Safe Fortunes Can Be Found in Private Equity…

It is a common fact that our investments don’t care what the DOW is doing, where the NSADAQ closed, where interest rates are projected to go in the future, or what inflation is doing.

It is the contention of the team at Farpoint Private Equity Advisors that our management style and investments are far safer than the public stock/bond/debt/options markets.

We acomplish this difficult task by conducting extensive due-diligence on and investing in cash-flowing businesses that are generally tax advantaged (not tax shelters, just tax advantaged).

Also, we shop under the radar of the large private equity firms (average deal size $500,000 to $5,000,000).

Additionally, we invest and develop businesses where we do not have to find/create the market for the end product (ie: the oil and gas production business, scrap metal, electricity generation, infrastructure, pipelines, water systems, water purification…). We also invest in core cash-flows that are stable and not subject to the psychology of the public markets or the economy (ie: everyday real estate, core food production, well located self-storage, waste management, medical hospitality…).

In short, we invest in core business assets that everyone needs everyday and we make exceptional returns, year-in and year-out.

Safety, Security, Exceptional Returns, Cash-flow and Growth.

Thanks for Reading

Paul Anthony Thomas, Author

Winning With Private Equity
Where your Opportunities are Limitless.

see what we are up to at: http://www.farpointadvisors.com

read my entertaining new book: http://www.winningwithprivateequity.us

Tweet me at: @pathomas2009

Why Is Private Equity A Safe Investment?

It is my contention, supported by 30 years of investment experience and thousands of discussions with speculators and investors, that investing in private equity with a savvy private equity manager is one of the safest and strongest ways to protect and grow your capital. When I say that, stock market investors look at me like a dog listening to a high pitched sound.

Here is why this statement is true. A true Private Equity Manager has one shot at success. He will do exhaustive research into his next investment. He will spend money, that no stock investor would ever spend, doing and verifying research, identifying the marketplace, hiring highly qualified talent and making sure all his ducks are in a row, before he ever offers that program to an investor.

A sound private equity manager will not just have a good idea, but he will have support for that idea, generated by his own dollars. He will perform hundreds of tests to insure his success. He will try the program with his own dollars first, or pay for research that no one else has.

Let me give you an example…My firm, Farpoint Advisors has extensive experience in the self storage marketplace. We have partners and mentors that have worked in the field for decades. In 2005, we identified what we thought was a niche in a large metropolitian marketplace. This niche was not obvious. To prove this niche, we spent 2 years doing on the ground research. We traveled the entire metropolitian area monthly, photographing the competition, conducting due diligence on the successful locations and identifying our niche, its location and the success it would provide. We overlayed our research, using GPS tracking and GIS demographics, on a detailed map and identified 15 locations that would provide excellent profits and little competition. When our research was concluded, we had a $45 million investment program that would provide steady, high yield, low risk returns to the portfolio, have low overhead burdens, own cash-flowing, profitable self storage locations without debt and have an exit strategy that would provide all partners with returns exceeding 20% annually, regardless of what the national economy did. All in all, an excellent investment program.

This is the type of investments that a sound private equity manager will provide on a continual basis and that is why investing with a high quality private equity manager is as low risk an investment as you can make.

To see what we are up to now, visit http://www.farpointadvisors.com

To order an copy of my latest book, visit http://www.winningwithprivateequity.us

Email me with your best and worst private investments and if they tell a good story, I will use them in my next book. Email me here: paul@farpointadvisors.com

May all your investments be winners.

Thanks for reading.

Paul A. Thomas, RIA, Principal
Farpoint Private Equity Advisors

Dumb bias causes big funds to overlook excellent values EVERYDAY!

Late in 2007, I was standing in an oil and gas auction, bidding and buying properties that we had researched as they came up within our price range. As the auction progressed, I was speaking with a long time oil operator who was in the process of buying and selling properties at the same auction. As the lots sold, I was buying in the 25% to 30% annual return range. As we spoke of the lots, he would look at his employees and ask them, “Why didn’t we bid on that lot?, Paul just bought it for a huge return”. This went on for more than an hour and you could see the frustration in his face as I bought lot after lot for a greater than 20% annual cash return.

