A Family Tradition
American Group’s Fred Hameetman Builds His Legacy on Opportunity
Fred Hameetman, chairman of American Group, started his career in real estate nearly 50 years ago with the acquisition of his first company in 1971. Since then, American Group has grown exponentially and now is comprised of approximately 50 companies, corporations, partnerships, and qualified opportunity zone funds, one of which, Cal-American Corporation, oversees the management of more than $500,000,000 in real estate. To date, there are nine Cal-American Income Property Funds.
“My first venture was in real estate limited partnerships,” recalled Hameetman. “I didn’t start out in real estate, but once I started, I soon realized that income properties are the ideal asset, by far.”
Hameetman has a diverse academic background, with a Bachelor of Arts degree from Occidental College, a Bachelor of Science degree from Caltech, and a Master of Science in Engineering degree from the University of Southern California. While attending USC, he worked at Douglas Aircraft, where he ran their hyper velocity impulse tunnel. “We conducted testing on antimissile defense missiles and atmosphere re-entry vehicles,” he said. “They were the predecessors to our space shuttles.”
After five years at Douglas, Hameetman realized aerospace engineering “wasn’t for me.” He began investing in stocks, developing a particular fondness for convertible bonds because of the flexibility they offered investors. Ultimately, Hameetman joined a real estate firm and discovered that income property was, in his words, “a great idea”. Sometime later, in his first private equity deal, Hameetman acquired an estate planning firm, which eventually became the start of his family office, which now operates under the name American Group.
“It was my first deal, and I’m still very proud of it,” he said. “I have gotten just under 30 percent internal rate of return (IRR) on that acquisition over the past 48 years.”
Eyes on the Prize: The IDEAL Benefits of Real Estate
Although he has acquired and managed just about every type of real estate project under the sun since American Group was founded in 1971, Hameetman has always maintained laser focus on his favorite type of real estate: the kind that is producing income.
“My favorite asset class is the asset class that is producing the greatest income for my investors,” he explained. “There is more to real estate than just physical property. The sector includes apartments, shopping centers, office buildings, industrial properties – the list goes on and on.”
At American Group, real estate is targeted and evaluated based on Hameetman’s IDEAL Investment™, an acronym that stands for Income, Deductions/Depreciation, Equity Build, Appreciation, all enhanced with Leverage.
“Over time and through experience, my favorite assets have become apartments, and, until recently, shopping centers,” Hameetman said, adding that online retailers like Amazon and relatively recent developments like physical distancing requirements in response to the coronavirus pandemic have largely “killed” the traditional shopping center model. For years, he has avoided office buildings, unless they offered exceptional value, calling them increasingly unnecessary.
“Even before COVID-19, office buildings were no longer absolutely necessary. So many people operate out of their basements these days, and when someone builds a new building down the block from your office building, the tenants tend to gravitate to the newer model,” he explained. “Then you have to refurbish, pour in more capital, and lease it all over again.”
The company has relatively small industrial property holdings as well because although these properties typically bring triple-net leases, “rents may be flat for five, 10, or even 15 years, which is not necessarily good for the ‘income’ side of the IDEAL Investment equation for growth,” Hameetman said.
On the other hand, Hameetman finds apartment buildings far more “IDEAL” and one of the most attractive asset classes in the real estate sector. “Everyone needs a place to live, and apartments offer one of the best opportunities for an investor to keep pace with the market, because between 20 and 50 percent of all tenants will move in any given year no matter what, giving the landlord an opportunity to pace rental rates with the rest of the market,” he said.
He noted multifamily buildings also meet the rest of his requirements since they come with many opportunities for savvy investors to use tax deductions and depreciation to their advantage, tend to offer significant appreciation and equity through mortgage reduction along with or in excess of inflation, and, of course, benefit from the use of leverage.
“I’m essentially an evangelist for income property, particularly apartments,” he concluded.
Trust, Taxes, and Emerging Opportunities in 2020
While 2020 has been a year of incredible turmoil and uncertainty for the entire U.S. population, including real estate investors, American Group is poised to bring desperately needed stability and security to investors and to local communities most susceptible to economic swings, thanks to its focus on development projects in qualified opportunity zones (QOZs) and on acquiring multifamily developments in certain target markets poised to resist and recover from economic turmoil more effectively and expeditiously.
Greg Horton, CEO of American Group, noted that, from the perspective of investors in American Group’s funds, “This is opportunity!” One major reason for Horton’s relatively optimistic outlook in a sea of pessimism is something that Hameetman and his companies had already started working on before the COVID-19 pandemic: leveraging projects eligible for opportunity zone funds.
“The Opportunity Zone Program is legislation that will never be replicated and probably will not be diminished by changes [because it was bipartisan in nature],” Hameetman said. “It is a once-in-a-lifetime opportunity for investors to defer, reduce, and finally eliminate capital gains taxes, while leveraging the gains to create significant returns in real estate rather than losing them to taxes. It is a win-win for both investors and communities!”
Hameetman first encountered the Opportunity Zone Program when he sold a property in San Pedro, California, after the Tax Cuts and Jobs Act (TCJA) passed in December 2017. “A developer bought the property from us for several times more than we had expected to get from it and then flipped it to a large opportunity zone fund. I knew then I had to participate in this program, and we did with an exciting development project in Florida,” he said. Hameetman noted that the relatively small size of his qualified opportunity fund (QOF) gives him the agility to move quickly and be “very, very selective” about the assets in which the fund invests.
