Frequently Asked Questions (FAQ)
Q) How can we trust you?
A) FGI has structured these opportunities to offer investor groups a high level of comfort:
Asset titles are held collectively and directly by the investor group through a specially US-incorporated holding company; in other words, all investors will own a pro-rata share of the US LLC which holds the title to the property. FGI will not hold any stake in the property title, directly or indirectly but will be appointed to provide management and advisory services;
Most of the pipeline assets to be acquired by FGI-led investor groups are existing developments with proven and established income streams. FGI believes this compares well with buying off-plan new developments which may have development risks and also can only promise uncertain potential rental income;
Unlike property developers/brokers, FGI does not mark-up on the prices of the real estate, and instead rely on a transparent compensation structure which spans the entire duration of the investment. This ensures accountability and aligns FGI’s interest with that of the investor group to optimize the performance of the investment assets throughout.
Post-investment, FGI will also assist to manage the property for maximum asset-enhancement opportunities and to mitigate any risks.
In summary, investors should derive more comfort investing alongside FGI-led investor groups, as compared to buying a property from a marketing exhibition and/or a property investment fund.
Q) Investing in the US seems very confusing, why should we consider that relative to other overseas locations
Investing in the US requires significantly more time and effort given the myriad of differing tax treatments, regulations, asset types and deal structures across different states. However, the very positive outlook for the recovering US economy over the next 5 years, the relatively strong net rental yields and potential for capital appreciation makes investing in the US real estate a very compelling proposition. In addition, investors may want to invest in the US for risk-diversification purposes.
Investing with FGI removes much of the time and effort that a savvy investor would typically need to make his investments. FGI provides for a single-stop, hassle-free access to superior risk-adjusted US real estate investment for its investor groups. In addition, investing with FGI may offer leverage, not commonly available to foreigners, in order to enhance returns.
Q) I am skeptical. How do we know if FGI can deliver the promised returns?
This is understandable. In this context, it is important to keep the FGI investment criteria in mind. Selected investment targets will have favorable macro economic fundamentals, be a property that has proven and established income track record and have a reasonable level of non-recourse debt financing to enhance returns. In modeling the returns, FGI has adopted conservative assumptions as follows:
Base case Scenario
The base case IRR returns as reflected in the info-memorandums are firstly anchored by proven and strong rental yields;
These cash-flow streams are already existing, immediate and diversified over a broad tenant base. Rent and tenancy demand are underpinned by strong economic and employment growth drivers in the sub-markets selected;
Exit capitalization rates assumptions are very grounded and reasonable, particularly in the context of fast improving US economic situation, housing demand and eventual easing of mortgage financing within the next 5 years;
Rental growth assumption is conservatively pegged at less than existing market growth rates. Through active management and execution of a variety of asset enhancement strategies (e.g asset upgrades, incentive programs, cost reduction, cost reallocation etc), it is very possible to achieve positive income improvement from the property over and above the market annual rent growth;
In summary, the base case capital values are based on very grounded and achievable assumptions, anchored by an already existing strong rental income cashflow.
Q) Do you have an office in Asia? Who do I liaise with?
Yes, FGI has established presence in Hong Kong and Singapore. These offices will allow investors to operate on Asian time and serve as a one-stop conduit for their US investments.
Q) Who do you have on the ground to manage the investment?
FGI has carefully selected strategic local partners in each of its target investment location who will work closely with FGI to manage the properties and also to execute the asset enhancement programs.
These local partners typically share FGI’s investment approach to investments, have extensive experience in managing assets of similar profiles and will be small enough that the key executives are able to keep a close eye on properties under management.
In addition to these strategic partnerships, FGI’s principals will visit each of its properties under management once every quarter. This is to review operations and financial records, as well as to ensure any asset enhancement programs are on track.
