As I am sure you agree in Hong Kong, property speculation seems to be a national pastime and many conversations revolve around this topic. Although property investments may boost portfolio returns (especially amid the current low interest rate environment), there are typically large upfront costs and large risks to take on individual properties. So for better risk diversity it might be wise to look at alternative real estate investments.

One such idea is simple. You purchase a raw piece of land in or near a city (not possible in Hong Kong!) with an upward growth forecast, in terms of demographics and job creation, prepare the land for future development and sell at a profit. Sounds simple enough, doesn’t it?

But now can you do that? You have no experience! In my role to bring you new and interesting opportunities and solutions I can introduce a company, with over 30 years of real estate experience that has served 68,000 clients globally.

The company in question has a research process they name “Four Pillars of Strength”. Firstly, their Acquisition Team begins by assessing the fundamental factors that contribute to a city’s growth, with key questions surrounding its economic health, population growth, employment opportunities, housing stock and affordability. Between two and four years are spent on in-depth research, from state level to city level, and then on target areas and specific land parcels.

After a suitable piece of land is identified and acquired their Syndication Team packages the raw land into smaller parcels that are more affordable for individual investors.

Once the syndication process ends, investors take ownership of the freehold title of their land parcels. Next come the Land Planning Team. They concentrate on the planning and development required for the land to become attractive to developers. This is where the potential to make substantial returns lie.

A piece of raw land is much more valuable with approved planning permission. They work closely with town planning bodies and prepare the development concept for each project. Appropriate approvals and zoning for future use is designated within municipal by-laws, and then the raw land is subdivided and registered for potential sale and actual development.

The final step is attaining a suitable sale price for the land. Enter the Exit Strategy Team. They review offers from third parties and put forward any appropriate offers to investors.

In a nutshell the opportunity has a targeted return of 20% per annum over a 4 – 6 year period. They have in the past returned an audited (Pricewaterhouse Coopers) weighted average annualized rate of return of 28.24% based on 32 fully exited projects and six partially exited projects. In their 30 years history they have never had a negative return.

But investing into raw land is not risk-free. Here diversity is the key. Two issues need to be taken account of. Firstly, investors should be prepared to invest for the long term. Longer time horizons increase the probability of making decent returns. The investment has a lack of liquidity and so exits are expected to be up to 6 years. But there is no guarantee of this. Secondly, since projects may have varying exit timeframes, investor may choose to participate in multiple projects.

The company makes invitation only presentations from time to time and I am happy to extend such an invitation if you would like to learn more about this opportunity.

Please contact me to let me know your thoughts.