I remember reading one time that being the leader of an organization means repeating that organization’s story over and over and over again, to anyone willing to listen.
Lately, I’ve found myself telling all kinds of people what we’re about. So, I figured I’d repeat it here, for those of you willing to listen.
- Buys older, dilapidated buildings in improving neighborhoods of Los Angeles at fair prices
- Closes quickly, paying cash and refraining from chipping price or screwing brokers down on their commissions
- Thoroughly renovates, replacing / upgrading all major building systems, using permits
- Re-tenants, leasing to anyone who can afford to pay (without regard to race, ethnicity, immigration status, etc.)
- Refinances, using long-term, fixed rate bank debt to pull out 75-100% of capital invested
- Distributes the refinance proceeds to investors (usually, roughly 18 months after acquisition of the property)
- Manages the buildings thereafter, maintaining them in good condition and distributing free cashflow from operations quarterly to the investors
- Holds forever
This business model is highly unusual in the real estate private equity space, because it does not print very high IRRs, nor result in the sponsor (Adaptive) getting rich quickly.
However, we’ve never been the kind of people who do things because everyone else is doing them. And this model feels right to us. So we’re going to keep doing it, probably for the rest of our lives.