The reason that his team did not bid on the properties that I was buying was that he was an old time oil man with definite ideas about the properties he wanted to own. His mind was closed to a majority of the marketplace, including the niche where I was buying. He wanted to operate the properties, he wanted greater than 25% interest in the properties, and on and on. His focus was extremely narrow, for such a broad investment world.

On the other hand, our focus was on another, broader, less popular niche…one that we had identified as a true value in the world of oil and gas production.

The psyche of 90% of oil and gas operators is that they want to call the shots. They don’t want someone else making decisions without their input. This industry bias creates a huge niche in which we can invest and make exceptional profits.

Our niche is generally known as the bastard of the oil and gas business. Because of the psychological stance in the oil and gas business, our niche is not very competitive and the values are ripe for the taking.

One of our managed funds has averaged over 25% annual cash returns for the past 4 years (yes…even during 2008). In 2009, we are up over 11% and it is only July and commodity prices are on the rise.

Another example of where big funds pass on true value every day is highlighted by an experience that I had last year with a New York based fund manager.

I was pitching 3 years of research we had conducted in the mini-storage marketplace in a large Texas marketplace. We had identified every competitor, photographed their property, conducted due diligence and identified their competitive set and details. During this research, we had uncovered 5 exceptional acquisitions and 15 well supported locations to build self storages in this metropolis. After an hour of discussion with some underlings, they were all ready to move forward with our $50,000,000 program. Just then, the chief investment officer came into the room, the team told him what they wanted to do….he looked at them like they were idiots. He said ‘Have you seen the national self storage numbers’, they are terrible. We don’t want to invest in that sector.

The underlings were dumbfounded. They talked about the research, the proposal, the low overhead…to a person, they were ready to invest $50,000,000 of their funds money into our deal. After 15 minutes of discussion, the Chief Investment Officer stood firm with his bias and told the team that he did not want to do the deal and did not want to hear any more about it.  He said he would rather leave his money in the bank at a 1% return than invest in the Texas economy.   Talk about an idiot.

Because of national numbers that had absolutely nothing to do with the local economy in our area of research, this intelligent manager let numbers posted by publically run companies with exteme overhead burdens and layers of management create a bias in his mind.  Because of these numbers, this savvy Chief Investment Officer passed on a deal that would have made him secure 25%+ annual returns for decades to come.

His narrow focus and lack of ability to recognize quaility research cost him a great relationship.

At Farpoint, our investments are opportunistic, niche plays that are more often than not “CONTRARIAN” to the overall marketplace. This is where we make money.   And our investors support this approach.

We operate on the adage that “When everyone else says sell, we are buying.” This philosophy has made us and our partners millions of dollars over the past decades and we will continue to execute on this philosophy.

During the economic downturn on the 1980’s, given the capital, I could have purchased real property in the Dallas area for $.01 on the dollar.  No one was buying and the RTC was selling a huge portfolio at the deepest discounts ever seen.   Even today, those properties are worth a fortune and bought for pennies.

See what we are up to here: http://www.farpointadvisors.com

See what our energy arm is doing: http://www.oilstatestrading.com

Buy a copy of my newest book: http://www.winningwithprivateequity.us

Email me with your best or worst ever investment idea. If it tells a story, I may use it in my next book. paul@farpointadvisors.com

Thanks for Reading…
Paul Anthony Thomas

How To Bulletproof Your Income and Portfolio with Private Equity

I was talking with a friend of mine the other day about the stock and bond markets and his retirement portfolio. He told me that in March’09, he opened his retirement statement and his portfolio was worth one-half of what its value was just 4 months earlier. This was a 6 figure loss for my friend. Does this sound familiar?

