The do’s and don’ts of investing in commercial real estate

I’m a HUGE fan of investing in commercial real estate, for various reasons:

  • Predictability of value and cashflows
  • Low beta compared to the stock market
  • Low liquidity is a minor issue for me┬á(money management is something you do BEFORE investing, not after)
  • Perhaps most importantly, smarter people than me have said that real estate is one of the very few industries where mediocre people can succeed ­čÖé

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Why investing in infrastructure (and the land beneath it) is a good idea

Right off the bat: I’m a firm believer and committed investor in vital infrastructure. Railroads, ports, pipelines, wireless towers, gas stations, airports, roads, electricity transmission lines and stations, you name it. For clarity – while the land that carries it, is not technically infrastructure itself, usually they’re bound together by decades-long leases (or short term leases that give more power to the landowner) that effectively make the ground underneath a senior tranche in the asset. More on that below. The┬ámajority of my portfolio is invested in land with infrastructure, but my appetite is insatiable.

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A bit about my investment preferences

A little bit insight into what kind of asset classes i like and don’t like. Things to keep in mind:

  • Safety of cash flows is paramount.
  • Capital preservation is more important than capital growth.
  • This is not other people’s money so messing up and moving on isn’t really an option. You have to get more right than wrong, constantly.
  • My investment horizon is years to decades. The longer, the better. Liquidity for capital deployed is relatively unimportant, but money management is not.
  • Something that doesn’t provide a relatively predictable cashflow while maintaining it’s value, is not really a possible investment instrument. At best, it’s a hedging instrument. At worst, it’s a zero sum game with me as the lemur in a room with 700-pound gorillas who are smarter than me.
  • I operate in – and exclusively invest in – safe regions, where bureaucratic, tribal and warlord relations don’t affect property rights.

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