May 2023 | Volume 1
KNOWLEDGE HUB: INSIGHTS AND INFORMATION
Lonicera’s investment strategy uses diversification to reduce risk and stabilize returns. This is done by investing in properties that have no traditional office user occupying more than 10% of the leasable square footage. With careful consideration, Lonicera does make exceptions for certain specialty tenants. This strategy protects our investors in case of a recession, pandemic, mass moves to work from home, and other unpredictable events out of our control. Smaller suites are leased faster than larger suites, so this also protects the investors when there are vacancies.
As we look to expand our investments and explore additional strategies, we have considered opportunity zone investments. These properties are in geographical areas designated by the US government as an economically distressed community where investments can receive preferential tax treatment.
Opportunity Zones have the potential for significant tax savings. Investors can defer and reduce capital gains taxes by investing in qualified opportunity funds. If held for at least 10 years, the capital gains taxes on the investment can be eliminated. This in turn can offer the potential for higher returns due to the potential for appreciation in the underlying assets.
COMMERCIAL LEASING OUTLOOK
Commercial leasing has shifted over the past few years to increase demand for smaller office and flexible warehouse spaces. At 2,500 square feet or less, smaller office spaces total 56% of the leases signed in Columbus, Ohio this year. This trend of increasing demand for smaller office spaces and flex warehouse shows businesses are pushing for more efficiencies. These efficiencies can be anything from more compact office layouts to better management of inventory by the business owners.
Lonicera continually evaluates the changes in leasing to adapt to the desires of the tenants. Through tracking leases in our submarkets, we are able to remain at the forefront of industry trends.
WHAT THE TEAM IS READING
Article by Alyssa Mercer
The first book I read when I started with Lonicera back in January was "The Hands-Off Investor" by Brian Burke. Since this was my first experience with syndications, this was a great place for me to start. Brian Burke explains syndications, different return structures and even how to chose the right syndication for the reader.
Even in the few months I have been at Lonicera, I have realized our most commonly asked question is about preferred returns and equity. Brian Burke does a great job explaining these topics with multiple examples for each. He presented the information in a way that was easy for me to understand.
Since Lonicera Fund IV closed mid April, the team has been actively looking towards Fund V. Although we are currently in Columbus and Indianapolis, we continue to analyze deals throughout the Midwest to ensure we are pursuing the best opportunities for our investors.
If you have any questions about Lonicera Investments, our past performance, or our future, please reach out. We would be happy to sit down with you and answer any questions you have!
ANY ESTIMATES OR PROJECTIONS AS TO EVENTS THAT MAY OCCUR IN THE FUTURE, INCLUDING PROJECTIONS OF REVENUE, EXPENSE AND NET INCOME CONTAINED IN THIS VALUATION SUMMARY OR ANY OTHER OFFERING DOCUMENTS, ARE BASED UPON THE BEST JUDGMENT OF THE COMPANY’S MANAGEMENT AS OF THE DATE OF THIS VALUATION SUMMARY OR THE APPLICABLE OTHER OFFERING DOCUMENT. WHETHER OR NOT SUCH ESTIMATES OR PROJECTIONS MAY BE ACHIEVED WILL DEPEND UPON THE COMPANY ACHIEVING ITS OVERALL BUSINESS OBJECTIVES AND THE AVAILABILITY OF FUNDS. THE ESTIMATES AND PROJECTIONS NECESSARILY MAKE NUMEROUS ASSUMPTIONS WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS AND ECONOMIC CONDITIONS, TAXES AND OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY’S CONTROL. THERE IS NO GUARANTEE THAT ANY OF THESE PROJECTIONS WILL BE ATTAINED. ACTUAL RESULTS MAY VARY FROM THE PROJECTIONS, AND SUCH VARIATIONS MAY BE MATERIAL. THE COMPANY HAS NO OBLIGATION TO UPDATE OR OTHERWISE REVISE THE ESTIMATES OR PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING OR DEVELOPMENTS OCCURRING AFTER THE PREPARATION OF THE ESTIMATES OR PROJECTIONS OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.