NEW ENTERPRISES (Creating new enterprises to solve problems)

We can help investors organize the following key enterprises which serve housing markets and enable them to develop in a sustainable way.

• 1 - Specialized (Primary Market) Mortgage Lending Enterprise:

  • Many emerging markets have strong (well-capitalized and well-supervised) banking systems. And there is no reason why banks cannot be effective and competitive mortgage lenders. However, we have seen many cases where banks just do not have a focus on mortgage lending for a variety of reasons;
  • In such cases, there is often a very significant entrepreneurial opening for a focused (residential, but commercial is also recommended) mortgage lender.
  • We are expert in planning such an enterprise, in designing a workable business plan, and in helping implement the plan.
• 2 - Secondary Mortgage Market Company (SMMC)

  • SMMCs are best understood as the bridge to the capital markets. Such companies connect mortgage originators with investors who have long-term investment horizons and prefer to invest in high quality, ratable asset-backed securities;
  • SMMCs thrive in operating environments where mortgage production stands to be high and where banks and other mortgage originators are under pressure to manage their asset-liability mismatch;
  • SMMCs are adept at standardizing the key aspects of mortgage lending;
  • SMMCs are adept at issuing mortgage-related securities or can lead investment banking firms in this field;
• 3 - Real Estate Investment Trusts (REITs)

  • REITs are pass-through investment vehicles, and the type of REIT we want to advocate for primarily is the equity REIT. The “passthrough” feature means that the REIT, by enabling law, must pay out to its investors ninety to ninety-five percent of its net earnings in the form of dividends. The REIT who observes this rule does not pay income tax, but, rather, the investors who receive dividends pay income tax. This “pass-through” feature avoids double taxation and makes the REIT vehicle more financially efficient.
  • REITs own income-producing real estate. The rents from such properties generate gross income for the REIT, and the net income (gross income less relatively small operating income) is passed-through to investors. Income-producing real estate can encompass a wide range of possibilities: shopping centers, office buildings, warehouses and industrial parks, and affordable housing which is rented out to tenants. A REIT focused on housing for rent is a “residential REIT”.
  • Investors who invest in REITs are looking for high quality assets, have low risk tolerance, need to receive bond-like returns (which often exceed government and corporate debt securities), and prefer rated and listed securities because they are easy to mark-to-market and for liquidity characteristics. In addition, investors also like the capital appreciation “sweetener” that comes when the underlying real estate is turned over at a profit over acquisition cost. REITs have been described as “securitized real estate”.
  • We advocate residential equity REITs for emerging markets (and we can help structure, organize and establish them) because they serve the role of being large off-takers for housing production. At the same time, they offer households currently living in sub-standard housing a rental or rent-to-buy alternative option to affordably improve their housing situation without resort to outright home purchases. In this role, residential REITs bring a modern housing tenure solution to households who cannot afford to purchase or who prize their mobility.