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Why Invest in Real Estate?

Diversification
In 1990 Harry Markowitz won the Nobel prize in economics when he proved that combining assets that have returns that are not correlated will reduce risk without sacrificing returns. It has been shown that the correlation between real estate returns and stock and bond returns is negative, meaning the returns do not move in lockstep. Thus, given a long term investment horizon, holding real estate in a diversified portfolio should improve an investor's risk-adjusted returns. Many investment experts agree that 10 to 15 percent of a properly diversified portfolio should be invested in real estate.

High risk-adjusted returns
According to Emerging Trends in Real Estate 2004, a national survey now compiled by Price Waterhouse Coopers, "real estate has delivered positive returns through an entire cycle, surpassing stock and bond performance for the last decade. The updated 2009 survey, stated “that after an unprecedented meltdown, housing values should finally hit bottom during the year, followed by later correcting commercial sectors.” We expect to see improving returns overtime in this segment. ”Cash investors will have the upper hand and excellent opportunities will appear to buy at market lows.” Retail has been hit hard according to the survey as “cash-strapped Americans struggle with credit card debt, the mortgage mess, and gloomy employment environment.” Therefore, shopping centers in our opinion are not the place to be at this time.

Potential hedge against inflation
When the economy goes through an inflationary period, real estate can provide a good way to preserve and even increase wealth for two main reasons. First, when inflation rises, property values often increase, along with the overall consumer price index. Second, a portion of the income received from commercial real estate rises because owners can pass on expenses through increased rents or higher common area charges.

Stable returns
The returns from commercial real estate come primarily from the rents paid by tenants. These rents are determined by a lease, which is most often a long-term contractual agreement. As a result, the returns of private property ownership can be less volatile than the returns of other asset types. The returns from vacation rentals are less predictable but can provide a strong source of income and help cover the costs of the property during the holding period.

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Why Private Real Estate Instead of REITs?


The advantages of owning real estate are often lost when investors choose publicly traded Real Estate Investment Trusts. First, since REITs are traded on public markets, their returns are positively correlated to other common stocks. This correlation eliminates the advantage of holding real estate to improve portfolio diversification. Historically, private real estate has demonstrated a negative correlation with stocks and bonds, which means that returns on stocks and bonds have not paralleled the returns of private real estate. Second, due to the high correlation with stocks, REITs do not provide investors with stable returns because of the volatility of public markets. Third, recent research has found that unlike private real estate ownership, REITs do not provide an adequate hedge against inflation. According to the Real Estate Finance Journal, "…REITs do not provide any kind of hedge against either the expected or unexpected component of inflation."

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How to Invest with Us


The common vehicles for equity ownership consist of two investment approaches. The first is the formation of a limited liability company or limited partnership structure, which is composed of multiple owners. The second approach is direct ownership, in which there is only one equity investor.

Prospective investors should note that nothing in this web site should be construed as an offer to sell securities. Offers to sell securities will be made by Weybridge only to persons and entities having a preexisting relationship with Weybridge or its advisors and can be made only through a private placement delivered to the prospective offeree in question.

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Limited Liability Company

When Weybridge purchases a property it often forms a limited liability company which then owns the property in a single purpose entity. The ownership of the limited liability company is shared by individual investors and Weybridge. Weybridge acts as the manager and performs all duties associated with owning and maintaining the property. The investors can participate in the ownership either through equity units or unsecured promissory notes. This structure allows investors to pool their resources and participate in larger real estate transactions with a total investment ranging from $25,000 to $200,000.

Equity Units
The equity units are typically paid a quarterly preferred return based on the annual cash flow generated from the property. When the property is sold, equity holders also receive their pro rata share of the net sales proceeds from the increase in value of the property, as well as their original investment. The equity units are structured to provide considerable upside potential for the equity holders, in addition to a preferred annual return.

Promissory Notes
Unsecured promissory notes provide a fixed return to noteholders, much like coupon bonds, most of which are part of qualified investment plans like IRA or 401K accounts. These returns are paid out before equity returns, and noteholders may receive an additional return for property appreciation upon sale or may receive accrued interest upon sale or refinancing. The notes are structured to provide high-yield fixed returns.

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Direct Ownership


Investors can also choose to own property without pooling their resources with other investors. This allows the investor to make larger investments of $200,000 or greater in tangible property without getting involved in the complexity and detail associated with the acquisition and management of commercial real estate. Weybridge will search the United States to find the property that best fits the individual investor's needs. Weybridge will also complete all due diligence, arrange financing, determine the best ownership structure, negotiate and close the deal, develop an ownership strategy, craft a successful leasing and management team and, once goals are met, dispose of the property.

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Real Estate as
an Investment Diversification Strategy

Why invest in Real Estate?

Why Private Real Estate instead of REITS?

Why Neighborhood or Community Shopping Centers in the Midwest?

How to Invest with Us

Limited Liability Company

Direct Ownership

Contact Us

 

 

"Many investment experts agree that 10 to 15 percent of a properly diversified portfolio should be invested in real estate."

 

 

"Real estate has delivered positive returns through an entire cycle, surpassing stock and bond performance for the last decade. "

Emerging Trends in Real Estate 2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Weybridge Capital Investors, Inc