This is the second half of a two-part interview with Wealth Migrate’s Scott Picken. In the first article, which can be found here, Mr. Picken discussed how he came up with the idea for Wealth Migrate.
Today he shares their plan for success and discusses how crowdfunding can help improve the modern economy.
Wealth Migrate specifically targets projects valued between $1 million and $10 million, as they have identified a ‘sweet spot’ where there are valuable opportunities and comparatively less competition.
“At $1 million there are a lot of mom and pop doctors and dentists riding around trying to be real estate investors. North of $10 million the big REIT funds are trying to capitalize.”
“$1 million, and it is a similar amount in Australia and the UK, is out of reach of the individual investor but below the radar of the big REIT. If they do a $100 million deal or if they do a $10 million dollar deal in their mind it takes the same amounts of effort and of people capacity to achieve”
“(The $1 million – $10 million range) provides us with a sweet spot where we can raise the capital quickly and efficiently through the crowdfunding vehicle, get good assets with good partners and have an exit strategy that is also fairly attractive.”
That exit strategy involves taking single buildings, which do not appeal to REIT’s and package them together in a scope that will appeal to them. Wealth Migrate often does this with medical buildings, a sector they target for many reasons (more on that later).
“We are buying up medical buildings around the world,” Mr. Picken explained. “It might not be interesting to a REIT if there are only seven buildings with, say, a value of $16 million but if we package seven or eight of those parcels and sell it at $100 million then it becomes attractive to them.”
While Wealth Migrate operates in many parts of the world, they employ a specific strategy in each of the countries where they do business. That includes the United States where Wealth Migrate has a strong presence in Atlanta and the central states.
“We have been investing in Atlanta for a number of years,” Mr. Picken explained. “It is the fourth biggest city in America, was voted 2013’s best city to live in, has the second biggest airport in the world and is great to invest in. It is expected to attract another million people by 2020 so it is ticking all the boxes from a fundamentals point of view.”
“We have good quality partners on the ground. We tell people it is not as much about the quality of the properties as it is about the people.”
“We like to deal with specific sectors . In Atlanta we have done very well with single family properties. We bought hundreds of them at auction in 2012, renovated them and held on to them. That has been a very lucrative market for us because we are buying them well below replacement cost and getting solid yields.”
“We have a long history since 1992 of investing in medical opportunities around the world. (Atlanta) is a very strong market for medical as there is a lot of investment from regional and federal governments. A lot of buildings we own are on ten-year leases with the government.”
“In Oklahoma and North Dakota we are looking at oil. From that perspective it was really about the quality of the partners on the ground and we were looking for something that was economically resilient and in regards to North Dakota what we’ve done is not what everyone else has done.”
What Wealth Migrate is doing is investing in blue collar housing. Mr. Picken admits they are monitoring declining oil prices “very closely”.
“Oklahoma is better as it has a lot of more industry,” Mr. Picken said. “The whole of Texas has been a very strong market for the residential and medical. We have been to Dallas and Houston and are looking at those markets quite aggressively.”
In this era of the search for quick returns, Wealth Migrate chooses a more patient approach.
“The number one objective before we look internationally is wealth preservation. A lot of people think it is about trying to make as many dollars as possible. But from my perspective and from my own personal investments that’s not the case.”
“When I put one dollar into investments I want to make sure I get at least one dollar out. Only then is it about what is the return beyond wealth preservation.”
“We focus on safe markets with safe partners and quality investments that are going to provide long-term returns. It is not about trying to hit home runs in the short-term. We’ve taken long-term views of the different regions we have looked at. I have personally invested in 17 different markets in America but as a company we have invested in five.”
Regardless of where they operate, Wealth Migrate takes a close look at the local medical sector, and that is by design.
“The chair of our group has been doing medical since 1992,” Mr. Picken explained. “He’s currently involved in 14 hospitals in South Africa and has a deal to build 10 more in Africa. The man, all he understands in medical, he’s been doing it his whole life. I asked him why he only invests in medical. He gave me three reasons.”
“The first it is the most economically resilient real estate you can invest in because doctors will always need premises. Even if the economy were to tumble people still need to go see doctors.”
“The second is doctors tend to never move. Once they establish themselves the little old lady and the other patients get used to going to the same location over and over again. People need to know the licenses stay with the building, not the doctor.”
“The third reason is doctors are very passionate about what they do. They aren’t going to shop around to see if the can save $20 per square foot for a place down the road. You tend to get long term leases with quality tenants who are in business for the long term.”
A look at demographics provides additional reasons, Mr. Picken said.
“The (global) population is getting older and they are going to need more medical. A major report has medical as the number one industry for 2014 and 2015. If you look at Australia, the US and the UK, medical and age care are the number one macroeconomic trend and they are very very resilient.”
The changes brought about by the Affordable Care Act led to more homework for Mr. Picken’s team.
“We took a lot of money and time to understand the effects of Obamacare and what impact that would have. We were in South Africa in the 1990’s when there was a complete disruption of the medical care and the medical aid. It moved from government to private and a lot of the middle men were cut out.”
“We were also involved in the UK in age care facilities in 2005 and 2006 when the government changed the legislation overnight. It turned a very lucrative age care building into a not so lucrative age care building because of the legislation.
If you are reading this and debating an entry into real estate investing or another sector of the market, Mr. Picken cautions it is not as simple as hitting the website and making a few clicks. There is some homework to do.
“We provide the information and the opportunity so the best homework an investor can do is to decide, with all the information we give them, where they are on their level of sophistication.”
“If you are just starting out, getting involved in medical investments is probably a bridge too far and you need to cut you teeth. That is why we have created a two-step process where less sophisticated investors can only get involved in residential properties. Those who want to get involved in more commercial, long-term, blue chip-type tenant leases can get involved in commercial. The third type, which is slightly more risky, is the development type of opportunity we get involved in.”
“People have access to the biggest library of educaton on our site so they can decide where they are on the spectrum,” Mr. Picken explained. “Then we provide them with the tools to be able to decide what they are trying to achieve, when they are trying to achieve it by, and how each individual opportunity fit into that objective.”
Given Mr. Picken’s global experience I was curious about what he has learned conducting business in so many different cultures.
“Growing up in Africa I learned men walk in a room first as a way to address potential dangers and to make it safe for women. That took some getting used to.”
While there are cultural differences business people need to learn, there is the common need for wealth creation and preservation, a process which is all the more global in part thanks to companies like Wealth Migrate.
“In 2014 $50 billion left China looking to invest in America. We all want wealth preservation, we want trust, we want transparency. Most importantly we want a partner we can do long term business with.”
“When it gets done, hopefully sooner rather than later, crowdfunding can provide a bridge of safety to allow people in the emerging world to invest safely in the first world. There are also people in the first world who are looking for far bigger returns in the emerging world.”
“All crowdfunders from around the world need to come as a collective voice and starting to educate people about what is possible. I truly believe crowdfunding can provide the catalyst like the printing press did 400-500 years ago where it democratized knowledge for the middle class.
“Together we can get the wealth movement to achieve the same objective. In Davos last year the number one threat in the world is the growing wealth gap. We can tax the rich, kill big business or we can empower people and there’s only 2 ways to do it – education and provide access to wealth. Real estate is a great wealth generator. We also have to help females around the world get access to (wealth generators).”
“Zig Ziglar said you can have anything you want in life as long as you help enough people get what they want.”