Powerball jackpots could power a lot of investment… and these days, commercial real estate is one of the more promising investment categories. With that in mind, our analysts at CrediFi set out to have some fun and craft three alternative investment approaches, factoring in that the winning tickets were sold in California, Florida and Tennessee. Of course, these may be of use to others as well, whether using approaches centered on (illiquid) building-level debt and equity, or more liquid capital markets securities.
Now, no single individual will get the full Powerball jackpot of $1.6 billion. If everyone takes a lump sum, then once federal taxes are taken, each of the three winners would be left with approximately $200 million. Theoretical billionaires no longer, these winners will still be multi-millionaires and still have enough to put a good chunk of change into the real estate market, if they so choose. Add in some leverage and/or joint venture equity on top, and we assume that each winner could have upwards of $500 million to spend in CRE.
How, then, should they invest their money?
Fortunately for the winners, not only do California, Florida and Tennessee impose no state taxes for lottery winnings, they also all have cities in the top 20 real estate markets, according to the PricewaterhouseCoopers-Urban Land Institute report on emerging trends in real estate in 2016.
So let’s take a look at several real estate strategies — what we’re calling trophy hunting, diamond seeking and vehicle spotting — that the lucky winners could use to invest in their own states, with a focus on Los Angeles (No. 10 in the top-20 list), Miami (No. 19) and Nashville (No. 7). Any of these strategies can be used on their own or mixed and matched.
Trophy hunting
Trophy hunters seek out high-profile properties in a given market, such as new or notable skyscrapers, landmark buildings… or the Playboy Mansion in Los Angeles’ Holmby Hills neighborhood, which Playboy Enterprises recently announced is being listed for sale for $200 million (but surely they can be bargained down at least a couple million).
Source: Forbes Business, Ely Razin
http://www.forbes.com/sites/elyrazin/2016/01/21/powerball-jackpot-powering-real-estate/#1f9f94d254f1
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