InDev Capital’s Opportunistic Real Asset Investing Philosophy

In emerging markets at certain times in the business cycles, as well as in developed markets in times of transition or distress, one can find large value gaps and unique opportunities in real asset investments. Due to the large capital required for these types of assets, opportunities arise in times of distress or market changes. During these periods, we find a lack of liquidity and often a much higher cost of capital than during normal times. This unique time in specific markets can create significant pricing gaps, purchases at discounts to replacement costs, demand for capital larger than its supply, increased investor negotiating leverage, and high cash yields. Dislocations are often an investor’s best friend.

Our Opportunistic Orientation has the Following Pillars

Focus on Risk First – When looking at an opportunity, we start off with its risk.  We try to understand first where an investor can get hurt before we determine how much said investor can gain.

Purchase Below Replacement Costs or Lend with a Clear Yield Spread – Protection of downside via purchasing well below replacement costs or lending at low loan-to-value ratios allows for going-in cap rates to be improved in a better market environment. In addition, this creates an opportunity for a sale to a lower cost of capital investor. 

Optionality in Returns – We work to find opportunities that have the possibility to increase returns post-investment.  This may occur through additional available square meters to build or land to farm and harvest, strong going-in yield combined with vacancy or additional capacity to boost returns, a unique demand story, or a specific change or improvement in the asset that can create additional upside, cash flow, and value. 

Cash Yield Spread – We try to invest at a 100 bps to 300 bps+ cash yield spread to what assets are trading at that time in the market.  We do this through a rapid ability to close and unique access and contacts in our respective verticals.

Comparable Assets – It is very difficult to make money if an investor allocates capital incorrectly.  If an investor cannot exit, the best valuation at time of purchase does not generate a healthy return. InDev focuses on comparable transactions on a given asset or security in the current market environment. We always work to make sure that we have a current yield spread and investment valuation and cost basis “per pound” that is value-driven based on today’s assets.

Co-investment –  InDev only works on transactions where our team is active in the investment strategy and is putting up between 5% to 15% of the capital.  We believe this alignment is critical.

Deal Sources for Opportunistic Returns 

Our investment opportunities are usually the result of motivated sellers in the following situations:

• Liquidity Issues (corporate or individual)
• Sector-oriented secular growth
• Forced selling based on bank pressure
• Bankruptcy
• Fraud
• Legal challenges
• Distress in seller’s operating company
• General distress
• The commonality is a motivated seller