Viacor Property Group is a property holdings company that focuses on generating superior risk-adjusted returns by means of property investments. Our primary focus is on niche markets where we use a value-investing approach to generate an alpha return. Viacor Property Group handles the development and construction processes internally and consequently passes all profits on to the company’s shareholders. We place emphasis on the long-term profitability of selected investments and not on short-term speculation.
Viacor Property Group is based on the private equity real-estate model.
Historically, real estate assets were a low risk and low return investment, averaging single digit returns over the long term. People had exposure to real estate mainly through the ownership of a property or a house. Around the turn of the century companies started pooling real estate assets and creating portfolios of commercial buildings, structuring these investments mostly as real estate investment trusts (REITs). REITs were successful in a sense that people could now easily get exposure to real estate as an asset class. However, due to the structure of REITs, capital appreciation was limited, as REITs traditionally distribute the majority of their income, mimicking the returns of fixed income securities. As a result of these limited real estate investment options, private equity firms developed a new model of investing in property. The private equity model was designed to achieve an equity-like return instead of the fixed income-like return investors were traditionally exposed to in the market. The private equity firms based their model on the idea of buying undervalued properties, redeveloping those properties and then selling those properties for a premium. They would do the developments within the same structure, as opposed to most REITs who develop separately and then sell the asset to the fund, and finance most of the buildings through debt, achieving superior returns for the equity partners. These private equity firms, who consistently achieved returns of between 20 to 30 percent, were extremely successful and hence the private equity model is what Viacor Property Group is based on.
Michail Myburgh and Xan Myburgh founded Viacor Property Group in 2010 by uniting a small group of high net-worth individuals and institutional investors. The intention was to create a vehicle that would serve as the private equity property allocation for the pension assets of their shareholders.
We identify and invest in properties using a long-term value-investing focus. Value investing is the concept that one should not try to forecast macro-economic factors but rather identify undervalued investments and invest for the long term. The approach was pioneered by Benjamin Graham, who most consider the father of value investing, and is the investment strategy used by Warren Buffet with Berkshire Hathaway.
Real estate investment offers diversification benefits due to its relatively stable prices and low correlation with traditional asset classes. Unfortunately REITs have been driven by market sentiment and have experienced higher correlations with equity prices and have therefore offered lower diversification benefits warranted by the asset base.
Due to the above factors the world has seen a rise in private equity real estate funds who take advantage of combining property portfolios. The private equity model is designed to enhance the return an investor would receive in typical property investments while at the same time limiting the risk exposures. This is possible because the private equity real estate model is not limited by the factors or inherent characteristics of other traditional real estate structures. Having a diverse asset base allows the holding company to find economies of scale with brokerage, facility management, development of assets and other factors that might restrict the return. It also allows the holdings company to finance new buildings at lower interest rates and higher gearing ratios.
The primary focus is on long term, high yielding assets. This has traditionally been commercial buildings with blue chip tenants and long-term lease agreements. The private equity model allows us to develop these buildings within the holdings company to a specific tenant's requirements and to find the optimal level of debt financing, maximizing the return in the process.