I have spent a good deal of time in recent months talking to potential investors and to intermediaries who have claimed to be able to introduce me to potential investors.
My investment proposal provides a secure income return from UK real estate, with growth prospects and shows annualised returns of c. 12% per annum. The portfolio will be modestly geared (below 40%) and there is a potential upside from asset management and yield shift in a sector which is currently overlooked by investors.
So, what have I learned?
It is nearly ten years since Warren Buffet, in his annual shareholder letter treated us to an essay on 'How to Mimimise Investment Returns'. The letter is still available at http://www.berkshirehathaway.com/letters/2005ltr.pdf
From my experience the majority of investors have not read Mr Buffet's letter. They are a long way from the actual source of their investment returns and are often caught in a web of the 'helpers'; 'broker-helpers; and 'manager-helpers' described in the letter.
The majority of these 'helpers' have a financial or banking background and discuss at length the importance of the asset management, regulatory oversight and the value add that their involvement brings. In reality many just help themselves to a slice of the returns, without adding any real value over and above making an introduction. In many cases even the introduction has proved worthless because their fees have fatally damaged the economics.
Few if any of them have experience of direct real estate investment markets and how to manage the lifecycle risks of acquiring, asset managing, financing and selling real estate.
The investors that I have spoken to directly, have universally acknowledged the sense of my investment case, but many still expect high levels of return and low levels of risk. In fact one investor was looking for secure income double digit returns with no entry risk and a guaranteed exit!
So, I will bypass the helpers and continue to focus my discussions directly with investors. If you are, or you know of, an investor or investors who would be attracted by a secure income investment with upside potential, then please get in contact.