now and is expected to produce over the mid-term, is directly proportionate to its worth. So if a property produces more income, then it is worth more. It has very little to do with “market comps”.
In addition, and most important, with multi-tenant office property rental income is spread among a number of tenants. Therefore, if one or more tenants vacate, the remaining tenants continue to generate rental income for the owner.  With efficient management of leasing activities, lease expirations are likely spread out over a number of years rather than bunched together.  While the investor is locating tenants for vacated space, rental income, while reduced, is typically sufficient to cover the mortgage, and other operating expenses if applicable. 

Industrial

PDS sources industrial properties throughout the United States. We believe industrial properties offer attractive investment opportunities due to the following characteristics:

• High, stable income returns
• Strong demand by tenants
• Demand stimulated by technological changes
• Strong market fundamentals
• High credit tenancy in many cases
• Minimal capital expenses
• Historically favorable investment returns

A primary objective of investing in real estate as an asset class is that it diversifies the total investment portfolio and reduces risk. Each asset class should be further diversified among the major property types.  Market and Economic research reveals that industrials comprise 15-25% of the total market of investment grade real estate. Many PDS clients are underweighted in industrial. We recommend that our clients take a close look at a strategy that will in the long-term target 15-25% of their real estate investment portfolio as industrials, mirroring the total overall market.

International

“We live in a global economy”. “The world is a small place”. How many times have you heard this?

A new study showed that average global house prices stood 8.5% higher at the end of June 2006 compared to the same period 12 months earlier.

So, whether you are looking to acquire real estate as an investment to rent, part of a real estate portfolio, or whether you just want to buy a vacation residence for your sole use AIRI is there all the way; guiding you through the local laws and making sure your acquisition is as safe and hassle-free as if you were buying a home in your own country.

Currently, we are looking at markets in

Central America

• Mexico
• Costa Rica
• Panama

South America

• Brazil
• Argentina

SE Asia

• China
• India

Europe

Latvia

Bulgaria

Morocco