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McKee Private Capital is the investment arm of McKee Asset Management. We specialize in the
acquisition, management and leasing of multi-family residential communities throughout California
and the United States. Through this division we form and operate private investment partnerships
comprised of individual investors who invest alongside us in these private offerings.
Since 1982, we have represented hundreds of investment clients. With over two decades of experience
in the property management industry, we have the expertise to analyze each investment opportunity not
only from an acquisition standpoint, but more importantly from a property management and leasing
perspective. When you invest with us, we manage all the details of the investment.
By design, our private investment groups are usually comprised of between 2 and 10 investors. Many
of our programs are open to investors with minimum investments as low as $100,000. We place our
primary emphasis on preservation of capital, and limit our risk exposure accordingly. Our performance
history is provided in the accompanying documentation for your review.
The popularity of private real estate investment groups has increased dramatically over the past few
years. This trend has been attributed primarily to investor preference for real estate investments
over equities and bonds due to real estate’s more secure and predictable cash flow and appreciation
over time. The tech stock melt-down of 2000 left many investors embittered as the result of the
massive losses suffered by the small investor. The sub-prime mortgage melt-down of 2007 has provided
renewed strength in the multi-family investment markets, as more and more Americans are forced back
into the rental market, as the result of a more challenging home mortgage market. We believe that
multi-family housing continues to represent one of the best investment vehicles available.
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We travel throughout the United States in pursuit of the best investment opportunities. By
conducting extensive market and demographic research, we identify regions of the country that
offer real estate investors an opportunity to achieve superior performance over time. By entering
new markets before they become exploited by excessive investor demand, these investments will
traditionally offer better value, with less risk.
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McKee Private Capital’s investment philosophy requires that it invest alongside its investors, putting its own
investment capital at risk. This approach puts us on the same course with our investors, which
builds compatible goals and objectives. Many institutional real estate syndications put little
or none of their own capital into their offerings, therefore taking little or no risk in the outcome
of their investment choices.
McKee Private Capital’s investment offerings fall into three broad categories:
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This investment is expected to appreciate in value over time. This is the primary objective of the investment. Current income from this type of investment is usually minimal or non-existent. |
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This investment is expected to produce distributable income from operations at regular intervals. This is the primary objective of the investment. Appreciation in value from this type of investment will be a secondary benefit, and in some cases will be minimal. |
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This investment is expected to produce moderate income from operations, plus appreciation in value over time. This is our most typical scenario. |
Each type of offering presents investors the opportunity to earn attractive, risk-adjusted returns
through the ownership of select, investment grade real estate.
In order to achieve superior returns on invested capital, we follow a disciplined selection
process aimed to identify those opportunities most likely to offer the greatest return on equity
over time. The following criteria are considered in this selection process:
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Acquire quality real estate assets located in good or improving locations. |
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When possible, acquire undervalued assets at or below replacement cost. This approach limits downside risk in a declining real estate market. |
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Acquire real estate assets that require repositioning in the marketplace. Enhance performance through improved management systems and innovative leasing solutions. |
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Real estate is a cyclical business, accentuated by growth and expansion, followed by contraction and recovery. Invest in markets where anticipated cyclical recoveries will provide opportunities for outsized returns on equity. |
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Acquire distressed, overleveraged assets at wholesale prices. Re- capitalize the asset with more moderate debt structure to obtain maximum return on equity. |
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While projected investment holding periods will vary, our private real estate offerings are
generally designed to be liquidated within 60-120 months following acquisition of the asset(s).
The projected holding period for each investment offering is specified in the offering memorandum.
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Investment Units are priced at $1,000 per unit. Minimum investment requirements vary based on the size of the offering, but are generally established with a minimum of 100 units, or $100,000 per investor. |
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Our investments are classified as private offerings, pursuant to Rule 506 of Regulation D as defined by the United States Securities Act of 1933, and are available only to accredited investors. |
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Unlike many other public and private real estate offerings, our offerings minimize marketing and organizational fees by raising all capital internally, without the use of broker-dealers. Our Acquisition and Organizational Fees generally do not exceed 5.0% of the total capital contributions. |
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Because investors goals and objectives change over time, our offerings are designed with shorter maturities as low as 60 months. |
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Real estate investments offer potential tax benefits. Generally, a portion of the profits earned by McKee Private Capital’s offerings are generated from capital appreciation, and therefore taxed at the preferential long-term capital gains rate. Additionally, our offerings may also benefit from tax deferral through the use of tax-deferred exchanges whenever the investment group chooses to re-invest again within the same entity. In some cases, the entity may be modified just prior to disposition to enable individual investors to complete individual tax-deferred exchange transactions on their portion of the distributable profits. Each investor's tax situation is unique. Please consult with your tax professional prior to investing, to ensure that this investment is suitable for you. |
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Real estate offers the potential for both income and value appreciation, and provides capital
preservation through the ownership of tangible assets. Also, diversifying an investment portfolio
with real estate allows investors the ability to offset volatility in the stock and bond markets
and increase overall portfolio returns.
