October 13, 2023
Recessionary Acquisitions: Investing For The Upside Of Downturns
Forbes Small Business Recessionary Acquisitions: Investing For The Upside Of Downturns Patrick Grimes Forbes Councils Member Forbes Business Council COUNCIL POST Expertise from Forbes Councils members, operated under license. Opinions expressed are those of the author. | Membership (fee-based) Oct 13, 2023, 10:30am EDT | Share to Facebook Share to Twitter Share to Linkedin Patrick Grimes is the founder of Invest on Main Street , a private equity firm managing passive multifamily investments in emerging markets. getty As an investor with a diverse portfolio and in-depth real estate industry experience, I have navigated many economic "roller coasters." And I've always found that downturns, despite their challenges, provide a unique opportunity for rapid portfolio growth. Based on my experiences, here's how to unlock the opportunities that exist during downturns, with some practical strategies for using recessionary acquisitions to do so. A Proven Strategy: The Tortoise, Not The Hare My experiences have taught me the importance of cautious, strategic investing. This means not speculating on pre-development or new construction in boom economies, but instead focusing on recession-resilient markets, existing construction and consistent cash flow. The key is to invest like a tortoise, not a hare. By prioritizing a cautious approach and embracing lower leverage, I found success. From a single-family portfolio, I founded my company, scaled up to larger multifamily apartment complexes, and built a recession-resilient and asset-protected portfolio for investors to diversify their retirement investment strategy. MORE FOR YOU Warren Buffett Revealed To Be Quietly Making Bank From Bitcoin And Crypto Amid Price Swings How Much Has The Cost Of Living Really Increased In 2023 Trump s SPAC Loses Nearly 200 Million In Stock Purchase Deals Navigating The Current Economic Landscape Today's economic landscape has been reshaped by diverse factors and unique challenges for investors, including: • The Covid-19 pandemic. • Surging inflation. • Escalating material and labor costs. • Rising interest rates. • Decreasing property valuations. • Surging insurance premiums and taxes. • Increases in delinquencies. • Extended eviction processes. These shifts, though troubling, highlight the importance of a diversified portfolio and the need for strategic and thoughtful investment approaches. Unlocking The Upside During Downturns: Recessionary Acquisitions One of the crucial lessons in navigating downturns comes from Warren Buffett: "Be greedy only when others are fearful." I have always hated that quote because the engineer analyst in me wants to not be greedy or fearful, but instead be calm and calculated in my analysis of opportunities. But Buffett's remarks are correct, and times of economic fear are fertile grounds for great deals. During earlier economic downturns , investors who emerged victorious often had a common strategy: They made their returns on the initial buy, focused on distressed operators, not assets, and traded forward quickly. Here are the seven steps of recessionary acquisitions: 1. Immediate Cash Buys The strategy kicks off with a cash buy, allowing investors to quickly seize distressed assets at the most advantageous terms. Cash purchases often provide the buyer with greater negotiating power and eliminate the extended timeline and uncertainties associated with trying to get a loan in a volatile debt market. This quick initial cash outlay provides the best basis for future transactions, thus setting the stage for rapid expansion. 2. Quick Refinancing Almost as soon as the first asset is acquired, the next step is rapid refinancing. By doing this, investors can free up their initial capital investment without waiting for the long-term appreciation of the property. This liquidity is critical to the strategy's speed, enabling the investor to move on to subsequent acquisitions. 3. Purchasing The Second Asset The capital freed from the refinance doesn't sit idle; it's immediately used to purchase a second asset, also in cash. Again, cash transactions are key to this strategy, allowing investors to secure favorable deals swiftly. 4. Sale Of The First Asset As soon as the second asset is in the portfolio, the first asset is sold. The idea here is that if the investor has made their return on the initial buy—thanks to the favorable terms the cash purchase secured—they don't need to hold on to the property for the long term. With minimal effort, investors can swiftly liquidate and move on. 5. Utilizing 1031 Exchanges On selling the first asset, a 1031 exchange is initiated. This tax-deferral mechanism allows investors to roll the proceeds from the sale into the purchase of a third asset without incurring immediate capital gains tax. This exchange isn't just a tax-saving mechanism; it's a critical wealth-building tool that allows investors to continue growing their portfolios. 6. Multiplying Assets By repeatedly applying this method, investors can quickly turn one property into two, then two into four, and four into eight very quickly. This high-velocity strategy stands in stark contrast to traditional long-term buy-and-hold methods. Rather than waiting for the asset to appreciate—or investing in costly improvements that may not keep pace with deflating market prices—the emphasis is on quick, calculated moves to step up portfolio growth at each acquisition. 7. Rapid Portfolio Diversification The result of this high-velocity strategy is not only rapid growth but also rapid diversification. With each new asset acquired, the portfolio becomes more diverse, helping to spread risk and protect against market fluctuations. Timeless Investment Principles—Even In Recessionary Times It's important to note that the risks are very great if you are not careful and do not structure your investments correctly. Many things can go wrong if you don't follow the principles and end up being the distressed owner that you are buying from in a downturn. Despite the changing economic climate, certain traditional investment principles remain crucial. One of the most fundamental is maintaining healthy cash flow. Although generating considerable cash flow today might be challenging, it can be achieved by adopting an investment strategy that prioritizes the swift expansion of holdings. It is also critical to maintain a low loan-to-value ratio on refinanced loans, limited to around 50% to ensure stability in cash flow and valuation during short-term holds. Securing adequate insurance and reserves and investing in recession-resilient asset classes and markets adds another layer of security. These principles, when combined with a strategy focused on swift capital expansion, can offer rapid and diverse portfolio growth. In this way, economic downturns are not dead ends; they are detours to better opportunities. Embrace them and make the most of your investments. While the journey may be difficult, the rewards are undoubtedly worth it. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation. Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify? Follow me on LinkedIn . Check out my website . Patrick Grimes Editorial Standards Print Reprints & Permissions
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Star Wars Director Says It's About Time A Woman Makes A Star Wars Movie
Jan 02, 2024
Oscar-winning documentary filmmaker Sharmeed Obaid-Chinoy is directing an upcoming Star Wars movie that brings back Daisy Ridley in the role of Rey. Obaid-Chinoy will become the first woman to direct a Star Wars film, dating back to the franchise's origins in the 1970s. Speaking about this, Obaid-Chinoy told CNN that she is "very thrilled" to make the movie and create something that is "very special.""We're in 2024 now, and I think it's about time we had a woman come forward to shape the story in a galaxy far, far away," she said.Obaid-Chinoy won Best Documentary, Short Subjects Academy Awards for Saving Face (2012) and A Girl in the River: The Price of Forgiveness (2015).In 2020, Lucasfilm boss Kathleen Kennedy told the BBC that a woman would eventually direct a Star Wars movie, saying that would "absolutely" happen, "without question." Victoria Mahoney was a second unit director on The Rise of Skywalker, but a woman has never claimed a top directing credit on a Star Wars movie.On the TV side of things, The Mandalorian has featured a number of female directors, including Deborah Chow and Bryce Dallas Howard. Chow went on to direct the Obi-Wan TV series, too.Another high-profile franchise that has never had a female director is James Bond. Producer Barbara Broccoli and Skyfall director Sam Mendes have both said they want to see a woman direct a future 007 film.As for Obaid-Chinoy's Star Wars movie, little is known about it apart from the fact that Ridley will come back to play Rey. It is expected that this film will be the first of the three new Star Wars films to come to theaters, possibly releasing in December 2025.According to a report, Peaky Blinders creator Steven Knight is writing the Rey movie, taking over for Damon Lindelof and Justin Britt-Gibson.
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NBA Names Clare Akamanzi CEO Of NBA Africa
Jan 02, 2024 15:29
The NBA named Clare Akamanzi – an accomplished business executive and international trade and investment lawyer – as CEO of NBA Africa. Akamanzi will start her position on Jan. 23, 2024, and report to NBA Deputy Commissioner and Chief Operating Officer Mark Tatum. In this role, Akamanzi will oversee the NBA’s business and basketball development efforts in Africa and will be responsible for continuing to grow the popularity of basketball, the NBA and the Basketball Africa League (BAL) across the continent, including through grassroots basketball development, media distribution, corporate partnerships, and social responsibility initiatives that improve the livelihoods of African youth and families. For the last six and a half years, Akamanzi was CEO of Rwanda Development Board (RDB), where she spearheaded Rwanda’s economic development by enabling private sector growth. Under Akamanzi’s leadership, RDB implemented several business policy reforms and initiatives that led to significant investment and development for the country, including through partnerships with the BAL, Arsenal FC, Paris Saint-Germain FC, FC Bayern Munich and TIME Magazine, among others. “Clare’s business acumen, international experience and familiarity with basketball and the NBA make her the ideal executive to lead our business in Africa,” says Tatum. “NBA Africa and the Basketball Africa League are well-positioned for continued growth, and under Clare’s leadership we believe these initiatives will transform economies, communities and lives across the continent.” “I’ve seen firsthand how sports can positively impact businesses, families and communities in Africa, and the NBA and the BAL are a perfect example of that,” says Akamanzi. “The NBA has done an incredible job growing basketball and the economy around it across the continent, and I’m excited about the enormous opportunities ahead to build on that momentum.” Previously, Akamanzi was Chief Operating Officer of RDB and Head of Strategy and Policy Unit, Office of the President of the Republic of Rwanda. She has extensive international trade, business and diplomatic experience, having previously worked for the Rwandan Government at the World Trade Organization in Geneva, Switzerland and at the Rwandan Embassy in London, England. Akamanzi has worked or studied in seven different countries and holds an honorary LLD from Concordia University in Montreal, Canada, in recognition of her work in Rwanda. She earned a master’s degree in public administration from Harvard University’s Kennedy School of Government in Cambridge, Massachusetts, where she was the recipient of three prestigious awards for academic excellence and distinguished contribution to the community: the Lucius N. Littauer Fellows Award, the Raymond & Josephine Vernon Award and the Robert Kennedy Public Service Award. In addition, Akamanzi holds a Master of Laws degree in international trade and investments from the University of Pretoria in South Africa, and a Bachelor of Laws degree from Makerere University in Kampala, Uganda. Akamanzi has served on several company boards, including the World Health Organization (WHO) Foundation, ECOBANK and Aviation, Travel and Logistics (ATL) company. She was recognized by Forbes as one of Africa’s Top 50 Powerful Women in 2020.
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