How We Invest
Mission
McKee Private Capital is a second-generation family business specializing in the acquisition and management of multi-family housing communities throughout the U.S. With our affiliated companies, McKee Properties and McKee Commercial, we have over four decades of broad-based experience in all aspects of real estate operations.
Real estate investing is a complex endeavor, made even more challenging when venturing into new markets in different regions of the country. We travel extensively throughout the U.S. looking for under-appreciated markets, hidden pockets of growth, and outsized cash flow opportunities. We invest our own family’s capital in every acquisition that we make, sharing the same risks and rewards as our investors. This unique approach helps build compatible goals and objectives.
Please review our portfolio and performance to learn more about us, and to find out if our investments might be right for you.
Due Diligence
We are opportunistic investors. We acquire properties in markets that are under-followed and under-appreciated, often resulting in greater returns than can be earned in more crowded markets. We are constantly searching for new opportunities that provide our investors with safe, sustainable monthly dividends and long-term capital appreciation. When looking at a new opportunity, we analyze various metrics to ensure that the asset will provide our investors with a safe return over the life of the investment.
We use a top-down approach to investing, focusing first on important macroeconomic elements that matter most:
- Population Trends – Is the MSA (Metropolitan Statistical Area) growing?
- Job Growth – Is there job growth, and is it accelerating. Any new plant openings, or layoffs imminent?
- AMI Growth – What is the long-term trend of AMI (Area Media Income) growth in the MSA?
- Crime Statistics – We obtain crime statistics for the MSA, and police service reports for the physical property, ensuring that we avoid areas with above average incidences of crime.
Next, we drill down to the microeconomic elements relating to a specific asset under consideration:
- Neighborhood – Is the property located in a desirable part of town?
- Reputation – What is the reputation of the property? We research social media to learn about the property and its reputation in the community.
- Property Condition – We visit the property to make our initial assessment of property condition, then engage our engineering consultant to conduct a thorough capital needs assessment in order to avoid costly surprises.
- Financial Analysis – We perform extensive financial modeling using historical occupancy and operating data as well as forecasting tools to provide an accurate set of assumptions for the investment pro forma.
DISTRESSED ASSETS
Acquire distressed, overleveraged assets at wholesale prices. Re-capitalize the asset with more moderate debt structure to obtain maximum return on equity.
TERTIARY MARKETS
Markets change, and so must we. By going into smaller, tertiary markets that are not overly impacted by excessive investor demand, we can generally achieve higher cash flow yields than those available in the major metro areas of the U.S.
BUY AT OR BELOW REPLACEMENT COST
When analyzing a new opportunity, we analyze the cost of acquisition versus the replacement cost of the improvements. In many cases we can purchase assets at significant discounts to their replacement cost. This limits our downside risk in a declining real estate market.
VALUE ADD
Acquire real estate assets that require repositioning in the marketplace. Enhance performance through improved management and leasing techniques, as well as incorporating unit amenity upgrades to boost rents.
EXPLOIT MARKET BOTTOMS
Real estate is a cyclical business, accentuated by growth and expansion, followed by contraction and recovery. Invest in markets where anticipated cyclical recoveries will provide opportunities for outsized returns on equity.
EXPLOIT MARKET INEFFICIENCIES
Regardless of market conditions, in good times or bad, real estate markets are inefficient when compared to the equity and bond markets. Whereas these markets tend to be fairly valued at all times, real estate markets are more fragmented, and therefore present opportunity for the diligent investor who can capitalize on market inefficiencies.
ACQUISITION
Once a suitable property has been fully vetted, we handle all aspects of the transaction from negotiation and execution of the Purchase and Sale Agreement, physical inspections, formation of the ownership entity, placement of debt financing and insurance, and closing.
DEBT FINANCING
As sponsors, we secure and provide carve-out guarantees for the acquisition financing on behalf of our investors. Most of our acquisitions utilize government agency debt (Fannie Mae and Freddie Mac). These loans offer the most desirable rates and terms, and are non-recourse, requiring no personal guarantees on the part of our investors. Investors who acquire 25% or greater interest in the investment will be required to submit the following documentation during underwriting: 3 years’ Federal tax returns, personal financial statement, and schedule of real estate owned. All investors will be subject to credit screening.
ASSET MANAGEMENT
Equity preservation is our most important responsibility. This requires constant vigilance. Our asset management services include:
- Supervision of 3rd party onsite property management
- Construction management of all capital improvements
- Risk management, including annual insurance analyses
- Real estate property tax appeals
- Processing monthly investor distributions, including property updates
- Partnership management and administration
- Annual partnership tax preparation
- Capital markets analysis
- Debt capital financing/refinancing
DISPOSITION
Our investments are generally held for 7-10 years. If you are a long-term investor and can commit your investment funds for this period of time, our investments might be right for you.
TAXATION
Real estate investing involves complex tax issues that are subject to change by Federal and State regulation. Please consult with your professional tax adviser prior to investing.
RISKS
Real estate investing involves risk. These risks are outlined in the subscription documents you will sign to become an investor. Please review these risks carefully and consult with your legal counsel prior to investing.