the o'donnell group investor guide

8/18/2019 The O'Donnell Group Investor Guide

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nvest like the big players in real estate:

nstitutions (Pensions, Endowments and Corporations)

Invest Like the Big

Players in Real Estate:Institutions (Pensions, Endowments and Corporations)


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nvest Like the Big Players in Real Estate:


Invest like the Biggest Players in Real Estate:Institutions (Pensions, Endowments and Corporations)

1.

o truly diversiy your portolio, you need to invest in a broad array o assets – not just publicly tradedstocks and bonds, but real assets – particularly real estate. Real estate, as an asset class, has historically

had a very low correlation to other investments. It provides protection against inlation, since its income

generally rises as the general price level does. And real estate generates steady income, much like a bond,

except that you may also participate in the capital appreciation as the buildings grow in value.

Most individuals obtain their exposure to real

estate through real estate investment trusts

(REITs). For many investors, especially wealthier

individuals, this is ar rom ideal. REITs are publiclytraded portolios o real estate properties whose

prices are listed each day on the New York Stock

Exchange and other exchanges. But because they

trade like stocks, they are sometimes inluenced

by stock market movements. Their perormance

is a good deal more correlated with stocks than

direct investment in real estate. Moreover, many

REITs have been badly managed, charging high

ees or subpar perormance, and not providing

transparent, necessary details about their holdings

or portolio strategy to investors.

Thus, high end institutional investors have

historically preerred direct investment into real

estate, through private equity partnerships

managed by seasoned proessionals in the realestate space. These big investors include pension

unds, endowments and corporations.

At The O’Donnell Group, we provide you

with the opportunity to invest directly in

a speciic sector o the real estate market

— industrial real estate — which we believe

offers especially attractive investment

characteristics to the discerning investor.

In this investment guide, we’ll illustrate

why you should consider investing directly

in private equity real estate, what makes

industrial real estate compelling and how

The O’Donnell Group’s vast experience

adds value.

T


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The Benets of Direct InvestmentWhen you invest directly as a limited partner in private equity real estate like the one offered by The O’Donne

Group, you beneit rom a number o advantages over REITs, including:

Attractive risk and reward Over time, private equity real estate unds have generated higher

risk-adjusted returns than REITs — even though their absolute

perormance, when not adjusted or risk, has been slightly lower.

Consider that over the last ive years the NCREIF Fund Index

returned 13.5% per year, on average, versus 15.6% or the

FTSE NAREIT All Equity Index. However, or that additional

200 basis points o return, investors took on our times as

much volatility. Also remember that the most successul private

equity managers may signiicantly outperorm their index. Top

quartile perormers in the NCREIF Fund Index returned 15.9%

over the last ive years — easily beating the REIT managers.

Tax benefitsMost o the return generated by private equity real estate unds

is taxed at the capital gains rate, at top rates o 20%. By contrast,

distributions rom REITs is taxed as ordinary income at the top

marginal rate o 39.5%. Depreciation can offset annual rental

income as well.

Low correlation to other asset classesREITs trade in public stock markets, so they can be affected by

broad market movements. Private equity investments in realestate, by contrast, are not tied to stock market perormance.

One study, perormed at the Cass Business School in London

ound that rom 1972 to 2007, Private Equity Real Estate,

as measured by the NCREIF Property Index, had only a 0.06

correlation to large-cap stocks, while REITs had a correlation

o 0.50.

Key Benefits of PrivateEquity Real Estate

Low correlation to traditional asset classes

including REITs

Pure real estate investment vehicle

Targeted exposure to industrial real estate

Invest directly with the manager

Manager has skin in the same game you do

Fee transparency

• Disclosed in offering documents

• Stronger valuation standards

• Annual valuation by Independent

Third Party Appraisers

Vehicle structured to outperorm over

investment cycles

Direct investment, with no middlemen

or placement agents in private equity

real estate have ewer layers o ees and

payouts, increasing transparency, and

potentially returns.

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Industrial Real Estate is Boring…and We Believe that is Really GoodIndustrial real estate, that is, warehouses and distribution centers, has always been viewed as the least sexy

asset class o the commercial real estate world. And, while it’s true that other sectors are more glamorous – think o

glittering hotels, architecturally signiicant office towers and opulent shopping centers – industrial real estate

has generated steady, predictable income, with ar less o the volatility that more ashionable sectors bring.

3.

Source: NCREIF, Q2 2015. All returns are reported on an unlevered basis.

