Investor Impressions From The Stella Capital Visit In Asia

We went to several countries in Asia last week market sound our distressed real estate strategy. We probably had 30 one on one meetings, plus a presentation to over 60 people in a five star hotel conference room. Everyone "gets it". There is not alot of rocket science to what we are doing.......we're buying great properties, great locations at a severe discount.

Probably the only objection or concern that we had could be summed up with this question. "Why would I want to own a building all the way in California at 30% off when I can buy a newly built building here in Malaysia at 50% off?"

My Answer is in two parts:

1)Safety. Lets say the world economy gets worse, I feel that property in select areas of California would take less of a hit than a property in Malaysia. With a value/distressed strategy such as ours, the most difficult thing to do is to pick the bottom. No one can do that. But we are attempting to buy properties in the bottom segment of a real estate cycle, if our timing is off slightly, I'd rather have the cushion of owning a high quality property that will not get beat up so bad. We can all take a 5% to 10% price decline, but it would be tough to swallow a 25% to 50% price decline.

2)First to rebound. As the hockey great Wayne Gretzky says, "I skate to where the puck is going to be, not where it has been" Its all about the rebound....which areas are going to come back first. I could go on and on about how great California is/was/going to be, but in summary, on its own, California is the seventh largest economy in the world. I recently read a 100+ page report by one of the largest investment banks that interviewed over 200 institutional investors from around the world that managed a collective $1 trillion in assets. The most interesting question was: "Once the world economy shows signs of improving, where is the first place you would invest?" 46% replied the United States. So you have to ask yourself not where is the money now, but rather where is it GOING to be invested?