Austin, Texas – What is going on in the banking world? Is my money safe? Where do I invest for safety?

 These are the questions all investors are asking themselves after the second and third largest banking collapses in our nation’s history. 97% of Silicon Valley Bank’s accounts were over the $250,000 FDIC protection limit, and the government has now stepped in to “backstop” all depositors. Earlier this month, Silvergate Capital and its wholly owned affiliate, Silvergate Bank, collapsed after taking risks such as loaning money on cryptocurrencies. When forced to liquidate its U.S. government bond holdings, they quickly realized that those bonds were worth only a fraction of their face value, as interest rates have skyrocketed since their purchase. Bonds hold an inverse relationship to interest rates. When bond yields go up, bond prices go down. When you hold a 3% bond and that same bond now pays 6%, the value of your 3% bond is now a fraction of what it was. The same goes for 3% mortgages, which many banks underwrote for the last several years. They are sitting on these 3% mortgages at their full value, not marked to market. 

For nearly a year now, we have been warning of the impending crisis ahead of us. We have set up two funds, Next Frontier Real Estate Holdings Fund I and Next Frontier Real Estate Holdings QOZ Fund I, to take advantage of this financial environment. Starting earlier this year, we began raising capital for these funds, both of which are still open and will soon cap at $50M each. If you have not yet invested, we highly suggest you consider doing so now. 

The QOZ multifamily investment in Taylor, Texas that we were considering has been scrapped due to an inability to find a price that both we and the developer can agree on. However, we believe that prices will continue to drop as developers navigate a difficult lending environment. In addition, we expect to uncover many other fruitful opportunities in the very near future. Through my 30 years of investment and asset management experience, including over two decades on Wall Street, I have never seen a greater opportunity than the one that lies ahead of us now. We have honed our skills, understand the dynamics of our local market, and remain prepared to pounce on the right opportunities. 

Profligate government spending and years of “quantitative easing” has basically loaned money to banks at nearly 0% interest. The printing of money at a record pace on top of rampant federal spending has driven inflation to 40-year highs and our national debt to $32 trillion. Now, we have a banking crisis caused by the risk assets those banks underwrote. This was exposed by last week’s “bank run” on SVB. What else can result from this? Banks only hold a small percentage of deposits, and if everybody tries to get their money out at once, they will not be able to oblige. 

We will now see a market where banks must sell assets to shore up their balance sheets. Many of those assets will be backed by real estate. We feel that real estate in Central Texas will hold its value much better than almost any other locality. Why? Demographics. Through population growth and corporate relocations, the Austin MSA continues to experience explosive expansion. 

When I sold my firm on Wall Street over 16 years ago, it was because I foresaw the mortgage collapse and decided to liquidate all risk assets. I moved all of my personal assets to cash and watched the world fall apart, and the subsequent government bail-out of those who put us in the position of failure. The banks and their executives received a reward for a job that could not have been done worse. At the time, I was unaware of the substantial opportunity in the Austin real estate market. We are seeing this same movie over again. 

At Next Frontier, we started over a year ago positioning for this exact opportunity. Last year, we sold all property assets under our previous REBEL Fund I & QOZ and returned all investor capital at an average IRR of 48%, net of fees. We then restructured, repositioned, and prepared our opportunistic and distressed asset funds. 

Please join us, as we will be closing to new capital once we have reached $50 million in each fund. We do not have legacy assets, properties, or loans that we need to unwind. We are completely 100% liquid and nimble, with the ability to invest at any time. If you have not yet invested, we advise you to do so now. If you would like to invest or would like more information on each fund – including details on past fund performance – please access our public deal room here. We welcome you on what will be a very exciting journey and we look forward to abundant success as your guides through this tumultuous environment.