INSTITUTIONAL INDUSTRIAL RETURNS FOR MAJOR MARKETSReturns or Year Ending Q2 2015 (%)

0

5

10

15

20

25

30

Total Return Appreciation Return

Income Return

L a s V e g a s

O a k l a n d

N a s h v i l l e

M e m p h i s

D e n v e r

P o r t l a n d

A t l a n t a

I n l a n d E m p i r e

S a n J o s e

A u s t i n

L o s A n g e l e s

O r l a n d o

F o r t W o r t h

O r a n g e C o u n t y

D a l l a s

C h i c a g o

S a n D i e g o

S e a t t l e

H o u s t o n

P h o e n i x

N e w Y o r k / N o .

N . J .

M i a m i

What happened to industrial real estate managed by The O’Donnell Group in 2008?

Founded in 1972, we have managed and profited through many market environments.

The global inancial crisis o 2008 created havoc in the stock and bond market, as well as many sectors o the real estatemarket. Still, industrial real estate emerged relatively unscathed. Across The O’Donnell Group unds, dividends continued

to be paid as always. There were no loan bankruptcies in our portolios – none. Our commitment to low leverage o 0% to

55% paid off with stability. For our investors in The O’Donnell Group funds, 2008 and 2009 were business as usual.


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Five Reasons to Include IndustrialReal Estate in Your Portfolio

Predictable returns in all kinds of markets. Total returns on industrial real estate investments have been ar less volatile than on other types o properties.

The chart below, or instance, shows how industrial total returns have mostly luctuated in the 10-20% range –

and have avoided most o the losses in years like 2008.

Steady cash flows. Industrial real estate investment has historically generated reliable income, month

afer month, as well as the potential or capital appreciation.

Low leverage. The O’Donnell Group doesn’t need to ampliy returns with heavy

use o leverage. Our unds, on average, have 50%-65% leverage.

Leverage is simply a mortgage. The real estate industry reers to

the percent o the purchase price borrowed as leverage. With low

leverage, your returns are less vulnerable to wild swings in value,

when interest rates change or market sentiment shifs.

Tax advantages. Our unds generate very modest tax liabilities, since dividend payments are ofen offset by

depreciation, and appreciation is taxed at Capital Gains rate.

Everything goes through a warehouse.Think about it. Warehouses are not an option! Everything you wear, everything you eat, everything you buy, use or touch has

probably spent time in a warehouse. Every other real estate sector has alternatives, and are subject to luctuations in demand.

Companies can use remote workers so they don’t have to lease office space, people can stay at an Airbnb or home instead o

going to a hotel, apartments lose their luster when home ownership become affordable, retail can be replaced by ecommerce, and

products can be sent directly rom warehouses. But the demand or warehouses and distribution centers is constant.

4.

U.S. INDUSTRIAL PROPERTY TOTAL RETURNS

-80%

-60%

-40%

-20%

0%

20%

40%

60%

NAREIT

NCREIF

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

YTD

Sources: NCREIF Fund Index Open-End Diversiied Core (ODCE) NAREIT Equity REIT Index.

*Returns as o June 30,2014.


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Expanding Demand for Industrial Properties

Industrial real estate is always a sound investment, but recent trends make iteven more compelling.

• Space is tight and rents are rising. Vacancy rates or industrial properties arebelow 10% nationally and lower than that in selected markets. Vacancies are

under 6% in 13 U.S. markets and below 5% in our others. Rents have risen

an average o 5.4% since last year, and by double that in selected markets.

• “Etail” is driving growth. E-commerce is projected to grow rom $263 billion in2013 to $414 billion in 2018, creating demand or vast new warehouse and

distribution centers across the U.S.

• The economy is improving. The U.S. industrial economy has strengthenedsigniicantly since the 2008 recession, and many industrial companies are inally

beginning to expand afer years o caution.

For all these reasons, more and more institutional investors are increasing

their allocations to industrial real estate. Now you can invest alongside them

with one o the industrial sector’s most experienced teams.

The direction of the market, The Fed,

geopolitical events or the rising or falling

fortunes of hot stocks are all noise to The

O’Donnell Group. Their perspective is

on industrial private equity real estate,

which provides income, a hedge againstinfation and interest rate movement,

and capital appreciation.“”

5.

Why Invest Now?