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Modern portfolio theory and empirical evidence suggest that diversifying an investment portfolio
with real estate offers the potential for higher returns at any given level of risk and market
condition. The following table illustrates that a portfolio including real estate as an asset class
can deliver superior returns with lower risk.
Prudent investors periodically rebalance their investment portfolio within each asset class, particularly when investing in cyclical assets such as real estate. Identifying mean-reverting assets (those assets which have declined in value to or below the mean historical return) is an important step in rebalancing an investment portfolio. Investors wishing to rebalance their real estate allocation might benefit from reducing exposure to highly appreciated real estate holdings in overheated real estate markets (held either individually or in publicly traded REIT’s), and re-invest in value-oriented properties researched and acquired by McKee Private Capital.
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Regardless of market conditions, in good times or bad, real estate markets are inefficient when compared to the equity and bond markets. Whereas these markets tend to be fairly valued at all times, real estate markets are more fragmented, and therefore present opportunity for the diligent investor who can capitalize on market inefficiencies.
Although less liquid than publicly traded REITS, private real estate investments offer several advantages over private and publicly traded REITS:
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Because many private REITs are distributed through broker dealers, investors pay high front-end marketing loads. These excessive fees reduce actual invested capital by as much as 10%. |
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Public and private REITs tend to be poor growth vehicles because they are required to distribute 90% of net income, therefore limiting their ability to invest in value-adding capital improvements. |
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Typically, publicly traded RElTs cannot take advantage of deeply discounted, under-performing assets. This is due to the REITs need to produce immediate dividend income which is essential for them to attract new equity. While dividend income may be attractive to investors, many compelling investment opportunities require that available cash flow be re-invested back into the property to increase value, and ultimately deliver capital gains far greater than the dividend income that would have otherwise been produced. |
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Stock prices of most publicly traded REITs tend to reflect movements in the overall equity markets rather than the underlying property value. Private real estate investments are largely unaffected by the erratic volatility of the stock market. |
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REIT’s, often flush with cash from new investor capital are compelled to invest this capital as quickly as possible in order to begin distributing dividend income. As a result, they are at times prone to overpaying for assets. |
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Not withstanding cyclical variations due to supply and demand imbalances, in the long run, rents, values, and the replacement cost of real estate improvements rise in line with inflation. This makes real estate investing a particularly effective hedge against inflation, and should be a key component in any well-diversified investment portfolio.
In the current interest rate environment, private real estate investments typically offer higher overall yields than many fixed-income securities.
Real estate is also far less volatile when compared to many equity investments. As reported by the National Property Index (prepared by the National Council of Real Estate Investment Fiduciaries - NCREIF) the standard deviation of private real estate returns was 5.9% compared to 14.4% for the S&P 500 over the past 25 years.
The McKee team is comprised of real estate professionals with extensive industry experience spanning over 25 years. They have navigated many real
estate cycles, in both up and down markets. Specializing in the analysis, acquisition and management of real estate investments, we have represented hundreds of investors in the achievement of superior investment returns.
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Russ McKee, founder and Broker-Owner of the company, has been a licensed California real estate broker since 1980. As an active manager of
day-to-day operations, Mr. McKee has achieved considerable expertise in the fields of asset management and investment brokerage & exchanging.
His education includes B.S. and M.B.A. degrees in marketing and finance. He has achieved the distinguished CCIM designation, awarded in 1994 by
the Commercial Investment Real Estate Institute of the National Association of Realtors. He has served both as Treasurer and Director of the
Coronado Association of Realtors, and is past Secretary and Director of the San Diego CCIM Chapter. Mr. McKee is married, and has four grown
children who also work for the company in various capacities during summer breaks from college. His family resides in Coronado, California.
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