November 30, 2016|Real Estate
Ethika Investments is a real estate private equity firm formed to provide investors access to a unique platform by tactically investing in opportunistic real estate assets primarily in the United States.
We invited Ethika President Jean Paul Szita to talk us through the firm and how it came to win this prestigious accolade.
Ethika Investments, an affiliate of Laurus Corporation, a real estate investment and development company that specializes in hotel and resorts, office buildings, multifamily and mixed-use properties, is a Registered Investment Advisor which specializes in management of private equity real estate funds with a vertically integrated solution.
The firm’s fund partners vary throughout each real estate cycle, but generally are a 65% /35% split between foreign and domestic capital sources.
Its clientele includes a wide variety of investors, from large institutional pensions to private sovereign wealth funds. Jean Paul explains the firm’s investment strategy and how it aims to provide these clients with the best possible financial solutions which meet their needs.
“Here at Ethika, we believe timing and diversification are the key components to any successful investment strategy.
“Therefore, our team focuses on investments in value-add and credit strategies where our team can stabilize the assets to produce dependable yields as well as upside opportunity, or provide financing that requires a deep understanding of transitional assets outside of the purview of traditional commercial real estate lenders to produce outstanding risk-adjusted yields. In today’s market, underperforming transitional assets remain attractively priced, and continue to deteriorate as distressed owners are unable to continue investing in them. After the strong acquisition period that occurred post 2009, we are finding that today is the era of strategic execution of value-add investment business plans and maximization of end value.
“Partnering with a local private equity real estate fund like Ethika provides foreign investors a trustworthy alignment of interest. Our funds also allow for vested interest as well as a clear objective, breadth of cycle-tested experience and an expansive skill set.”
It is this strategy which sets the firm apart within the financial market and highlights the suitability of its investment offering to clients, as Jean Paul explains.
“Ethika is vertically-integrated, serving both as a fund manager and real estate services provider, and working in tandem with our affiliate Laurus Corporation, we are directly involved in the management of the business plan for every investment, ensuring execution of the value-add process from start to finish.
“The company puts together entire strategies for investing that encompass everything from sourcing the asset, underwriting the asset, escrow, design, construction, repositioning, accounting, investor relations and property management, consolidating the entire process to a single operation, again minimising risk and the room for error. Ethika also has a highly diverse client base and prides itself on developing and maintaining relationships with their clients as the core of its business.
Central to the firm’s success is its experienced and dedicated staff, who are ambitious and eager to support clients however possible.
“At Ethika our staff are integral to the firm’s continued expansion, into new markets and alternative investment strategies, as we explore unique approaches to value creation while upholding our commitment to delivering outstanding risk-adjusted returns to our investors. As such we look for individuals that prioritize relationships with clients and who possess a diversified and substantial background in the industry.
“Individuals who have a history of excelling in their careers both professionally and academically and in particular, value those who have demonstrated their ability to provide leadership in their prior organizations are highly sought after, and we aim to support them and provide a working environment in which they can flourish and grow in their careers.” Within the wider financial market, while there seems to be no shortage in available capital, funds and investment managers are taking their time, carefully combing for smart deals, and adopting a wait and see approach as the market transitions.
“An experienced fund manager like Ethika Investments relishes this period in the market cycle because our team possesses a deep understanding of the nuances within the real estate marketplace and an ability to spot the pockets of opportunity, not only in the commercial office sector, but across the great real estate landscape, that will undoubtedly arise from this period of uncertainty”, Jean Paul comments proudly.
While there are some challenges in the hospitality sector as the gap widens between buyers and sellers, office and retail are offering solid investment opportunities with a substantial upside if you know where to look.
For the office sector, positive projections for the next three years anticipate absorption of existing office space to total 175 million square feet, which is more than the past eight years combined. Jean Paul explains how his firm works to ensure that it stays ahead of market shifts in order to remain at the forefront of innovation in the industry.
“At Ethika, we diligently track trends in market level economic and real estate fundamentals and demographic shifts to predict where markets are growing, and maintain diversification across each fund. It’s important to look at opportunities that are not purely cycle-driven, selecting strong investments that take into account macro trends. Our team buys assets that are not perfectly stabilised in order to acquire properties at an attractive price. These practices place us as a leader in the investment market and build our clients’ trust in our investment judgment.” Looking at the challenges the market faces, additional interest in U.S. real estate is increasing competition, making it imperative that fund managers understand the subtleties affecting regional deals and dig deeper into secondary markets, moving beyond U.S. gateways. Ethika’s recent investments in Minneapolis, San Antonio and San Diego are cases of upside opportunity brought about by the dynamic growth in these local markets and beyond and are testimony to the success of the firm’s approach to investment.
Moving forward, an increased migration of both domestic and institutional capital into alternative investments is predicted, with the real estate market set to increase its focus on funds that strive for alpha creation, or with respect to yield driven investments, which are insulated from risks of cap rate expansion. As such Jean Paul concludes by highlighting Ethika’s focuses for the coming months, which are revolve around supporting these industry changes.
“Looking ahead, our plan is to continue to focus on our most recent fund, Ethika Diversified Opportunity Real Estate Fund II. The fund focuses on opportunistic and value-add investments in the top 30 U.S. markets, continuing to capitalize on underperforming assets priced below replacement cost with significant upside potential.
“Additionally, the firm is enhancing its focus on credit strategies with its first platform dedicated strictly to debt investments launching in Q4 2016. With more cumbersome regulations impacting the desire and ability of banks and traditional debt capital channels to lend, the market for private lending continues to grow at an exponential rate. Ethika’s specific experience in value-add real estate provides the firm a unique capability to provide borrowers with financing solutions on projects not able to fit a narrowing criteria of bank, CMBS and traditional balance sheet lenders.”
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