Source:• “An Industrial Real Estate Revolution,” by John Gates, National Real Estate Investor, May 2015 http://nreionline.com/industrial/industrial-real-estate-revolution

• “U.S. online retail sales will grow 57% by 2018; projected growth” by Allison Enright, Internet Retailer, May 12, 2014.https://www.internetretailer.com/2014/05/12/us-online-retail-sales-will-grow-57-2018

• “North American Industrial Forecast,2014-2017” Cushman & Wakeield

http://nreionline.com/industrial/industrial-real-estate-revolutionhttps://www.internetretailer.com/2014/05/12/us-online-retail-sales-will-grow-57-2018https://www.internetretailer.com/2014/05/12/us-online-retail-sales-will-grow-57-2018http://nreionline.com/industrial/industrial-real-estate-revolution


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CASE STUDY #1

Every building has a story:Crescent Corporate Center, Anaheim, California

CASE STUDY #2

Every building has a story:Cedars Sinai Building, Torrance, California

The O’Donnell Group acquired the Crescent Corporate Center, in 1999,

and sold off the buildings rom 2003 to 2004. The project was comprised

o 11 buildings. The O’Donnell Group had the buildings repainted, slurry

sealed the parking lots, completely retroitted the landscaping, and

replaced building windows and doors. The buildings were then restructured

as separate parcels and sold individually to both proessional trade

buyers in a 401 exchange, and existing tenants.

The project was akin to buying a pizza or $10 dollars and selling the

individual slices or $15.

The O’Donnell Group purchased the Crescent Corporate Center for

$18.5 million, and sold it for $29.1 million, in 5 years.

The Crescent Corporate Center brought a $10.6 million total profit.

The area around Los Angeles is the largest and

strongest market or industrial real estate, with a vastpopulation, crowded ports and vibrant retail and

manuacturing sectors. In 2000, The O’Donnell Group

purchased a warehouse space in Torrance, Caliornia

or $13.4 million.

The property was leased or six months at the time

o purchase, which allowed The O’Donnell Group

time to create a plan and budget, to bring the building

rom Class B to Class A standards. Upgrades included

painting the interior and exterior o the building, new grading and asphalt in the parking lot, improvements

to building entrances and dock space, landscaping around the building and interior enhancements. Altogether,

The O’Donnell Group invested $4.4 million on retroitting the property. The reurbished building met Class A

standards, which substantially increased its value. The irst year provided a tax deduction, due to depreciation.

Although there was a “loss o money,” it was covered by the budget and did not have capital calls. The O’Donnell

Group sold the building in 2003 or $33.9 million. The Cedars Sinai Building brought a $16.3 million total profit.

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A Proven Player in Industrial Real EstateThe O’Donnell Group has the experience, specialized knowledge and market presence to give you access to

the most compelling deals in the industrial real estate space.

A tested process.We have proven success as a niche investment buyer,

manager and seller. Beore we acquire a property, wemake sure that it oers compelling value by asking

questions including:

• Is the acquisition cost below replacement cost?

• Is the asset leased at below market rents?

• Do current cash lows yield returns in excess o

market returns?

• Is the asset poorly managed?

• I there are multiple buildings, can they be sold

individually to users and investors?

• Does the property have unctional obsolescence that

can be rectiied?

• Does the property have signiicant and immediate

upside potential?

The O’Donnell Group employs timing and knowledge o the

real estate market cycle to maximize value or clients. The

O’Donnell Group has consistently demonstrated its ability

to predict and interpret the real estate market in order to

maximize the beneits to our clients.

Scale.The company currently owns and manages over 1,000,000

square eet and 85 acres o land or the development o industrial

buildings. We have a ull suite o real estate capabilities, including

property management, asset management, constructionmanagement, leasing, and accounting.

Relationships.The O’Donnell Group is uniquely positioned with the brokerage

community and private and institutional buyers to maximize

exposure o the investment to ensure the highest possible

proceeds on an individual property or portolio sale.

Experience.We have 43 years o experience in this space. The irst O’Donnell

development partnership was created in 1972, and since then,The O’Donnell Group has developed or acquired over 22 million

square eet o industrial and office business parks across the

U.S.. Over the years, we have successully managed through

economic cycles, and The O’Donnell Group has consistently

been ranked among the top developers in the State o Caliornia.

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nstitutions (Pensions, Endowments and Corporations)8.

Meet Our Team Douglas O’Donnell, Chief Executive Officer

In 1992, Douglas O’Donnell started his career in commercial real estate by joining O’Donnell Property Services, andlater Insignia Commercial Group, Inc. He worked his way up through the companies, rom Leasing Coordinatorto eventually overseeing the leasing and sales activities, or the 25 million square oot portolio. He has developed

over 4 million square eet o industrial buildings.

