Imperium Romanum : While strolling from the Coliseum to the Forum (not in LA) a couple of weeks ago, I was struck by the scale and history of this empire; a 2,500 year run, becoming the most powerful economic, cultural, political and military force in the world around 400 AD; governing 21% or roughly 71 million people on mother earth. At the height of Rome’s power, approximately 1.5% of “elite” households captured about 20% of the Empire’s GDP, while the next 10% captured roughly 20%. The remaining majority produced more than 50% of the empires’ GDP, but lived in poverty. Consequently, no middle class existed and consumers as we know and love them today, weren’t shopping at Armani or Versace! Rome’s landscape is populated with religious and pagan shrines of immortality to its rulers; Not to be outdone by the Pharaohs, Julius Caesar allegedly spent $437.75 (in today’s $’s) per square foot to purchase the real estate around the Forum for an expansion. Caesar was wealthy and could afford it. Maybe it was a frothy market in 702 AD. Certainly free market capitalism had different metrics 1000 years ago, but Stanford’s Center on Poverty and Inequality recently completed a “Wealth Index” study that sorta reflected 400 AD socioeconomics. Big surprise; the team concluded that the top 1% of US individual taxpayers, represent 22.5% of GDP today and had income growth in excess of 31 percent from 2009 to 2012, while income for the remaining 99% grew by 0.4 percent. Why is it that history always repeats itself and has consistently done so over the past 1,312 years? Food for thought– Tiramisu anyone?
IL Papa and the Immobiliari: No that’s not Andrea Boccelli’s new band; Vatican City is ground zero for the everlasting union between the Pope and real estate. Also, a new relationship with Constantine helped a lot. With a bit of historic license, Constantine the Great, was the first Christian Emperor who ruled the “Empire” from 306 to 337 AD and understood the importance of a strong relationship with the “Bishop of Rome”. Relationships are always a two way street, then and now; Constantine donated the Lateran Palace to the Bishop, which later became Saint Peter’s Basilica. In return, the Pope provided Constantine with strong public political support and 7 million dedicated Christian foot soldiers. The alliance worked for a while. As time marched on, the Roman Empire crumbled and the Pope’s political and economic power grew exponentially. Fast forward to 1929, when Benito Mussolini granted complete independence to the Vatican State. According to Fortune, the Vatican is the world’s largest tax haven and the only financial empire that ranks second only to the United States Government in financial clout. There is no doubt, considering the church’s priceless art, land, gold and investments across the globe, it is one of the wealthiest institutions on Earth and Europe’s largest landowner. I think it is safe to say that the Vatican’s real estate holdings, described by many as “Fortress Assets” are irreplaceable and certainly enhance the Pope’s balance sheet; clearly The Vatican is a long term investor; it invest as an institution, on behalf of the institution and not its individuals. The red clad cardinal “fashionistas” residing within the ramparts of their sovereign nation have not lost sight of their political and economic might, and they never sell!!
The Multitudes and Masses-Where’s the Road Less Traveled?: If you are intending on visiting Rome, prepare to feel like a tightly packed sardine, without the oil. While “mosh pitting” my way through the Sistine Chapel, I had an epiphany; the Pope was a very early adopter of what many today describe as “Crowfunding”; they’ve done it by stuffing thousands into a small room to briefly experience Michaelangelo’s greatest work for a small investment- ticket; Instead of a roomful of potential investors, crowdfunding relies simply on the internet. Crowdfunding is rapidly changing the real-estate investment market, offering developers new ways to finance projects, small investors a way in, and the socially conscious an avenue to support their local communities. Private individuals, more than traditional institutional investors, find this avenue very appealing. According to iFunding, “combining commercial real estate with crowdfunding represent an $11 trillion market!” Markley Roderick, the moderator of the “Innovations in Real Estate: Crowdfund Investing” conference in April 2014 in New York City, pointed out that new SEC regulations allow affluent investors (with a net worth of $1 million or more) to gain direct access to the real estate market through crowdfunding, or peer-to-peer lending (among other investment markets). Roderick says that wealthier investors are already investing on crowdfunding sites like iFunding, Realty Mogul, CrowdStreet and Fundrise. Based on Vatican history, crowdfunding has worked really well for the church for quite some time…even without the internet!
If it Ain’t Broke, Don’t Fix It!: As part of DJM’s long term investment strategy to increase our offerings, preserve capital and create wealth, we are launching the following fund which fits nicely into our current multi-tenant retail platform. DJM Capital Partners, Net Lease Fund, LP (the “Company”) is a $200 million dollar fund ($100mm equity + $100mm debt) focused exclusively on the acquisition of approximately 40 to 50 income producing properties with a defined mix of geographic diversity and a selective tenant profile. We believe an opportunity exists to achieve attractive risk-adjusted current returns through intelligent and careful acquisition of high quality, free standing Single Tenant Net Lease real estate. We will leverage Robert Brown, DJM’s Senior VP of Acquisitions’ 15 years’ experience acquiring and owning Net Lease Properties with DJM’s skills at acquiring, operating, repositioning, and developing high quality retail real estate. Target markets include the West Coast States (CA, OR, WA), the Sunbelt States (TX, AZ, FL), and New England. Lease Term and Credit will focus on an average remaining lease term of 10 years, with 50% of the properties S&P BBB- rated or higher. Within the next several weeks, we will be sending out the Offering Memorandum to all DJM capital partners with a follow up early November. You can expect a call from me or Russ McNeill, DJM’s Senior VP of Equity Development- Call me old fashion, but I still believe in the value of personal contact with everyone and am just not ready to abandon relationships for the internet…hard to have a meaningful conversation on Twitter; I think the Pope would agree, don’t you?
DJM Capital Partners, Inc.
D. John Miller, Founder & CEO