Salus offers investors the opportunity to establish a real estate portfolio that is intended to produce both a consistent income stream and appreciation. With a minimum investment of $250,000 an investor can own an interest in a real estate asset that may achieve both of these objectives. The long-term leases – a minimum of 10 years to 20 years – are intended to produce regular distributable income that historically average between 7 percent and 7.75 percent before depreciation. Investors typically receive cash distributions from rental payments on the leases on a monthly basis. The length of those leases and the 98% lease renewal rate on built-to-suit GSA properties are intended to establish a consistent stream of monthly returns. In addition, investors can take advantage of an asset that offers the potential of value appreciation. Salus targets properties priced between $10 million and $100 million that fall below the radar of large REITs. Over time, the properties may provide consistent income and increase in value at least with the pace of inflation.
The potential to reduce federal taxes makes investing in real estate an attractive investment option. By engaging engineering and accounting professionals to perform a cost segregation study, Salus is able to maximize depreciation to enhance the after-tax yields for investors. Cash flow from properties is typically tax deferred for the first five years they are owned by Salus, and 50% tax deferred during years six through 10. Cost segregation studies are conducted on each property. This process seeks to maximize tax depreciation and reduce current income tax obligations by reclassifying properties to the shortest possible depreciable life possible. To illustrate the benefit of cost segregation, consider an investor in New York State’s highest tax bracket (42%) who earns a pre-tax income on Salus investments of $50,000 before depreciation. Over the first five years, depreciation would more than cover the amount of income. It would probably require a taxable instrument yielding 12.5% to achieve the same return.
A long-term perspective lies at the heart of Salus’ investment program, beginning with how Salus evaluates a property before making an investment. The process is based on rigorous due diligence and a complete picture of the GSA-leased property market through databases covering each of the 8,000 such properties in the continental United States. Typically, Salus holds a property for a minimum of five years in order to take advantage of the initial depreciation benefits; however most of the properties in the portfolio are held for at least 10 years. Most acquisitions are underwritten using at least one lease renewal period and one refinancing; typically covering a 20 to 30 year period. Investors are limited to exposure to the amount of capital they have invested in the program.
Salus’ first priority is forging long-lasting client relationships. Salus achieves this by working alongside clients to determine their investment goals. Salus principals invest their own capital in each transaction, and earn compensation only after investors receive the preferred return on their investment.