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Published byHelen Hicks Modified over 9 years ago
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James W. Herrig, J.D. Vice President, Counsel & Compliance Officer & Russ Pixler Senior Financial Advisor
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Direct investments are generally income investments, providing a regular stream of dividend payments based on real estate rentals, mortgage payments, equipment leases, and oil or natural gas sales. * *Guide to Understanding Direct Investments, Morris and Morris, © 2005 Lightbulb Press, Inc. All rights reserved. 2
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“... the illiquidity of a direct investment can help insulate you against the volatility of the market because it’s not subject to daily fluctuations in price. As a result, a direct investment can have a stabilizing effect on your portfolio.”* *Guide to Understanding Direct Investments, Morris and Morris, © 2005 Lightbulb Press, Inc. All rights reserved. 3
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Non-traded (unlisted) REITS [real estate investment trusts] Industrial (single tenant) Office Single tenant Multi-tenant programs Retail ( and items to consider for this and other segments) Big box Strip mall Single/multi-tenant Quality of the credit Lease duration Bunched or staggered lease maturities Fixed or adjustable Triple net leases Use of leverage Refinancing schedule Recourse or non-recourse debt Mixed Multi-family Storage facilities Other areas are less likely as an income choice 4
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Equipment leasing programs (a residual value opportunity that may provide an inflation hedge) Energy Development Energy Exploration Real estate Limited Partnerships Energy royalty programs 5
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[NOT AVAILABLE FOR CLIENT USE] The HKFS Direct Investment Matrix The HKFS Direct participation fact sheets Log into Affiliate Access at www.hkfs.comwww.hkfs.com Click on “+” sign beside Brokerage Click on Direct Investments 6
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Examples of Fact Cards 7
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[NOT AVAILABLE FOR CLIENT USE] Reinvestment terms: $9.50 Tax form: 1099 Proposed Liquidation Date: 12/31/11 Tax features: Some sheltering Investment features: 88% of investment goes into investment; 7% preferred annual return & returns of investment 15% of excess to advisor, 85% to investor *IN, IA, MO, KS: not to exceed 10% Liq NW *Chris.ziebrow@cnl.com Ann.evans@cnl.comAnn.evans@cnl.com at 866.809.1237 See also ProEquities Due Diligence Report at www.proequities.com. (Login to Advisor Portal, Choose Due Diligence under the Sales Tab. Click on this product under Direct Investment)www.proequities.com 8
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Create a “ladder” based on anticipated “liquidity events” Propose an evolving portfolio of direct investments Diversified by type of vehicle by sponsor during the buy cycle Combine with traditional taxable income sources Combine with traditional tax-deferred income sources Combine with traditional tax-free income sources 11
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We have talked about meeting income goals Potential to meet goals related to asset growth 12
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Opportunistic REITS Exploratory oil and gas (consider using a series of investments) Limited Partnership Programs (example: Walton) 13
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ProEquities Internal Due Diligence ProEquities Due Diligence ProEquities Product Committee HKFS Due Diligence 14
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Public versus private Income versus growth Traded versus non-traded Reg. D programs Limited number of investors $1MM net worth excluding primary residence State specific requirements 15
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Oil and gas Intangible Drilling Expense (more w/ developmental, less with exploratory) Depletion Allowance Potential Tax Law Changes Land Development No current income Seeking capital gains Equipment Leasing – a residual value play Unlisted REITS sheltered income from depreciation followed by potential capital gains treatment potential for increasing income and valuation LACK OF LIQUIDITY and the risk of loss for distressed sellers in distressed markets EXTENDED HOLDING PERIODS 16
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Non-listed REIT Initial offering 2 to 4 years Income check as soon as 1 month or up to 6 months for partial check (and may be from investor capital during initial stages) Extended second initial offering period 1 – 4 years Offering closed Continuing operation 1 – 3 years Liquidity event Developmental OIL or Gas / Royalties Capital raise 2 to 6 months Deployment of capital up to 8 months Initial check about 3 – 6 months following completion or partial completion of one or more wells Checks may continue for a number of months or up to 30 or 40 years with revenues declining more or less depending on commodity pricing/hedging Leasing program Initial offering of 6 months or less Deployment of capital 6 to 18 months Initial check 3 to 6 months from subscription (may come from subscriptions) May continue 3 – 8 years depending on program design May continue longer if necessary to dispose of specialty equipment 17
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THANK YOU Now for questions… 18
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