Our Company About Us Our Team Brokerage Insights Contact Opportunities Markets Investor Portal Current Investors Prospective Investors Our Company About Us Our Team Brokerage Insights Contact Opportunities Markets Investor Portal Current Investors Prospective Investors More than 2 results are available in the PRO version (This notice is only visible to admin users) Everything is bigger in texas, especially the returns Newsletter written by – richard edison December 1, 2023 Austin, Texas – As the trade routes of the world opened over the past century, we now find ourselves as more of a global economy than a collection of national economies. While much celebrated, this also brings much to be feared. After a 15-year run of near-zero interest rates worldwide, nearly all markets trade at a significant multiple of where they were before the so-called Global Financial Crisis of the late 2000’s. We are now faced with what could be our first global depression – a scary proposition, indeed. With nearly all assets currently overvalued, we find ourselves asking: Where is a safe haven to allocate my assets while still achieving significant gains? $8 trillion in U.S. debt is maturing over the next 12 months. Additionally, the U.S. deficit will grow by about $2 to $3 trillion, and traditional buyers of U.S. debt remain mostly on the sidelines. We are now witnessing failed bond auctions in the U.S. Treasury market, something previously unimaginable. Globally, current inflation and interest rates are skyrocketing to the highest levels in over 15 years. Central banks’ monetary policies have caused tremendous deficits in governments throughout the world, causing massive inflation. We are looking at a tsunami of debt accumulation worldwide, with governments refusing to curb spending. Consumer debt is at an all-time high and the average principal and interest payments on 30-year fixed rate mortgages in the U.S. are up 26% year-over-year. Bankruptcies are up 30% over the 12 months ending September 30th, 2023. 60% of Canadian mortgages are set to come up for renewal within the next three years and homeowners are facing a “payment shock” unless interest rates significantly decrease, according to the Royal Bank of Canada. All nations are being forced to go deeper into debt to save their economies. In addition, the worldwide banking system is on the verge of collapse. U.S. banks alone could be grappling with at least $650 billion of unrealized losses in their securities portfolios, according to an estimate from Moody’s. U.S. interest payments on its debt are at an all-time high, per Reuters. Since 1990, home prices in Australia, New Zealand and Canada are up 532%, 602% and 331% respectively, compared to 289% for the U.S., according to Oxford Economics. Even U.S. Fed president Jerome Powell admits that the global path we are on is ultimately unsustainable. The future is bleak, but the solution is clear. Real assets will stand the test of time. There is a finite amount of desirable land in the world, and it is quickly being scooped up for future developments as populations grow. In early 2007, after selling one of the largest equity trading firms in the world, I set out to find where to safely invest money amidst the upcoming GFC. After consulting with one of the largest real estate firms in the U.S., I was directed to Austin, Texas. With a job market traditionally rooted in government and higher education, this once sleepy college town had lost a large percentage of its employment base by 2004. The table, however, was set for an economic boom of unprecedented proportions, as Austin began actively recruiting tech companies to take advantage of its low cost of doing business and highly educated workforce. Austin and the Central Texas region quickly became a destination for migrating talent. This is due to Austin’s central location within Texas and the U.S., and the fact that Texas is one of the very few zero-income-tax states in the country. In 1999, the population of Austin was 587,000. In 2015, the Austin metropolitan population surpassed 2 million. The decade ending in 2020 saw a 33% population increase. Additionally, the Austin suburbs of Georgetown, Kyle and Leander rank as the fastest growing affordable suburbs in the U.S., with growth rates since 2020 of 26.7%, 23.7% and 22.2% respectively, according to MoveBuddha. Austin is now known as “Silicon Hills,” as many tech companies have relocated operations out of high-tax, business unfriendly states like California. Texas now has more S&P 500 corporate headquarters than any state in the nation. Houston, Dallas, and Austin are now projected to be the three largest cities in the United States by 2050, with Austin’s population projected to reach over 22 million by the year 2100, according to MoveBuddha. My team and I have had tremendous success capitalizing on Austin’s explosive growth, returning 39.1% (annualized, net of fees) in our prior REBEL Real Estate Investment Fund I and 56.5% in our REBEL Qualified Opportunity Zone (QOZ) tax-qualified fund, focused on investments exclusively in rapidly expanding opportunity zones. Both of these funds comprised exclusively of assets in Central Texas and were fully liquidated in mid-2022 in foresight of the looming economic distress. Having sold all legacy assets, we began repositioning for the present opportunity with the introduction of Next Frontier Real Estate Holdings Fund I and QOZ Fund I. These newest Next Frontier funds are positioned to acquire distressed and opportunistic real estate throughout Central Texas, and have remained entirely in cash holdings since opening in early 2023. Being in an all-cash position without legacy assets affords us an unbridled agility to uncover and acquire premier opportunistic deals as they begin to unfold, in accordance with our extremely strict and disciplined underwriting standards. Our target assets include raw and undeveloped land, industrial and data centers, and medium to large size multifamily developments. These are three sectors that will continue to experience growth over the long term as large corporations, their employees, and American families continue to relocate to the region. Promising opportunities have already begun to unfold,Continue reading “December Newsletter – Everything Is Bigger in Texas, Especially the Returns”
Category Archives: Market Update
What is Going on in the Banking World?
Our Company About Us Our Team Brokerage News Contact Us Opportunities Markets Investor Portal Our Company About Us Our Team Brokerage News Contact Us Opportunities Markets Investor Portal More than 2 results are available in the PRO version (This notice is only visible to admin users) what is going on in the banking world? Market Update written by – richard edison March 29, 2023 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. Next Frontier Real Estate Holdings 4700 West Guadalupe Street Austin, Texas 78751 (512) 994-0154 Our Company About Us Our Team Contact Us Opportunities Brokerage News Investor Portal © 2023 Next Frontier Real Estate Holdings, LLC. All Rights Reserved.