Here’s How UC Asset LP Is Planning To
Change The Professional Office Space Landscape; Two Strategies In
Play
March 18, 2021 -- InvestorsHub NewsWire -- Via Digital
Journal -- Finding under the radar investment opportunities,
and acting on them, can deliver exponential rewards. Here's one
catching our attention- UC Asset LP (OTCQX: UCASU), a limited partnership company that invests in
real estate, primarily in the Atlanta area.
The stock is trading at $2.05 per share and trades between 0 and
200 shares per day. That's not a bad thing, necessarily. Remember,
this is a genuine under-the-radar stock, so by accruing shares
patiently, the opportunity to book exponential gains is in play
once new investors tune in to the UCASU story. Notably, shares have
traded as high as $2.40 this year and also touched the sub-dollar
levels at $0.32 per share. Now trending back toward its highs, the
question begs- what's causing the move?
Well, several things. The company raised $8.6 million to date
and added another $300,000 in March 2020 through a private
placement deal. That's a perfectly decent balance sheet for an
emerging company. Better still, though, from an operations
perspective, net equity in the company surged to 39%, helped by a
healthy compounding growth rate of 8.58% from 2016 to 2019. Also
attractive is the improvement to its balance sheet, where proactive
moves helped UCASU strengthen its portfolio and boosted cash
reserves in late 2020 by selling $2.5 million in properties that
generated roughly $1 million in gross profit.
A report of its 2020 financial results is expected later this
month. Here's what's in play:
Cash And Strategy Combine
As noted, UCASU plans to report full 2020 financial results
this month. Investors were provided Q4 2020 results that included
the profitable sale of a large tract of land outside Dallas for
$1.3 million and the sale of some of its Atlanta residential
property for its full asking price of $1.35 million. Those sales
are helping to build a respectable war chest for future
acquisitions.
In fact, by mid-year, UCASU expects to accrue between $4-7
million in cash that it plans to use to purchase new assets in the
post-pandemic economy. The focus is shifting away from purely
residential, and plans are in place to enhance its focus on
commercial and mixed-use development.
And as the plans develop, the company's property portfolio may
still be growing. That's despite general consumer market weakness
and noting that residential real estate markets remained strong,
even bullish, as remote working and learning created a new type of
demand from buyers looking for larger spaces and/or relocation from
city centers.
Moreover, businesses learned that Zoom meetings and other
similar platforms can often replace large office space. That's bad
news for landlords but potentially great news for companies like
UCASU that are targeting a niche opportunity through mixed-use
property purchases.
This is where the company is being innovative and intelligent.
By building its cash reserves, UCASU expects to position itself in
a position to maximize opportunities in a commercial market that
may soon see a day of reckoning. In other words, mainstream media
isn't covering the undercurrent of a radically disrupted real
estate market. However, UCASU is paying attention, and they believe
they developed a strategy to deliver both short and long-term
rewards. Here's how:
The pandemic has hidden a big secret...many landlords across the
country are not getting paid rent by their tenants. Evictions have
been put on hold by the government, and despite financial relief to
renters, that money is not always making it to the landlord's
in-box. These government regulations have all but quieted the usual
market pressures associated with the residential real estate trade.
However, these forbearances also played a role in investment
property values that have yet to see meaningful pressure lower.
Thus, the timing was good for UC Asset, who in April of last year
began to diversify out of residential investments and into
opportunities to provide mortgage support to commercial property
owners whose cash flow has been disrupted by the pandemic. A
business model was born.
Real Estate Innovation And Investment
Starting that ball rolling, in June of 2020, UC Asset closed its
first commercial property support investment in a rental property.
And with the pandemic still raging, agreements to continue
rent/mortgage forbearance in the commercial markets limited new
investment opportunities through 2020. Obviously, it's hard to pay
a mortgage with no income. Thus, UCASU came to the rescue. But now,
they are assessing post-pandemic demand for that product.
Clearly, with vaccinations ramping, it's a reasonable assumption
to expect that these temporary supports will not continue
indefinitely. Thus, 2021 is likely to return to more normalized
business and ignite interest in commercial investment
opportunities.
When that happens, cash can be king. While no company intends to
add harm to an already bad situation, the market's reality suggests
that when forbearance agreements are terminated, the economic
pressures to owners caused by the pandemic will surface. Then, they
will have to face the pent-up cost of back debt, make capital
investments to retool properties to meet new health protocols, and
try to recoup thousands of dollars in back-rent or start the
tireless eviction process on potentially hundreds of
families.
Moreover, a Zacks report suggests that approximately $430
billion in commercial real estate debt comes due in 2021, which may
cause property owners to seek new investors or liquidate their
properties. Both instances fit into UC Asset's newly formed
business strategy. In fact, UCASU is developing two investment
strategies.
Filling A Much Needed Niche In Commercial Real
Estate
As noted, UCASU is finding an innovative and potentially
lucrative niche to fill. Two strategies can get that done. The
first is through exposure to providing commercial real estate
mortgage support. An example of how it works came in June when
UCASU purchased its first commercial property support investment in
a rental property with a market value of $850k.
When the deal was made, the current owner earned a profit from
the property before the pandemic but had not collected rent for
five months. Unfortunately, he still has a remaining mortgage
balance of over $400k. In the deal with UCASU, that owner will
receive a cash payment to compensate for its existing equity. In
return, UC Asset will take over the mortgage and is entitled to
purchase the property for $1 after its mortgage is paid off. The
deals will vary in terms, and no two are likely the same. However,
despite the complexity, both UCASU and commercial property owners
are eager to make a deal. Thus, UCASU can be a proverbial savior to
property owners.
As profitable as that opportunity can be, UC Asset management is
also positioning to take advantage of other market opportunities.
They recognize that its commercial mortgage support program has a
limited investment window, and the penetration into the market has
been slow. And with lenders, landlords, and government mandates
postponing a picture of actual demand, UCASU knows they face other
competitive pressures.
Thus, a second strategy is born. Here, UCASU wants to help
revitalize neighborhoods through its SHOC (shared home office
concept) program that includes a commitment to invest in
underserved communities around Atlanta. Their initiative took a
step forward in September when UCASU announced plans to revitalize
clusters of distressed residential properties in neighborhoods
close to major airports. Then, they renovate them into
cost-efficient home offices and market them as shared
accommodations on platforms such as Airbnb (ABNB) in a bid to serve
business travelers who prefer renting a shared home-office compared
to staying at a conventional hotel.
It's a genius idea at a time when the world has changed. And by
the end of December, UC Asset announced an initial capital
commitment of $1 million to pilot its SHOC strategy. In an update,
management said its goal is to form a $10 million portfolio of
shared home office properties over the next year. Returns from
those properties could be substantial. And demand, especially from
people not yet comfortable in large group settings, may surpass
available offices.
So far, the company has successfully invested in individual
residential properties near Atlanta's main airport. Those purchases
put the SHOC strategy in play. Moreover, with these SHOC locations
revitalizing neighborhoods and at the same time offering a place to
work, UCASU believes that community stakeholders and local boards
will embrace the projects. Clearly, the timing is right for a model
of this type and fits nicely into a post-pandemic business
landscape.
UCASU may not be out to change the world's view of how a
100-story office building should look. Instead, they are making
headway to show that better options can exist...and if they make
millions of dollars along the way, that's fine, too. UC Asset LP
may indeed be a sector game-changer.
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