Current Investment Objectives
TEP aims to assemble a portfolio of highly stabilized, income producing property, with best probability of renewal to preserve wealth for our investors. It is comprised of three sectors:
- General Services Administration (GSA)
- State & Municipality
- Aerospace and Defense
Leveraging Decades of Experience to Create Generational Wealth
- Focus on legacy assets that generate stable, reliable cash flow streams
- Risk averse investment philosophy with strategic focus on niche sectors with high barriers to entry for additional investors
- Investment committee members are all personally invested in every TEP fund and have aligned their interests with investors
Target Sector Profiles
- The General Services Administration (GSA) is an independent agency of the United States Government, established in 1949 to consolidate and streamline administrative functions across various government departments. The GSA is divided into two principal divisions, the Federal Acquisition Service (FAS) and the Public Buildings Service (PBS).
- GSA-leased space nationwide has continued to increase over the years. From 2001 to 2016, the annual average rate of leases continuing beyond that fiscal year averaged 95.4% (including leases terminated after the census in 2001 and 2010). At the end of fiscal year 2016, the GSA was the lessee on nearly 8,000 leases totaling over 184.7 million square feet of space.
- With the new administration’s policies coming into focus, the real estate community can expect to see increased lease executions through 2020.
- Included in the increased lease activity should be long term leases for many of the space needs that were the subject of short term extensions in 2016 and 2017 due to the impending presidential transition.
- State government-leased assets provide many of the same investment characteristics as GSA/Federal government- leased real estate. However, with each state having its own set of leasing procedures, lease forms, and standard terms (such as appropriations language), the market on a nationwide basis is not as uniform as it is with the Federal Government.
- The investor pool for state-leased properties benefits from high barriers to entry and is not as deep, providing less competition in a relatively untapped marketplace.
- Capitalization rate pricing and potential investment yields tend to be higher for state-leased assets with comparable lease terms and a comparable risk profile. In addition, lease structures and terms tend to be more landlord-friendly than with GSA/Federal Leases – with less operating expense risk, annual or periodic rent increases during the lease term, and termination penalties.
- As a result, state (and select county and municipality government) leased assets provide an excellent opportunity to increase portfolio stability and risk-adjusted returns.
- In 2017, the aerospace and defense (A&D) sector reported record profits of $77 billion, an 18% increase over the prior year, and surpassed the previous record set in 2014. The top 100 A&D companies reported $728 billion in revenue, an increase of 4% over 2016, and $77 billion in operating profit in 2017. Operating margin was 10.6%, also a record, having reached double digits only once before in 2014.
- Driven primarily by the US defense subsector, revenue growth in A&D companies has repeatedly outperformed US GDP growth in recent years.
- The defense industry reported accelerating revenue growth in 2017. In March 2018, President Trump signed the omnibus spending bill, which sets the Department of Defense (DoD) budget at $700 billion, about a 20% increase in two years. Therefore, we expect continued acceleration of revenue and profit in 2018.
- Revenues of the top 20 global A&D companies accounted for nearly 73.7 percent of the global A&D sector revenues in 2016 (in line with the 74.2% in 2015), reflecting continued sector concentration.