Mercy, Mercy Me… Things Ain’t What They Used to Be! Thank Marvin Gaye and His Lordship of the Manor of Bigbury, Nick Johnston; Whether it’s about global warming referenced in this popular song from the early 70’s or comments from my British friend, “America has gone mad!!”; Our politics and economics continue to amaze and confound millions around the world; from the “theatre of the absurd” presidential campaign, to our $18.8 Trillion national debt. In fiscal year 2015, the $3.8 Trillion federal budget is roughly 21% of the U.S. GDP, which equates to roughly $56,378 per individual. According to Bloomberg, it took the country 205 years of independence from the “no taxation no representation imperialist power to the east”, to accumulate its first trillion dollars of debt in 1981, but has only taken 403 days to accumulate our latest trillion. Which explains why Nick waives the Pound Sterling “in my face” touting it as the most valued currency on the planet (not true ‐4th place). And, he laughs and delivers sarcasm as only the Brits can, at our political process, debt and deficits and our “exaggerated sense of entitlement”, whatever that means. It’s always fun to joust and defend the US of A, particularly in light of Lord “Fluffy’s” cultural hubris.

“God Save the Queen”:  By contrast, current UK debt is £1,542.6 trillion or 81% of GDP: a bit less than the GDP of the state of New York. Which may explain why investors in the international community view the UK as a safer haven than the US for parking capital based on debt load alone. Subject to more debate. Nonetheless, Bob Brown, DJM’s head of acquisitions, response to this back and forth was that “Apple should just buy the country and park their billions to help them out (and avoid US taxes); and if you think Trump’s nuts, at least we don’t have a queen…Food—what! Who wants to live on bangers and mash‐‐‐to say nothing about sucky weather…”.Something pure about Yankee perspective. Plus, Brits making over £150k are automatically taxed at 45%, plus a 12% “National Insurance Tax” to pay for health care, social security, state pensions and a 21% value add tax on consumption. I presume that tax deductions are not nearly as favorable in the UK as here. Even with all our flaws as a nation, America is not financially underwater, coming to an end or hijacked by a demagogue. Last time I checked, we have an open election process, freedom of speech‐a solid Bill of Rights, a growing economy with 5.5% national unemployment, and the #1 GDP in the world based on current value—and the largest repository of foreign capital invested in our treasury bonds anywhere else in world; like $6.1 Trillion according to the US Treasury; all very positive and the envy of many across the pond. Just not Fluffy!

Capital Flight on Steroids: Gulen Movement anyone? No, it’s not a diet. Does Turkish Islamic scholar and preacher Fethullah Gulen, and resident of Massachusetts ring any bells? What does this have to do with DJM Capital Partners? Not long ago, I was engaged in a lengthy meeting with several very successful Turkish real estate developers and investors. We were discussing the merits of investing in US commercial real estate through DJM’s various platforms; net lease fund, multi‐ tenant property partnerships, our preferred equity and mezzanine financing opportunities. I was surprised by the depth of their interest. After several months and many conversations later, I understand their motivation.

Be Careful What You Wish For: Of course, depending on who you talk to and believe, some describe the Gulen Movement as a collection of like‐minded, an almost apostle‐like group of students, teachers, businessmen, academicians, journalists and other professionals, who believe in rigorous academics. The movement is active in education with private schools and universities in over 180 countries as well as many American charter schools. Some describe the movement as a pacifist, modern‐oriented version of Islam, which advocates for science, interfaith dialogue, and multi‐party democracy.

Play Nice in the Sandbox or Else!: The alternative view is that the movement is nothing more than a murky terrorist organization bent on overthrowing the government of Turkey. The group is accused of engaging in illegal wiretapping, blackmail and issuing terrorist threats. As a consequence, followers of Mr. Gulen, are under intense scrutiny by the Turkish government, including the president and security agencies, making their business and personal lives very uncomfortable. Many of the followers manage vast amounts of commercial real estate, businesses and fortunes. I’ve recently learned that the group of Turkish investors who I met in December are close to the movement. In my constant quest to identify suitable equity for DJM’s platforms, I am fascinated by the complexity of many foreign equity investors and the political, social and economic landscape they navigate just to deploy capital. We take our freedom to invest for granted; not the case for everybody. Obviously, capital flight is a fact of life for many not so fortunate to be citizens of the US or the UK. Much of this Turkish capital is coming to the US, with a heavy emphasis in commercial real estate. At what point will any of us view our country as hostile to our capitalistic endeavors and essentially create an exodus of US capital abroad? I think we have at least 6.1 trillion reasons why this won’t happen.

Let’s Get It On!: So what does all this mean? Like so many things in life, people get distracted and lose focus on what are the priorities. A bit philosophical, nonetheless, DJM Capital Partners has experienced consistent growth, a legacy of quarterly returns for over the past 20 years and is generally thriving with its core mission to create wealth through real estate for all its partners. We are not hampered or hamstrung by taxes, political pressure, intimidation or even mild forms of socialism, as my buddy Nick fails to acknowledge in the land of Queen Elizabeth. As crazy as the political process appears to be here at home, we are the beneficiaries of hard won personal and civil liberties that allows those intrepid souls to take risk and enjoy its rewards. The real question to ask is where are we in the recovery cycle? Many of our investor partners are tightening up their underwriting and pulling back from acquisitions based on much broader global events in Europe and China. Are core real estate asset values in a bubble? Probably. How is DJM responding?—as we always do‐“be patient and be smart”. Interest rates will continue to remain at historical lows easily for the balance of 2016. Over the next couple of months, DJM will be closing nearly $200 million in refinancing in the low 4% range. Who would have predicted that interest rates in 2016 would be where they are? Nobody, because human behavior, and by extension, politics and economics cannot be reduced to an algorithm. Which is why I like the direction of our market; a bit of fear imputes a bit of reality, and pricing that makes DJM a player. Ok then, Kebabs & Bangers anyone?


Take care,

DJM Capital Partners, Inc.
Asset Manager

D John Miller, Founder and CEO of DJM Capital

D. John Miller, Founder & CEO