So where are the opportunities in the LP market today? Secondary Limited Partnerships Investments offers several advantages over other investments:
When a partnership is formed a defined ending time is
established for the partnership. The time between unit acquisition
and liquidation or dissolution of the partnership and distribution
of the proceeds is called the holding period. When you
purchase units on the secondary market you are buying them from another
investor who has already used up a significant portion of the holding
time. So you have a much shorter period to wait for your profits,
therefore your return on investment over time should be significantly
higher.
Because unit price is determined by fair market dynamics,
supply and demand are the major impact. So prices have settled to
somewhat below the liquidation value of the partnership units if the
LP were to be dissolved today. So you could be ahead of the game from
day one. It also means there are no General Partner up front
loads. That was borne by the primary investor. Again, the secondary
market should show you a quicker, higher rate of return.
Many new LPs on the market today are what is called
blind pools. Since not all of the properties or assets have been purchased,
you don't know many important specifics about you are buying.
In the secondary market you have audited financial reports and detailed
performance histories for each partnership you are considering. Registered
partnerships report quarterly to the SEC and these reports (10Q and
10K) are available online. So you can see how well each LP is doing
and the real rate of return.
In
the secondary market you can screen assets by industry and/or location.
So you can employ industry and area economic trends to work for your
investment. This also allows you to buy only the partnership
units that show the performance characteristics you want. At
the very least, you make a more informed decision.
Properly priced LPs have been very profitable. Historically
appreciation, income and capital returns in the secondary market have
each exceeded expectations.
You will not be called by irate tenants to fix the hot
water. You will not be asked to become an expert at something far
afield from your normal pursuits. Top grade experts in the field manage
your venture in a thoroughly professional manner.
The value of pooled funds is that you as an individual
can enter the game at a level available only to the big players before.
If you are smart this can mean better grade investments, bigger deals,
more profits.
With more funds to invest, the General Partner of a
pool can afford to diversify the LP's assets over a variety of segments
of the market. This can provide less risk for your investment and
give you broader market coverage than you could achieve as an individual.
Parking lots and low rise condos tend to provide low
yearly investment returns. Most major players look for properties
than can provide more enticing returns. Very few individual investors
have the leverage or clout to enter the kinds of deals that a well
designed limited partnership can provide. From investments in TV and
cable systems to container ships, aircraft leasing, and vineyard development,
the opportunity is usually well beyond the reach of the single investor.
Today the Secondary LP market has a strong player with
LPShares. We handle top quality LP product and offer it at fair market
rates. So if liquidity is why you did not buy LPs before, that's no
longer a concern. LPShares Partnership Exchange brings true liquidity
to the LP market.
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