Searching for opportunities to benefit others – by improving outcomes or cost savings – one Tennessee investor translated his business savvy into a successful retirement investment with community impact.
Equity Trust client, Adam, works for an investment banking firm that helps middle-market clients raise capital. Several years ago, he was introduced to the concept of self-directed retirement accounts. Self-directed IRAs allow investments in alternative assets such as real estate, private lending, notes, and more.
Finding the Ideal “Resort” Location
A few years ago Adam’s firm was approached by the CEO of a substance abuse treatment company in search of a location to start a new residential treatment campus. Part of the company’s mission is to provide a large “campus” setting with recreational activities that support the treatment process.
“I wanted to help the company because they were successfully helping people and growing quickly,” Adam said.
After initially targeting smaller locations near their corporate office in Tennessee, the client identified a 40-acre property outside of Dallas, Texas that was home to a bed and breakfast. The bed and breakfast was under-performing at the time so it seemed like an opportunity worth pursuing.
Putting the Investment Together with a Plan in Place
Adam was interested in this opportunity as his first self-directed IRA investment because, as he recalled in the interview, “I believed the investment would allow for the potential of a significant return in a short period of time because of the ability to refinance the property.”
Adam, along with a group of other investors, invested in a private placement for an LLC that would acquire the piece of real estate. Since the original bed and breakfast had no cash flow, the LLC borrowed against the property until they could generate cash flow again.
The investors’ LLC then leased the property to the substance abuse company, who renovated the property and started operations. Fourteen months from the initial acquisition, the substance abuse facility was up and running and generating cash flow.
This was a critical juncture in Adam’s investment because, as anticipated, the loan the LLC had on the property was refinanced and the investors were repaid on their loan, resulting in a return of 65 percent in fourteen months.
A New Facility with Tangible Impact
Today “The Treehouse” facility is a “private therapeutic retreat – rooted in the healing power of nature – that leads clients toward lasting recovery and freedom from addiction,” according to the company website.
This thriving, 40-acre campus blends into the rustic landscape of trees, lakes, and creeks and includes a network of zip lines, horse trails, and other recreational activities. The Treehouse can support 60 patients but is already considering an expansion effort.
“I have a lot of experience working in the healthcare industry,” Adam mentioned. “I like opportunities that provide a benefit to those involved. Whether it’s cost savings or improving outcomes, those are two things I look for,” he said.
Adam admits there were a few bumps in the road, considering it was his first self-directed IRA investment, but he grew more comfortable as the investment process progressed. For investors with experience or knowledge in a particular area, Adam’s story demonstrates the ability to utilize IRA capital to impact lives, in addition to his own portfolio.
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The above case study is for educational purposes only. Past performance is not indicative of future results. Investing involves risk, including possible loss of principal. Information included in the above case study was provided by the investor and included with permission. Equity Trust Company does not independently verify all information provided by third parties.