Vogl Capital's primary focus is on real estate loans not typically supplied by large financial institutions. That supply is limited by regulatory constraints and by the atypical nature of the loan collateral. With headline rates in the high single digits, leverage produces investor returns in the low- to mid-teens, all with a 20-30% cushion against a drop in value due to against a rise in capitalization rates. Conservative approaches to valuation of collateral create opportunity for enhanced returns in cases of default, as penalty interest and fees prove collectible.
To diversify some of its capital away from real estate, Vogl Capital maintains a minority of its investments in operating businesses. It aims to invest in businesses whose cash flow is likely to generate an adequate return even if the market's valuation of that cash flow drops. As such, it targets businesses with low EBITDA multiples whose offerings have favorable demand trends. In this area, Vogl Capital has a strong preference for single-business opportunities over funds.
On occasion, Vogl Capital acts on opportunities that fit none of the above categories. It typically does so when the opportunity's upside is particularly compelling and its downside risks particularly contained. Most of its investments in this area have low likelihood of performance correlation with the rest of its portfolio.
While Vogl Capital has been moving its investments in real estate down the capital stack to protect against the risk of rising capitalization rates, it aims to maintain some positions at the top of the capital stack. These investments require a manager prepared to ride out a real estate cycle by holding for 5-15 years as required, and they require trends for the relevant geographic market that are likely to result in greatly improved demand for use of the asset over that time period. Vogl Capital currently is not considering investments whose profitability depends on the current pricing environment changing only incrementally in the coming years.
Current Focus Areas
Vogl Capital's overall focus is on real estate, because investments in that area typically don't involve operational complexity that is difficult to assess. In today's investing environment, Vogl Capital is guarding against short- to medium-term risk of rising capitalization and interest rates.