Prospective Investor Questions (A series) - part three
This series is emcompassing some of the questions we often get asked or questions that we rarely get asked but are key to answer. We’re outlining questions we’ve both received in the past and are receiving as we actively raise money for our projects. Here are the first few questions,
Q: Should we holding back due to the economy?
A: Our opinion at arete is, no. If deals work now, they’ll work in the future. For example, a project you buy today that cashflows at 6% interest in 5-10 years when rates are back down to say ~3% your cashflow would be double if not triple what it cashflows today, without even considering principal paydown, etc. Further, the word in the industry is “hold and hold liquid”, which means as soon as the market switches, we’re going to have a buying frenzy and 99% of the time, opportunities will be lost due to bidding wars, and various other factors. Not to mention, what’s the cost of lost opportunity while sitting on the sidelines?
Q: How passive is passive really?
A: Nothing is ever passive, even though that word is considered “sexy” in todays day and age. For Arete, passive income still means a lot of work and infrastructure. For our joint ventures or debt investors, it’s very passive and you can tailor your experience with us. First, the onboarding is a bit more complex as we strategize and plan your investing needs, speak with your legal team, accountant, plan for tax and holding strategy, etc., thereafter, it’s simply submitting documents and signing paperwork which we make as easy as possible as well, by couriering packages and various other things. Once projects are secured (with joint ventures), we keep our joint ventures up to date with emails, photos, videos and various other updates, and are available for walkthroughs, tours, etc. so it is ultimately up to our partners and we tailor your experience with Arete. Once projects are completed, we like to meet with joint ventures once bi annually to review our holdings, for debt investors, we like to meet once monthly to review your investments. Lastly, any challenges that arise are usually only presented to our joint ventures with solutions and therefore require decisions, otherwise, we’ve made the process as seamless and passive as possible.
Q: How do you keep us up to date throughout the project?
A: We like to say “you tell us” (half jokingly), meaning its customized to you and your needs. In essence, our standard is, milestone updates leading up to closing, possession date update, weekly updates & videos, thereafter leasing updates or listing updates, refinance updates (if applicable) and then bi-annual or annual meetings.
Q: Responsibilities, who’s responsible for what?
A: Arete is responsible for all active and overall management responsibilities like managing construction, property challenges, leasing/property management, managing other third parties, etc., Whereas our partners are usually required to provide funds to acquire projects or to make improvements as necessary. With the above answers, it should provide more context.
