Client Spotlight – White Buffalo Capital
“Our favorite holding period is forever.”– Warren Buffet
Since the beginning of time, real estate has been a bedrock for wealth creation and preservation, but it is still an unfamiliar asset class for many investors. There are ways for investors to benefit financially from real estate through real estate investment companies (REITs) or private real estate opportunities via funds and single transaction deals. Unfortunately, these investment vehicles often have inherent conflict based on time or requiring several underwriting assumptions to come to fruition, with returns diluted by fees that do not explicitly correlate with the property’s economic success.
Based on decades of experience in commercial real estate, we have observed that focusing on quality longer-term investments compares favorably to others concentrating on higher potential profits that tend to be short-termed investments. Over time, we believe that the highest and greatest land use is holding it and enjoying the asset’s appreciation through the income it produces. If the underlying reason for investing in real estate is the land, why sell the property instead of benefiting from the long-term appreciation?
White Buffalo Capital Fund will place investor equity into unanchored multi-tenant retail opportunities to create a long-term diversified portfolio with reliable returns. The underlying investment criteria will heavily focus on the real estate itself, with the balance concentrated on the tenants’ use and credit. These income-producing properties hedge against inflation while providing dependable distributions.
The acquisition opportunities shall be considered “core” or “core-plus” in nature. Core and core-plus investments are considered lower on the risk structure because they involve stable, income-producing properties in prime locations, highly trafficked, and leased to quality, high credit tenants on long-term leases. Our strategy does not rely on leverage to produce outsized returns, but with steady income streams, these properties perform like a high yield bond with little downside risk to principal.
By focusing on core and core-plus assets, the Fund will maintain low-risk levels while creating value through specified contractual rents and value add strategies for mismanaged properties or market inefficiencies. Both situations will build value from existing cash flow without the need to ask investors for additional equity. Our fund structure will create a dependable buyer that Investment sales professionals will gravitate towards aggregators of properties that could translate into reviewing off-market or lightly marketed opportunities.
The Fund will focus on service-oriented tenants providing consumers with services that can’t be replicated or significantly impacted by internet options, such as Amazon, and are least affected by technology and innovation. Our focus will be retailers catering to necessities such as health and beauty, service, and food-oriented concepts. These tenants continually succeed despite the current pandemic environment and recent economic downturns because they focus on our daily needs. We will avoid tenants who focus on the consumer experience, such as movie theaters and big-box tenants, that require a significant amount of retrofit money should the tenant break their lease or vacate at the end of their lease.
Our investment will rely heavily on micro-level statistics instead of fads or general trends for regions, states, or cities as macro-level market designations. Our targeted markets are business-friendly environments with a growing population comprised of a highly-educated workforce with a high quality of life and low living costs.
The combination of reliance on data-focused analysis and decades of industry relationships will allow the Fund to acquire quality assets while significantly reducing redevelopment risk. Instead of purchasing a single investment, the investor’s equity will be combined in a pool of committed capital to acquire several assets leased to various tenants across a diverse geography. Therefore, investor diversification increases with every additional transaction. Leases for multi-tenant deals are three to ten years, with contractual rental increases throughout the lease period. Rent increases provide not only asset value protection but also interest rate and inflation protection as well. Investors can expect reliable long-term cash flow while being shielded from short-term lease negotiations.
White Buffalo Capital’s strategy allows us to focus on the basic tenet of real estate – land – enabling the critical growth component to create investment appreciation. Our approach also protects wealth during economic downturns, insulates against capital market fluctuations, and provides a consistent income source, preventing the need to sell other investments at depressed values.