Prescient offers direct investment opportunities because it offers investors the best benefits from real estate. 

There are two ways to invest in real estate – direct (physical) or indirect (securitized or financial) investment.  Direct investment offers several advantages over indirect investment offered by Real Estate Investment Trust (REITs).  The principle advantages of direct investment are:  1) capital appreciation, 2) greater tax benefits, and 3) superior portfolio diversification.  The following are brief discussions of each benefit.

1.  Greater potential for capital appreciation.  The goal is to make money.  Direct real estate offers the best means of maximizing returns through greater potential capital appreciation from increased property values captured when properties are sold.  Unlike REITs that don’t offer returns that explicitly reflect property sales and the resulting gains in property appreciations, Prescient’s direct investments in real estate do.  The result is not only do our investors receive a preferred cash distribution on a regular basis which are like the dividends REITS payout; our investors also receive a distribution of any capital appreciation.  With this in mind, Prescient not only focuses on strong income producing properties but also on properties with the greatest appreciation potentials. 

2.  Better tax benefits.  The goal is to shelter one’s income once one has earned it.  Direct real estate offers the best shelter through greater tax benefits.  Unlike REITs, direct investments can pass through tax losses, which may then be used to offset taxable gains.  Some properties, for instance, can generate paper losses because of high depreciation expenses.  These losses can then be used by investors to offset gains from other investments.  Direct real estate investment can be particularly appealing to accredited investors. 

3.  Superior portfolio diversification.  The goal is to protect one’s assets through diversification.  Direct investment offers the best diversification benefit.  While REITs are commonly marketed as having a low correlation to the stock market, direct investments have an even lower factual correlation.  The reason for this is REITs are a hybrid financial instrument with stock and fixed income-like qualities that are valued based on an exchange traded market price that doesn’t necessarily reflect the value of the underlying assets.  Because of how they are valued, REITs have a volatility that closer follows the stock market than direct investments.  Measuring the significant statistical correlation of REITs and direct investments to the Standard & Poors 500, REITs have a correlation .39 while direct investments have a negative correlation of.03.  The implication is clear:  direct investments are the superior means of portfolio diversification.  Realizing this, Prescient’s explicit strategy is to offer its investors the full diversification (which are the intended) benefits of real estate ownership that can only be achieved through direct investment.  The bottom line is: direct investment in real estate is real estate.  There is no substitute. 

Regardless of the benefits of indirect or direct investment, investment performance is largely a function of the property being invested– its type, its location, its leasing status, condition, management, and market.  Because our focus is on achieving the best returns and not blending or averaging returns, we have the agility, flexibility, and speed to find the deals that deliver the best returns and benefits to investors.