Everything is Bigger in Texas – Especially Investment Returns.
As the trade routes of the world opened over the past century, we now find ourselves 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 new 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% in 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 research firm Oxford Economics. Even U.S. Fed chairman 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, NFREHF founder Richard Edison set out to find where to safely invest money amidst the upcoming storm. After consulting with one of the largest real estate firms in the U.S., he was directed to Austin, Texas. Austin is the state capital, and this once sleepy college town had lost a large percentage of its job 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 a state that is in the middle of the U.S., and the fact that Texas is one of the very few zero-income-tax states in the USA. In 1999 the population of Austin was 587,000. In 2015, the Austin metropolitan population surpassed 2.0 million. The decade ending 2020 saw a 33.0% population increase.
Additionally, the Austin suburbs of Georgetown, Kyle, and Leander rank as the fastest-growing affordable suburbs in the US, 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 tech companies have moved much of their operations out of high tax, business unfriendly states such as California. Texas now has more S&P 500 corporate headquarters than any state in the nation. Houston (Texas), Dallas (Texas), and Austin are now predicted to be the three largest cities in the United States by 2050, with the Austin population predicted to reach over 22 million by the year 2100, according to MoveBuddha.
Mr. Edison has had tremendous success capitalizing on Austin’s explosive growth, returning 38.7% annualized in his prior REBEL Real Estate Investment Fund I and 54.2% in his REBEL Qualified Opportunity Zone (QOZ) tax-qualified fund, focused on investments exclusively in rapidly expanding urban-adjacent opportunity zones. Both of those 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, Mr. Edison 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 any legacy assets affords Next Frontier an unbridled agility to uncover and acquire premier opportunistic deals as they begin to unfold, in accordance with their extremely strict and disciplined underwriting standards.
Next Frontier’s target assets include raw and undeveloped land, industrial and data centers, and medium to large size multifamily. 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 present themselves, with many more to come over the next twelve months as the effects of crippled capital markets continue to permeate property values. Next Frontier is steadfast in opportunity amidst economic turmoil and distress, with the belief that strategic and savvy acquisitions in such time will reward visionary asset managers and their investors.
Utilizing their expansive network of banks, servicers, receivers, brokers and property managers, Next Frontier has the capacity to uncover the best off-market deals and opportunities in the United States’ fastest growing and most promising metropolitan area. They are now welcoming capital injections into their two funds, Next Frontier Real Estate Holdings Fund I and QOZ Fund I, under a highly investor-friendly fee structure.
If you would like to discuss a potential capital allocation or would like to learn more about their offerings, please reach out to Mr. Richard Edison and/or Mr. Zhane Thomas, Director of Operations at Next Frontier, website
https://nextfrontier-re.com/
or you can reach out directly to them via these emails, redison@nextfrontier-re.com and/or zthomas@nextfrontier-re.com
As economic uncertainty continues to boil, fundamental cracks in over a decade of commercial real estate growth are beginning to show. Through the turmoil, high-growth markets like Austin and the greater Central Texas region will have a much greater ability to persevere and adapt into the next generation of real estate expansion and wealth generation. Not only is Next Frontier in an agile cash position without legacy assets, but they have the experience, expertise and connections to navigate and capitalize on the market shifts that loom.
Prepared for the road ahead, the team remains excited to welcome new investors into to the Next Frontier of Real Estate Investing, thank you.
Disclaimer: The information above is a sponsored advertisement on The Baileys and Partners Newsletter. Investment opportunities have risks, and past performance is no guarantee of future returns. Individuals, family offices and corporations should carefully assess their financial circumstances and consult with their financial advisors before making any investment decisions, as the investment opportunity presented herein may not be suited for all investors.
Statements about possible returns or performance are not guarantees and should not be construed as such. Furthermore, the material supplied is not financial, legal, or tax advice and individuals or corporations should consult with their own financial advisors before making any decisions. Individuals or investors are encouraged to undertake their own research and due diligence before making any investment decisions. Thank you.