At that point in time, he made the decision to take control of his financial future. He went to cash in his portfolio and began shopping around to buy warehouse space in various markets in the State of Texas. He likes the smaller commercial properties ranging from 5000 to 15000 SF where he can have multiple tenants in one location. In an economic downturn, as companies expand and contract, these properties become vacant. When the old owner doesn’t want the property any longer, they routinely sell for a great discount over what it costs to build. These properties make some stellar investments for the patient investor. My friend buys for $1.00-$5.00 per Sq Ft. and rents for $.25/sq ft./month, sometimes making an incredible 100%+ annually on his money per property. He is happy with a 25% return, but he routinely does much better with his private equity investments on 3-5 year leases. He leases on a triple net basis and manages the properties himself. These are some of the most secure investments any investor can make and they are relatively easy to find and execute, with just a little homework, study and patience.

It takes time and effort, but the end result will create you and your heirs a lifetime of income that no-one can touch. If you don’t want to do the research and management yourself, find someone in your circle of influence that does this for a living. Pay their management fees and let them go to work for you. There are management companies in every market, trustworthy people that will take care of your interest for a small monthly fee.

The major catch to this is that you must re-invest in your properties to keep them up to date, well maintained and leased. It will cut into your profits a little, but it will keep your income high for decades.

Farpoint Advisors is just such a manager. We find assets to buy that cash-flow into the investors account monthly. We manage those assets and acquire new assets when the appropriate deal comes along. Sometimes we build new assets to sell, frequently having the property sold before it is complete.

See what we are up to here: http://www.farpointadvisors.com

Learn how to BULLETPROOF yourself by reading my new book:
http://www.winningwithprivateequity.us

Email me your lastest investment (good or bad) and I might use it in my next book. paul@farpointadvisors.com

Thanks for Reading.
Paul Anthony Thomas

Contrarian View: Transportation is a wealth creator now…

As a private equity manager and advisor, you must always look to the contrarian view to make money. In July 2009, the economy is presenting us with an impressive buying opportunity in many fields. One particular field where we see values is along the Gulf of Mexico. With the decline in the economy, transportation assets are coming available that would not ever be for sale in normal economic times. I just reviewed a parcel near the intercoastal waterway that is perfect for a loading station for barge traffic. Good water access, great road access and reasonably priced. We will pursue this tract and other opportunities that we see in this marketplace to their logical end points. If we can make a deal, the properties acquired will cash-flow double digit returns  into our accounts for decades to come.

You can see what else we are up to at: http://www.farpointadvisors.com

Order a copy of my newest book here: http://www.winningwithprivateequity.us

Email or call Paul Thomas:  paul@farpointadvisors.com

Private Equity Pitfall #3 – Ignorance (part 2)

As a professional private equity manager, it continually amazes me how people put their life savings at risk on a poorly researched, poorly planned direct investment.

I was recently visiting with a 60′ish business owner who had spent $100,000 of his retirement money (over half his nest egg) to open a roasted nut house where he roasted and sold all types of nuts to the public. It was a drive-in establishment called “Goobers – To Go”. He was complaining about how he had not seen a single customer or internet order for the past 3 days and he was losing money everyday.

This was an poorly planned investement from the very conception. This man liked peanuts, and thought everyone else would buy roasted peanuts as well. He thought he could sell $5,000 worth every month from a rented location. Besides being nearsighted and ill planned, this investment was very poorly executed and clouded by love, the businessmans love for roasted peanuts.

As a private equity manager, this would never happen to my clients. If we do not have market support for a program, a driving need, evidenced by diligent research conducted without emotion, then we are not an investor on any level for such a program.

Thanks for reading.

See what opportunities we are working on: http://www.farpointadvisors.com

Buy a copy of my new book, Winning With Private Equity at http://www.winningwithprivateequity.us.

Private Equity Pitfall #3 – Ignorance (part one)

An example of how ignorance is omni-present in the private equity world is the extension of the Kelly Snyder Oil Field of Scurry County, Texas. This discovery is a classic case of how the statement “if it does not work for me then it will not work for you” can cost an investor billions.

In 1948, a sleepy geologist working for Humble Oil (now Exxon-Mobil) encountered something he was not expecting. He was drilling through 200 feet to rock that he did not recognize. He was ignorant of his surroundings.  There was significant oil production from this horizon within 15 miles, but he was unaware of this fact.  The shows of oil were intermittent and inconsistent. Since his frame of mind was on the primary objective, a deeper horizon, he did not see the evidence that was being presented to him.  He did not connect the dots.  Humble plugged the well.

