07-29-2009 @ 4:15 am

July eNewsletter

Imagine a boxer who has been knocked out but has awakened and begun to climb to his feet just in time to stay in the match.  As he grabs at the ropes for support, the colors and sounds of the crazed crowd shouting his name are blurry and muffled, coming in and out of focus.  His head is spinning, and he's not quite sure which way is up and which way is down.

It’s hard to think of such an image and not draw parallels to this economy.  After the house of cards came crashing down in 2008, we’ve all been reeling, trying to get our bearings after such a blow.  And it’s not just a matter of finding the right expert to listen to or the right indicator to watch—there seem to be signs that we’re coming to the end of the tunnel, back into the light of prosperity, as well as signs that we’re going to have to ride out more of the same gloom. 

Consider:  As we move into the second half of 2009, we are entering a world of mixed economic signals.  The Conference Board’s index of consumer confidence was up to 54.8 in May but fell to 49.3 in June.  The Moody’s/REAL Index recently reported that commercial real estate values have fallen to the level they saw in 2004.  Gains have been noted in home prices in May and in June.  Depending on where we look and to whom we listen, we could develop any number of opinions about where the economy as a whole is headed.  And what makes things even more confusing is the undeniable effect the voices of the prognosticators and the actions of the government have on the market with the government stepping in and out as a not-so-impartial referee. But even in the midst of an economic environment that can only be described as uncertain, there are two things we feel confident about.  First, value-based real estate investing has proven to be a successful strategy throughout numerous economic and real estate cycles.  Secondly, we firmly believe that the structure and approach of SDG Advisors will allow us to outperform the market.  Here’s why:

  1. We are a nimble company.  Our modest size allows us to navigate decisively through the questionable terrain of today’s economy.  We can react to time-sensitive windows of opportunity, unhindered by a  bulky corporate structure or a long chain of command.  Key decisions are made quickly and appropriate action is taken.
  2. With SDG, investors enjoy a close proximity to the asset.  In our opinion, every layer between the investor and the asset adds risk to the investors’ capital. We manage the assets ourselves, meaning that investors’ money does not change hands more than is necessary and that key information about the asset finds its way into the hands of those who need it immediately.
  3. We know real estate.  We are first and foremost investment professionals, and we focus on real estate.  Given our strong level of experience with the real estate market, we bring an expertise to the table that equips us to make informed, responsible decisions even in a confusing economic atmosphere.

In the end, no matter what happens with the economy at large or even with the commercial real estate market in particular, well bought real estate assets will suffer the least and will recover first and the best managers will outperform the pack.  We believe we are firmly in this category.  As a whole, the economy is still on the ropes.  But whatever happens, we understand what it takes to go all 15 rounds because with 50 years of combined experience, we have done it before.

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