Q&A with Michael Anderson of PREIshare
President, CEO
Luminary Series:
PREIshare innovatively combines time tested economic principles with aggressive national marketing and social media strategies to provide higher returns with less risk in real estate investments. Key strategic principles include:
Market Presence = Deal Flow – Social media provide exposure to real estate sponsors and investors of PREIshare’s unique fractional/passive real estate ownership liquidity options.
The predominant reason investors hesitate to invest in real estate is lack of liquidity.
Historically investor funds are locked until the sale or refinance of the property. PREIshare overcomes this obstacle with the first ever secondary marketplace for fractional real estate ownership. Their revolutionary Listing Hub™ is the platform for the purchase and sale of these interests.
Please feel free to view our exclusive Family Office Insights recorded discussion with President and C.E.O., Michael Anderson, CCIM, and the PREIshare Executive Team as they present PREIshare’s new and pioneering real estate sponsor and investor financial services platform. This is a timely launch of their long-needed equity investment programs designed to take strategic advantage of today’s income-producing real estate market conditions.
Short Cycle Investing – The time value of money principle states that an investment loses future value at the opportunity cost of that money the longer the investment is held, particularly with unrealized gains. Typically real estate investments are held for 5 to 10 years. Their business model reduces the extended timeframe and provides compounding returns in the same timeframe by cycling that investment every 2 to 3 years.
Opportunistic Return Rates – The rate of return an investment can demand is proportionate to the value of the need it solves. The PREIshare Fund (the “Fund”) buys these ownership interests at a discount dependent on yield and risk management requirements, while positioning the portfolio to achieve above average returns.
Ability to Continually Reinvest – Through their market presence, the Fund will meet their investor needs for liquidity and relevant market information for informed reinvestment.
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What change, or value proposition does PREIshare bring to the commercial real estate syndication industry?
Real Estate investment has many advantages including:
• Tax advantaged passive income (in the case of syndicated investments),
• It is secured to the ultimate tangible asset, real estate, and
• When leveraged, it may produce superior returns and wealth generation.
However, real estate investing has one significant disadvantage. THE LACK OF LIQUIDITY. Many sponsors lock in investments for typically 5 to 10 years, leaving no room for an investor’s changing needs.
PREIshare’s answer establishes the industry’s first secondary market. Most people do not understand that a fractional passive real estate interest is a security, it is not a direct ownership of real property. While it should have the same right of transferability as other securities, it is often restricted from free trading not by law, but by contract. PREIshare will break the siloing of these assets.
Why do you believe the industry will adopt this secondary market for these fractional interests?
Change occurs when the benefits outweigh the need to maintain the status quo. PREIshare creates such compelling benefits for industry stakeholders:
1. Passive Investors: Through PREIshare’s secondary market, sellers receive liquidity at a market-driven price, and buyer decisions are based on trailing income and market capitalization rates rather than proforma numbers. Increasing investor liquidity demand through this secondary market will persuade sponsor adoption of liquidity language in their offerings.
2. Syndicators: Based on PREIshare’s studies, sponsors offering the option of liquidity will more than double the number of potential investors. Additionally, by adding a liquidity option for investors, sponsors may reduce the higher returns typically required to attract investors. With more investors and lower return requirements, these sponsors will enjoy a lower cost of equity, making more potential acquisition options viable.
3. Lenders: Since additional equity is the only solution to fix capital and cash shortages, PREIshare provides preferred equity which delivers:
A. Surety to close
B. Protection for ongoing investments:
• Create a reserve when a property is temporarily not meeting its debt coverage requirements
• Fund capital improvements
• Fill in gaps created by changes in underlying debt that deleverages the property
How will you reduce risk while providing a higher return? Isn’t this generally considered a contradiction?
This is often true when acquiring properties based on proforma returns at an un-discounted rate. PREIshare utilizes four strategies to improve return while lowering risk.
1. Buying at a discount
2. Acquiring properties with a track record
3. Purchasing properties mid-term, thus shortening the time exposed to unforeseen market changes. This shorter investment term increases return due to the time-value principle of money
4. Diversifying acquisitions by sponsor, real estate class and location
5. All preferred equity investments will be high on the capital stack, just behind debt
Michael Anderson of PREIshare
Michael Anderson, CCIM is a highly accomplished leader in the commercial real estate industry, having held a variety of senior positions, including President, CEO, Chairman of the Advisory Board, Founder, and Co-Owner of AKA Partners. He also founded and was former President and Chairman of RealSource Companies, which maintained a billion-dollar multi-family investment portfolio and completed over $6 billion in investment transactions while maintaining self-management and private ownership. Michael’s experience, industry recognition, and CCIM designation make him an invaluable team asset.
Contact Michael: manderson@preishare.com