John O’Donnell, Board Member John is the principal partner in various partnerships involved in the development o industrial real estate in Southern

Caliornia, Northern Caliornia, Seattle, Washington and Anchorage, Alaska. These partnerships operated rom

1972 to 1989 while developing over 18 million square eet o industrial space.

Shahab Taleghani, Controller

As Controller or The O’Donnell Group, Mr. Taleghani serves as an executive manager in which he

oversees all accounting or all assets and property management within The O’Donnell Group and O’Donnell Management

Company.

Mr. Taleghani has twenty years o progressive experience in both Real Estate Development and Property Management

Accounting. Prior to joining The O’Donnell Group, he served as Corporate Controller or Southern Caliornia regional

offices o Trammell Crow Company. He was responsible or managing the accounting department and administrating the

books or the regional company as well as projects under development and property management. Mr. Taleghani’spast work experience also includes tenure with Jones Lang LaSalle, COMPASS Management and Leasing and The Brinderson Corporation.

Mr. Taleghani holds a Bachelor o Science Degree in Accounting rom the University o San Francisco.

Jennifer Carroll, Head of Property Management

As Director o Property Management or The O’Donnell Group, Ms. Carroll oversees all property management, tenant

improvement, construction and leasing or The O’Donnell Group.

Ms. Carroll has ifeen years o progressive experience in both Real Estate Sales and Property Management. Prior

to joining The O’Donnell Group, she was in the Commercial Property Management Department o River Rock Real Estate

Group. She was responsible or tenant management and inancial reporting. Ms. Carroll’s past work experience

also includes tenure with Prudential Caliornia Realty, First Team Real Estate, as well as Culbertson, Adams &

Associates in Urban Planning and Development.

Ms. Carroll holds a Bachelor o Arts Degree in Social Sciences rom the University o Caliornia, Irvine. She also has a Caliornia Real Estate license

Katherine Morrison

Ms. Morrison serves as Acquisitions Manager within The O’Donnell Group. She is responsible or researching and

reviewing potential acquisitions. She provides critical inancial data analysis in pursuit o uture investments. She

also oversees underwriting special projects. Prior to joining The O’Donnell Group, she was a Project Specialist at WM Financia

Services. Ms. Morrison’s past work experience also includes tenure with Triconex Corporation and McKibben Engineering

Company.

Ms. Morrison holds a Bachelor o Arts Degree in Speech Communications rom the University o Caliornia, Long Beach.

Becky Cranford

Ms. Cranord oversees the property management or The O’Donnell Group’s Northern Caliornia properties. Ms. Cranord

has twenty-two years o property management experience through her own company, McAvoy Management which

specializes in ull service property asset management. McAvoy Management continues to oversee and manage the

ollowing mixed use properties: Bay View Business Park, Shoreline Center, The Doyle and Marilyn Buildings, The Stewart Title

Building, Saety-Kleen Buildings, McPhail Buildings, among others. Ms. Cranord attended Bowling Green University,

Ohio or two years, and completed Real Estate License and Broker courses at College o Marin in Kentield, CA.


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nstitutions (Pensions Endowments and Corporations)

Benet om the Stable, PredictableReturns of Industrial Real EstateReal estate makes up an integral part o any diversiied portolio, and or sophisticated investors, there’s no

better way to gain exposure than through institutionally managed real estate private equity partnerships.

The O’Donnell Group has specialized or more than 40 years managing private equity partnerships that

invest in an ofen overlooked segment o the marketplace, industrial real estate, a sector that has deliveredsteady cash lows, strong capital appreciation, and protection rom inlation and volatility. For more inormation

about how industrial real estate private equity can add value in your portolio, contact us today at:

567 San Nicolas Drive

Suite 450

Newport Beach, CA 92660

909-718-9898

[email protected]

9.

For more inormation:

ODonnellGroup.com/OpportunityFundV

ODonnellGroup.Wealthorge.com

Invest Now
mailto:info%40odonnellgroup.com?subject=Request%20for%20Informationhttp://odonnellgroup.com/OpportunityFundVhttp://odonnellgroup.wealthforge.com/http://odonnellgroup.wealthforge.com/http://odonnellgroup.com/OpportunityFundVmailto:info%40odonnellgroup.com?subject=Request%20for%20Information

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