Two years later, Standard Oil re-entered the well, making a producer and extending the Kelly-Snyder field several miles to the North. Today, this billion barrel giant contains over 1600 producing oil wells and produced over 210,000 barrels of oil per day at its peak. This field remains one of north Americas premier oil discoveries of the 20th century and was passed upon by the best of professional oil finders.  This geologists ignorance cost his employer billions.

You can see what Farpoint Advisors is up to at: http://www.farpointadvisors.com
You can purchase a copy of my book for immediate delivery here: http://www.winningwithprivateequity.us

Thanks for reading.
Send me an email with you best ever investment and your worst, if they tell a good story, I will use them in my next book, Winning With Private Equity II.

Paul A. Thomas

Listen to my Blog Interview

Winning with Private Equity Author Paul Anthony Thomas is interviewed 6/26/2009 – Karen Rands on Blog
Source: www.blogtalkradio.com
Karen Rands the Compassionate Capitalist will talk with Paul Anthony Thomas author of Winning with Private Equity as they discuss the 9 Pitfalls of Private Equity. Paul Thomas a 30 year veteran of private equity and value investing recounts several of his hard learned lessons in this easy read. …

Private Equity Pitfall #2 – Too Much Ambition (3rd post)

6-24-2009

I have another acquaintance who, at first blush, appears to be the most ambitious person you will ever meet; however, he thinks about himself first, and he cannot see a deal to the close. He is extremely intelligent, but he just does not take care of details. A trecherous combination in the private equity business. A guy like this has so many loose ends that he can never bring a deal to fruition.

He is constantly turning up projects that will make HIM wealthy, while only giving me my investment back with a savings account return.

His ambition is misplaced. I will never enter into a deal with him. My investment would be at risk of total loss.

See what we are up to at Farpoint Advisors here: http://www.farpointadvisors.com

You can purchase a copy of my newest book here: http://www.winningwithprivateequity.us

Next we will tackle the topic of Ignorance in the private investing world.

Thanks for reading.

Private Equity Pitfall #1 – GREED (final entry)

6-18-2009

In the private investing world I live and work in, you just cannot deal with greedy people. Their greed will convolute the success of the deal and cause FAILURE. Let me say this again, GREED BY ANY PARTY IN A PRIVATE EQUITY DEAL CAUSES FAILURE!
I was interviewing a management team last month. One of the new managers in particular was quite aggressive that day, in a very greedy and insulting way. He was asking pointed questions and wanted to know how we were going to carve out 10% equity in the program for his personal account, even though he did not have any skin-in-the-game or any management responsibilities in the program.  His position was totally unreasonable.
Well, after that session, it was obvious to me that our relationship was at an end. My comment to the other professionals was “can we just pay Mr Jones to stay at home, and keep his nose out of this program?”.
You must understand – this meeting cost me money.  I was interested enough in this potenital investment to have a personal meeting with the management team, and before that happens, I have already committed several hours and considerable money to the effort, including pre-interview research, business plan study time, cursory background checks on the principals and so forth. Needless to say, I was disappointed at best. You would think that a 40′ish year old man would know and understand that no one wants to deal with a greedy individual, under any circumstance, especially when you are dealing with someone else’s money.
At Farpoint Advisors, our professionals understand that everyone working towards the good of the deal is first and foremost the one critical factor to success. If the deal succeeds, then the participants will succeed beyond their wildest dreams.
At Farpoint, our program managers all learn this through experience. Our managers earn a stipend (small salary) and gain ownership in the program as the deal succeeds (an earn out). Without success, they just have enough money to eat and pay rent. Without the deal succeeding, there is no personal success. We find this is a very motivating concept and it keeps our people engaged and interested.
See what types of programs we are currently working on at: http://www.farpointadvisors.com
Purchase a copy of my new book: “Winning With Private Equity” at http://www.winningwithprivateequity.us.
Thanks for reading,
Paul A. Thomas, Principal
Farpoint Private Equity Advisors