I was reading an excellent article written by Ziad K. Abdelnour of Blackhawk Partners in New York. (read Ziad’s article here: http://www.facebook.com/topic.php?topic=14859&uid=4296731491#!/topic.php?uid=4296731491&topic=14859).
This article discusses current day (Q1 2010) exit strategies for private investments. The bottom line is that exits are very narrow in todays public markets. M&A activitytraditional and IPOs have generally dried up. I recommend the writings of Ziad to all my clients. Ziad is a very knowledgeable writer and private equity investor. Ziad has forgotten more about big money private equity investing than my 30 years in the business has taught me.
The fact that IPO’s and M&A activity have come to a halt puts a major strain on the traditional PE marketplace. But at Farpoint, we do not care. When you invest the Farpoint Way, in hard assets that cash-flow in any economy, you generally never want to sell. As we know from my book “Winning With Private Equity”, one of the key rules to private equity investing is knowing when and how to sell.
The Farpoint Way…
At Farpoint Private Equity, we structure our investments so that they will lend themselves to a wide variety of exits when and if the time comes, but the bottom line is that we like Core Business, niche market investments that we will never want to sell (like Warren Buffet, our favorite holding period is forever, only on a smaller, more compact scale). Investments with perpetual income and growth, with little downside risk.
People ask me every day: What is a Core Asset or a Core Market?
One example of core markets and cashflowing assets would be, an oil lease that has produced its flush production, but will produce from the original zone for another 20 years and has 3 more zones behind pipe. In all likelyhood, this lease will be producing cashflow for more than 50 years and we purchased it for a 4 year payback of our investment. Talk about a no worry cash stream that your grandkids will benefit from.
Another example of a core business asset that we just love would be a landfill serving a medium sized metro market. Typical costs for disposal of waste in a traditional Municipal Solid Waste landfill are about $20/ton. A typical city of 100,000 will make 4.5 pounds of waste per person per day which equates to $4500 per day in gross revenue. If you are generous with expenses, this operation still makes significant profits each and every month, without questions, with very little overhead. Barriers to entry are high, but the rewards are great.
Farpoint Core Business investment programs are designed to return above 20% on equity routinely, regardless of where the DOW or S&P close. We structure investment programs to protect the investor from inflation, risk, and loss and most importantly, to generate regular cashflow. We love cashflow. In fact, during the most recent market termoil, when everyone was losing their head about the DOW, our energy fund generated a 9.65% cash return to its investors and grew in value and our real estate programs continued to cashflow into our checking accounts.
We are narrow market, niche players that despise debt. We crave cashflow and growth. Be sure to read my next blog where I will discuss opportunities that I see in the Core Business Private Equity marketplace.
You can read more about the types of investments we manage by reading my book “Winning With Private Equity” http://www.winningwithprivateequity.us
Thanks for reading.
Paul Anthony Thomas
Registered Investment Advisor
Farpoint Private Equity Managers
325-675-6300 phone
paul@farpointadvisors.com
Twitter: @pathomas2009
Linked’n: Paul.Thomas
Skype: paul.thomas.farpoint
