by Fund Manager Datta Khalsa
Firmus posted a solid 9.023% annualized return over the course of 2019, continuing an unbroken record of growth and positive returns for our investors year-over-year since our inception in late 2013.
Over the course of its first six full years of operation, Firmus posted average annualized returns of 13.309%, compounding to average gains of 18.78% year over year for our investors who rolled these returns back into their shares. In other words, $100,000 invested in 2014 has $212,684 value today by being reinvested back into Firmus every year.
History of Firmus Financial’s IRR:
To recap our reporting method, the fund’s returns are based on the combined performance of our assets. Using what is termed mark-to-market appreciation, we set a timeline for each investment starting with the initial cost as of the date of acquisition and ending with the projected net proceeds as of the forecasted date of disposition or payoff. Each investment’s individual returns are then calculated as a percentage of its annual estimated accrued value over the course of the year. The weighted returns for all these assets are then pooled together along with the fund’s annual cash flow to calculate the overall yield for the period evaluated.
Moving into 2020, the fund controls a diversified portfolio of 25 assets across 11 states that include Arizona, Arkansas, California, Florida, Georgia, Illinois, Missouri, New York, Ohio, Pennsylvania and Texas. As we have started to see declining returns for Single-Family Residential flips, we have shifted our focus towards doing more private equity loans and multi-unit townhome developments, and have added new partnerships with several experienced hotel developers, one who specializes in entitlement projects here in the Bay Area and another who specializes in the rehabilitation and stabilization of established hotels in proven tourist markets across the country.
Locally, Firmus holds an equity position as in the entitlement project we partnered on at the Cupertino border for development of a 135-room “upper select service” hotel offering a restaurant and rooftop lounge. And the development team recently engaged with Hyatt for a contract that is expected to pay returns well in the double digits based on a projected sale date of September in this year.
The national developer we are partnered with controls over 5000 rooms nationwide with a business model of acquiring distressed hotels in desirable markets and rehabilitating them to restore their franchise “flag”. We have invested in two projects with them, one in upstate New York and one in Missouri, where our position starts out with us receiving monthly fixed dividend payments over the first 18 months at 11% return, with our stake converting to an equity share once the project is stabilized and refinanced. At that point, Firmus’ full initial capital investment will be repaid with us continuing to receive pro rata distributions on all profits and/or proceeds thereafter.
The 20-townhome development we have underway in Phoenix is on track to be completed before the end of the year, and the 15-townhome project that we are partnered on in Aptos with a local developer has now received full entitlement so we are moving towards construction on that one this Summer.
In other news, we are expecting about $1 Million payout on our $707,000 investment in Blythe, CA within the next 30 days which will enable us to pay down our debt as we continue to streamline our portfolio to continue to perform well in the course of anticipated changing market conditions.
Moving into 2020 we are excited to see our multiple investments and development projects coming along nicely, as we continue to build on our solid foundation of investments over the past six years.