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Kipling Partners invests in real estate properties in growth markets that are expected to yield improving long-term tax-deferred cash flow and capital appreciation benefits. We typically target holding periods of 5 to 10 years, and sometimes longer for superior performing properties. Such long-term ownership of stable, income-producing properties is often the goal of many investors seeking to balance their investment portfolios by including predictable annual long-term tax-deferred cash flow. Retirement income and estate planning considerations also contribute to the rationale for focusing on long-term stable tax-deferred income. This approach has inherent tax-efficiencies and reduces overall transaction costs.
Our philosophy is to always target the greatest after-tax cash flow yields using
standard depreciation to the benefit of investors enabling a significant portion of the cash flow from
investments to be tax-deferred. As an example, an 8% cash flow on a properly structured real estate investment for a California investor in the 44% combined State and Federal tax bracket is equivalent to an approximately 14% pre-tax return.
Our goal is also to maintain ownership of well-performing properties while experiencing improving cash flow over the holding period. Conservative refinancing, as opposed to a sale, is often considered an attractive alternative on superior performing properties because refinancing proceeds are tax-deferred. In some instances, however, a refinancing option is not pursued in favor of holding the property for its continuing low-risk superior cash flows and sustained positive long-term results. Alternatively, if our assessment of the marketplace indicates that properties are selling at inordinately high prices, then we will sell selected properties to take advantage of that hot market.
Other important aspects of our real estate investment philosophy are:
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To the extent feasible, source transactions through inefficient ("off-market") marketing channels by utilizing our extensive network of experienced real estate professionals
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Target locations with high barriers to entry and strong growth prospects
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Seek projects where there are value-add opportunities that can produce outstanding post-repositioning cash flow and capital appreciation
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Employ debt financing with fixed interest rates and longer-term maturities to mitigate the risk of interest rates increasing
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Typically, avoid markets which are not stabilized due to job losses, decreased population, or poor underlying economic fundamentals
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In selected cases, buy properties in underperforming markets at well below replacement cost when we determine that demographic, economic, and development trends are very positive
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On a case-by-case basis, joint venture with local partners who possess specialized local expertise in real estate, property management, and operations, and who always co-invest in the property
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Target relatively conservative debt ratios of 65% to 75% of total cost/value
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Provide timely cash distributions and accurate financial and operating results to our investors through our Affiliates, Partnership Reporting Services
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