UC Asset Announces Upgraded Strategy to Build Higher-growth Portfolio
On the verge of its first day of public trading, real estate investor UC Asset LP (OTCQX: UCASU) announced it will execute an upgraded strategy to build a portfolio aiming at long-term higher-than-market-average growth.
"Before our shares are traded publicly, we, as a private company, had a need to balance long-term growth and short-term cash flow management. The latter are usually more compelling," Said Greg Bankston, UC Asset's manager and general partner.
"We focused on quick house-flips, in northern suburban Atlanta and most recently southern and western side of the city," Bankston explains. "We have earned a decent ROI on quick flips, but it is a risky business with obvious ups and downs."
According to the offering document of UC Asset's IPO, in its 22 months of operation till the end of the year of 2017, UC Asset's house-flip projects averaged annualized ROI of 22.8%, and the company's net equity per share grew by 34.9%. However, it suffered a net equity loss of $0.028 per share, or -1.8%, for the year of 2018.
The company projected a moderate net gain for the year of 2019. According to Bankston, there will be a remarkable increase of performance once the upgraded strategy is applied.
"The upgraded strategy is about a niche market of incoming-producing properties, which our competitors may usually not engage," Bankston says. "There are properties which may potentially yield better ROI, but they also require extra time and additional cash investment to realize those potentials."
Larry Wu, founder of UC Asset, explains it in terms of legal structures: "UC Asset is formed as an MLP (Master Limited Partnership), not as the more popular form of REIT. That distinguishes us from our competitors, because we will not be under pressure to produce cash dividends like a REIT may do." Therefore, UC Asset can execute a "Warren Buffett-style strategy": acquire and hold portfolios of greater potential of long-term value appreciation.
To optimize this strategy, UC Asset plans to acquire properties using its shares, in order to save cash to be used on post-acquisition improvements on those properties.
"Using shares to acquire properties will benefit ourselves as well as the property owner," says Bankston. " It will reduce our cash outflow and remarkably increase our cash-on-cash return. Meanwhile, the seller will have their opportunity to stay as part of our long-term growth after they have sold their property to us."
UC Asset will start to trade on OTCQX, January 02, 2020, and the initial trade price will be $2.00 per share.
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