Magnolia’s strategy involves purchasing shares of public REITs that own properties in targeted markets. These markets are considered to be “high barrier to entry” markets which imply the market is land constrained, has a unionized work force, and has significant government regulation. Magnolia’s targeted markets are: Boston, New York City, Washington, D.C., Los Angeles, Seattle, San Diego, and San Francisco. Historical analysis has shown that properties in these markets have been systemically undervalued and therefore investment in these markets has led to above market returns.
Portfolio Selection Algorithm
Magnolia employs a quantitative valuation model to select REITs for its portfolio that incorporates data provided by the REIT and NCREIF data. Magnolia then employs an optimization algorithm that balances value maximization, geographic diversification, and diversification among REITs.