Real Estate & Alternative Investments in Bulgaria & Around the World
The world of investment in real estate, land and other types of alternative assets available to investors is growing. Globally, private investors can now access interesting opportunities in timberland, agriculture, oil & gas resources, and more traditional property types in a way never before possible. Previously, only deep-pocketed institutional investors could locate and invest in funds that sought high returns with less risk, but this is changing quickly as investors of all types seek income-producing assets with less volatility than common stocks.
As Bulgaria becomes more democratized, it’s possible for private citizens to get their own piece of the commercial property market or invest in appreciating agricultural land for farming without the requirement to have millions of Lev to do so.
Let’s look at a few emerging local and international investment opportunities.
The case for investing in agricultural land has a strong basis with the continuing need to feed the growing global population. Farmers always need productive land for their crops and livestock. Traditionally, it’s been near impossible for private investors to invest in any agricultural investments other than large agri-food companies. These options lack the purity of a land-based investment. Global real estate advisors like Knight Frank have their own agricultural department to manage the growing interest and publish their Knight Frank Investment Farmland Index which tracks returns on agricultural investments.
With over 2,000 agricultural and non-agricultural properties owned, Bulland Investment has been extremely busy since its founding in 2005. The objective of the company is to acquire agricultural land that is suitable for production which enables farmers to focus on what they do best. The company owns land in many parts of Bulgaria, with key holdings in the administrative regions of Pleven, Sliven, Stara Zagora, and Veliko Tarnovo. Their head office is in the Sofia principality.
Timberland – the combination of standing timber on the stump and the land beneath it – has become a valuable commodity lately. The attraction of forests filled with oak, pine, birch and other species is not lost on sophisticated investors like the Yale Endowment Fund which has invested heavily over the past decade in timberland to diversify its extensive portfolio. The Church of England also did well with timberland in 2016 with a 24% increase in value.
The case with Timberland is that the trees often grow organically at 7% per year (growth rates vary between species). The oldest trees can be harvested, which carry the highest value, to turn that organic growth into an income stream from sales at regional timber markets. Being a renewable resource, the remaining trees grow the next year providing a yearly stream of income from the harvest. Should the price of timber fall, management can decide to postpone a harvest that year until prices return to previous levels.
It is commonly believed that timberland is risky as an investment due to the possibility of beetle infestation and forest fires, but typically only 0.5% of the return is lost annually due to these causes. In the case of a company like Rayonier which owns over 2.7m acres of timberland in eleven states across the United States and New Zealand, their holdings are so diversified that these issues would never wipe out their holdings.
Another source of returns is the disposal of non-strategic timberland which is either difficult to access during harvesting season or is too far away from other key holdings in the area. Natural resources come into play too with companies able to make joint venture agreements with mining companies for oil and gas rights. The proceeds of which are funneled back into buying well-positioned timberland for better returns.
Crowdfunding in U.S. Office Space
The latest innovation in smart investing comes from stREITwise with their use of new legislation to provide one of the first crowdfunded office REITs. The idea behind their launch was to deliver private real estate crowdfunding into the hands of a younger group of investors who enjoy crowdfunding sites and would like to invest using the same technology.
Instead of relying on buying private REITs through financial advisors with hefty sales commissions and REIT fees added on, their new REIT keeps fees around 2% while avoiding joint venture deals that tend to add an additional layer of costs. New property deals are sourced directly to avoid outside consultants. Their first REIT specializes in acquiring and managing office space in central business districts and other neighborhoods in the U.S. where there is a need.
It’s an exciting time to be looking for real estate and alternative assets globally. As the laws change to make it easier for small investors to access new opportunistic investments, the future looks bright for real estate and alternative investments.