The Florida project, dubbed “Palm Beach Riverstone,” is located in West Palm Beach. The project’s momentum has not slowed even with the COVID-19 pandemic. “We have been working through the entitlement process, including getting our designs approved by the city while everyone is working from home,” Horton reported. “There is documented need for this development project, which includes a 374-unit multifamily community, which is well underway. A second project on the same property is a 150-key hotel. These projects will bring over $250,000,000 in economic impact to the area during construction and the first year of operation.”
Palm Beach Riverstone is positioned in an ideal location, Horton explained, thanks to its easy access to Florida’s I-95 and close proximity to multiple medical centers, including women’s health centers, cancer treatment centers, and the world-renowned pediatric orthopedics center at Palm Beach Children’s Hospital. “We are right in the path of progress,” he said.
American Group’s agility has been on full display during the COVID-19 pandemic as the project continued to build momentum despite a national shutdown. “Everyone is doing more due diligence than ever,” Horton said. “Because we are nimble and focused on this project, we were in a position to answer every question we have been asked and keep things moving. We literally doubled the size of the project prospectus to make sure every investor and every lender had the answers they needed.”
American Group is also working hard to identify other areas where opportunities exist in today’s market. At present, the company is focusing mainly on Florida, Texas, Utah, and Arizona. These states are receiving massive population increases from the large coastal cities and states with high taxes and high cost of living. Texas and Florida offer no personal income tax and they are “right-to-work” states without serious union issues.
“There are going to be poorly capitalized multifamily owners who are going to be in serious trouble during this COVID-19 recession,” Horton observed. “Although we generally feel our investors will get a better return on their investment in development projects, we are very open to buying existing apartments with the right type of potential.” Horton and Hameetman agreed that leveraged, B-class apartments can be particularly attractive because the potential returns will be extremely positive for investors positioned to hold the properties until local economies open back up and residents can pay their rents.
“Owning assets in different locations gives us diversification in the portfolio,” Hameetman explained. “We already saw more residents making their rent payments than many analysts predicted. We believe people will catch up when they are able, especially if you work with them.”
Through it all, Hameetman and his group remain focused on their investors’ best interests. To Hameetman, that means staying the course when it comes to protecting investors’ capital gains via opportunity zone investing.
“The bottom line is that every possible penny of capital gain should go into an opportunity zone fund that is responsible, focused on the investment and its returns, and capable of delivering the massive tax benefits still available to investors today,” Hameetman said. “Don’t invest blindly, but pick a fund that is transparent, has a clear plan, and has the money to get the project done. American Group is dedicated to making sure our investors know exactly what we are doing, and right now, we are protecting investors’ returns by investing squarely in the path of progress even during these difficult times.”
Carole Ellis is the editor-in-chief of Self-Directed Investor Magazine. Learn more about the research mentioned in this article and about safe-haven assets and how they can factor into your portfolio by emailing her at Carole@selfdirected.org or visiting selfdirectedinvestormag.com.
Investing in Opportunity Runs in the Family
Fred Hameetman has a long and storied career in real estate, and he has passed some of his affinity for the asset class on to his son.
Chris Hameetman, who holds a J.D. from the UCLA School of Law and a Bachelor of Arts degree in Art History from Duke University, is an independent real estate broker and handles sales and financing for the AAAmerican Opportunity Fund in addition to serving as president and CEO of Century American Realty Inc., a real estate company focused primarily on the sale of multifamily, office, and retail properties.
Chris is also the founder of Rainforest LA, a private-equity firm focused on early-stage growth opportunities, and the Chairman Emeritus of Tech Coast Angels (TCA) Network, one of the largest and most successful angel investor organizations in the country. He served as a board member, advisor and/or venture investor for a variety of companies in fields ranging from fintech, biotech, medtech, edutech, digital media and gaming, machine learning, consumer goods and services, SaaS and robotics, including Green Dot Corp., Blue Bottle Coffee, Savara Pharmaceuticals, and Neural Analytics.
Earlier in his career, Christopher was a transactional attorney with Century City-based Pircher, Nichols & Meeks working on notable real estate projects across Southern California, including the Century City Mall, the Howard Hughes Center, and the redevelopment of the iconic Sunset Strip.
Finding Opportunities in Unprecedented Times
Lately, it seems like every economist prefaces commentary on the national, regional, and local economies by pointing out that nothing is certain in these unprecedented times. Many even recommend sustained inaction until the situation “clarifies.” Fred Hameetman, however, is very certain about how to spot a good project and how to steer clear of the more perilous ones.
“Investors have to pay attention. You cannot afford to wait and see what happens because you will miss your opportunity,” he said. “At a certain point, you must pick the best from what is available.”
Of course, Hameetman does not advocate going in blind. “In today’s market — and in every market — you have to know as much as possible about the opportunity zone, the opportunity zone fund, and the project or investment,” he explained. “For example, if you invest in a fund that allows developers to buy and double-promote its properties and projects, the tax elimination will not be as significant of a benefit, because of reduced appreciation and investment returns.”
Hameetman listed three qualifications he believes every investor should address before investing in an opportunity zone:
The managing group should be a known, responsible entity with a solid track record.
The fund should be clearly focused on the investment or project in the opportunity zone at the present time.
It should be clear that the investment will gain significant value over time.
“Tax benefits are not nearly so important if your project manager fails to leave anything in the project for the investor and you get little appreciation over time,” he said. “Make sure you know who you are investing with, what they are doing, and how much experience they have doing it before you place your capital with a fund. Once you know, every penny of capital gains should go into opportunity zone funds.”
The AAAmerican Opportunity Fund is currently accepting investments. The fund has a 10-year minimum hold period, invests in assets meeting Hameetman’s IDEAL Investment™ standards, and focuses mainly on multifamily income properties in areas that will enable investors to benefit from the preferential tax treatment of the Opportunity Zone Program. Learn more at www.AmericanGroup.us.
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