The merits of real estate as an alternative investment asset class are well-proven – from wealth preservation, inflation hedging, returns generation, providing a source of consistent passive income stream, to diversification
Direct investment in real estate has largely remained a domain confined to high net worth or institutional investors
The average investors have unfortunately not been able to enjoy the full benefits of direct real estate investment
Real estate is an asset class that is less transparent compared to stocks and bonds, presenting a double-edged sword. Information, or the lack of it, creates inefficiencies in the market that reward those with quality research and punish the under-informed. We seek to build an information edge by performing thorough research – both top-down and bottom-up.
Too often, investors focus overly on potential returns at the expense of risks. While a value-driven approach is important in our investment strategy, we are more sensitive to potential downsides. Stress tests on leverage limits, market demand, operating expenses and exit strategies form the more vital component in our deal assessments.
We are firm believers of leveraging on technology to improve both decision-making and operational efficiency. We apply techniques and our experience from quant trading and data science to real estate market analysis to provide our investors with the competitive edge.
Integrity and credibility form the bedrock of our principles and they guide our decision-making every step of the way. These values cascade into our actions; we seek alignment of interests through co-investment, transparency through material disclosures, and target quality of deals over quantity. Our staff are incentivised on performance and do not engage in businesses that create a conflict of interest between us and investors. Our investment decisions are motivated only by what we believe will help them achieve their investment objectives.
We are fundamental investors at heart. There is nothing wrong with crafting investment strategies off early-stage government urban renewal/infrastructure plans, tentative signs of regulatory policy changes, or even investor sentiments/behavioral economics. While all these factors figure in our analyses, we also recognise that we live in a highly dynamic world and the investment environment could change relatively quickly. With deals anchored in sound fundamentals, history has shown that even if the performance of an asset deviates unfavorably due to unforeseen reasons, market fundamentals and mean-reversion eventually re-assert themselves.
Cliché but eminently important nonetheless. Intricately tied with #1, mean-reversion would be pointless if the cash position of a deal is not sufficiently robust to see through short-term unfavorable gyrations. Even for more opportunistic deals involving development where investor distributions are back-end loaded, we place heavy focus on the health of the project's cash flow.
A unique feature of real estate is the asymmetrical market response time between physical demand and supply. While the demand-side situation can change relatively quickly, the industry is much less nimble on the supply-side. Strategies anchored by supply-constrained markets are much more robust. RealVantage looks for target markets with no competitive supply planned or under construction and seek to get ahead of capital flows in areas where economic growth is projected to drive tenant demand and new supply is not yet on the horizon.
We seek to acquire—at the right price—fundamentally sound assets that have previously lacked capital, attention or effective management. While buying below replacement cost offers a margin of safety, such opportunities are few and far between. RealVantage believes in a disciplined approach in purchasing an asset, using its data-driven algorithms and detailed qualitative criteria to establish the maximum purchase price.
Unlike stocks and bonds, real estate is an asset class that goes beyond buying-low-selling-high. In addition to capitalising on physical and financial market cycles, on a selective basis, our investment strategy would incorporate value-add and opportunistic deals which would trade up the risk-return spectrum to complement a core portfolio. We look to acquire under-managed or under-capitalised assets that the RealVantage team can stabilise and refurbish, and implement a dynamic asset management plan in order to position each investment for sale at the maximum price.