Included among them are; relatively low correlations of returns with the traditional asset classes; a hedge against inflation; generally low standard deviations of returns; the power of positive leverage; and the opportunity of experienced asset managers to improve value.

Historically real estate has served as an excellent investment for income and long-term appreciation as well as a hedge against inflation. Through positive leverage, investors can increase their yields and protect their investment against inflation. As an example, a 30% equity position with just 3% annual inflation of property values results in a 10% return on investment in year 1, BEFORE taking into account any current income from operations or the tax benefits of depreciation. Without considering compounding, in ten years the property value should be about 30% greater, meaning that your original 30% investment would have doubled. Conversely, if one purchases 10 year notes or bonds, does not reinvest the majority of the interest or dividends, and inflation averages 3%, the principal at the end of the 10 year term will be worth 70% of the original invested capital in present day value.

Of course there are risks associated with the ownership of real estate. To mitigate risk Capstone has specialized in a certain asset class that virtually guarantees that the rent will be paid through the lease term. That asset class is one backed by the United States Government through their lease of the office or industrial buildings that we purchase. The United States Government has moved toward privatization of many of its facilities...This has created a new and very impressive asset class of real estate investment. These properties are not readily available to the average investor. Capstone has developed a particular expertise in sourcing and acquiring such properties.

While the principals of Capstone believe that a prudent investment strategy should include a presence in stocks, equity and bonds we also strongly believe that investment-grade real estate plays an important role from an asset allocation perspective and should be part of an investor’s portfolio. Without minimizing the inherent business risks associated with property ownership we regard United States Government leased properties as being similar to a AAA Bond with the added benefits of depreciation and appreciation.

We believe that long-term United States Government leased properties offer an excellent vehicle as a portfolio diversifier and risk reducer, with all the benefits of secure, predictable, tax advantaged current income with medium and long-term appreciation.