Black Swan Advisors (BSA) Releases Second Study on Non Traded REITS (NTRs), Focusing on 15 Target States for NTR Investments: Fly Over States Have Highest Growth Rates

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15 Flyover states have the highest growth rates at 5.7% from 2010-2015 vs. 1.3% for other states (data from US BLS). Attractions are low tax rates, right to work laws, favorable governments. http://www.blackswanadvisors.net

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Central US (AKA Fly-over Country) is the #1 Target Market by Non Traded Reits (NTRs) for new Real Estate Investments. Black Swan Advisors Releases New Study of Population and Job Growth Rates in Target States.

Black Swan Advisors (BSA) http://www.blackswanadvisors.net, long known for its in-depth analysis of the financial condition of the home building industry, has recently completed a similar study of the Non Traded REIT Industry (NTRs). As part of that NTR Study (Study 1), BSA has reviewed the population and job growth records for those states which are home to many of the NTR properties. These 2 Studies provide the evidence of why Fly-Over Country is a preferred location for new real estate investments. BSA is using these studies as the core of its guidance to clients interested in making new investments in NTRs and to the current shareholders of those NTRs looking for an exit strategy.

The investment strategy of NTRs has been to acquire projects in faster growing states with much lower acquisition costs (higher cap. rates) so that higher dividends could be paid to shareholders. BSA has acquired population and job growth statistics from the Bureau of Labor Statistics (BLS) for the period 2010 thru 2015. From property data available in the 10Ks/other public filings of the NTRs we have been able to identify the most frequently chosen state markets (target states), which led BSA to formulate the attached chart (full chart available on BSA website (http://www.blackswanadvisors.net).

This chart demonstrates the following for the 5 year time frame:
1.    The top 15 target states experienced a 5.71% growth in population while the lower 20 target states (including California, New York, Illinois, Connecticut, etc.) experienced a 2.6% growth in population over the same time period.
2.    The size of the labor force in the top 15 states grew at a rate of 3.3% while the lowest 20 states had a 1.3% growth rate. This confirms that the growth in population is made up of well educated, willing to work employees of all types and ages. People are moving to these states for new, high paying jobs in lower cost of living areas.
3.    This movement confirms that while companies want to move to lower cost of operation states, their employees will move with them to achieve a better quality of life, including a much lower cost of living.

Given the significant differences in these growth rates these trends are unlikely to change direction for the foreseeable future. Demographic trends do not turn on a dime. What is important here is that not only are people and jobs moving, but so are politics and money. 70% of all states now have a majority of GOP control of the 2 state houses, the governorships, and federal positions such as congressman and senators.

As reported in Study 1, the evidence suggests that this population movement is inspired by several very real economic conditions as follows:

1.    Better job opportunities as provided in Right to Work states
2.    Lower costs of living across the full spread of these states
3.    Lower combined tax rates, including a combination of income taxes, estate taxes, property taxes, sales taxes, and others as applicable.    
4.    A much lower level of regulatory control by legislatures
5.    Balanced budgets in many of these states, indicating that future tax rates are unlikely to rise as much as other states

In summary, NTRs have been investing in faster growing states with more stable politics in place. Hence the state GDP of each of these states should grow at a faster rate than the US rate, currently at 1.2 to 1.5% per annum.

Further, the recent election results has improved the investment prospects for these states. The election results themselves have validated the changing demographics of many states with increasing populations based on the following characteristics:

1.    Revival of manufacturing in states which used to be manufacturing centers.
2.    Rebuilding the military, which will generate manufacturing of defense contractors and increase research into new technologies.
3.    Lower overall tax rates, lower costs of operation.
4.    Reduced environmental constraints on new job creation.
5.    More balanced state budgets leading to fewer tax increases in the future.
6.    All these attributes will lead to faster state GDP growth, resulting in more rapid increases in demand for existing real estate products.

Based on these 2 Studies, BSA has identified a number of strong new opportunities to invest in NTRs. Interested parties should contact BSA for further discussions regarding these opportunities.

On a very limited basis, BSA may be able to assist existing retail shareholders with liquidation or other investment strategies. See Study 1 for further supporting evidence.
The BSA Studies are not publicly available, and may only be accessed as a client of BSA. For additional information, contact:
Charles J. McLaughlin
President

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Charles J. McLaughlin
Black Swan Advisors
+1 (949) 351-3943
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