Newport Beach, Ca. November 22, 2016. Black Swan Advisors (BSA), long known for its in-depth review of the financial condition of the home building industry, has recently completed a similar study of the Non Traded Reit Industry (NTRs). As part of that NTR Study (Study 1), BSA has reviewed the population and job growth records for those states which are at the heart of the investment strategies by many of the NTRs. This report constitutes Study 2 and should be used in conjunction with better understanding Study 1.
Part of the investment strategy of NTRs has been to acquire projects in faster growing states with much higher capitalization rates so that higher dividends could be afforded. BSA has acquired population and job growth statistics from the Bureau of Labor Statistics for the period 2010 thru 2015, the latest data available. From the various property data available in the 10Ks and other public filings of the NTRs we have been able to identify the most frequently chosen state markets (target states), which led BSA to formulate the attached chart.
This chart demonstrates the following for the 5 year time period referenced:
- The top 15 target states experienced a 5.71% growth in population while the lower 20 states experienced a 2.6% growth in population over the same time period.
- The size of the labor force in the top 15 states grew at a rate of 3.3% while the lowest 20 states had a 1.3% growth rate.
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Given the significant differences in these growth rates these trends are well in hand and should be continued for the foreseeable future. Demographic trends do not turn on a dime. What is important here is that not only are people and jobs moving, but so are politics and money. 70% of all states now have a majority of GOP control of the 2 state houses, the governorships, and federal positions such as congressman and senators.
As reported in Study 1, the evidence suggests that this population movement is inspired by several very real economic conditions as follows:
- Better job opportunities as provided in Right to Work states
- Lower costs of living across the full spread of these states
- Lower combined tax rates, including a combination of income taxes, estate taxes, property taxes, sales taxes, and others as applicable.
- A much lower level of regulatory control by legislatures
- Balanced budgets in many of these states, indicating that future tax rates are unlikely to rise as much in the other states
In summary, NTRs have been investing in faster growing states with more stable politics in place. Hence the state GDP of each of these states should grow at a fast rate than the US rate, currently at 1.2 to 1.5% per annum.
Based on this Study, BSA has identified a number of strong new opportunities to invest in NTRs. Interested parties should contact BSA for further discussions regarding these opportunities.
On a very limited basis, BSA may be able to assist current retail investors with liquidation or other investment strategies.
The BSA Study is not publicly available, and may only be accessed as a client of BSA.
For additional information, contact;
Charles J. McLaughlin
President
cjm@blackswanadvisors.net
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