Jeff Bezos, in his now-famous inaugural shareholder letter (1997), wrote of a “Day 1” mindset. There is a lot of wisdom in companies holding that perspective as they grow, but for Copium Investments, the “Day 1” mindset was a literal reality of this past year.
2021 was a year of many firsts. While the core of our business – buying and operating good real estate – has been around for a while, this year was our first time to buy, develop, and lease properties in the Treasure Valley, develop professional operations systems, raise outside capital, build a property management division, and more.
On top of this, we have met so many incredible people who have helped us get off the ground. For those who have partnered with us (in large or small ways) or who are watching from the sidelines, I would like to share the background of why we are doing this, starting with the high-level vision (Why Real Estate? Why Idaho?) and moving to specific projects.
Like many business ventures, this decision was influenced by both past experience and future expectations. Real estate has been good for us and we saw ways to do it better. More specifically, though, we chose this business because:
Idaho is the best state in the nation. Moving on.
In seriousness, though, Idaho is a leading representative of a broader class of states that we believe will continue to have strong population growth in the foreseeable future. The fundamental driver of this is the ability to choose where you live.
Why is this such an important factor? Population growth is one of the largest influences on real estate value. Today, migration is the main cause of population growth (the other is having lots of kids, and unfortunately, that’s becoming more and more irrelevant). Those who bought and built properties in the path of inbound migration over the years have had a strong foundation for successful investments.
Migration is not a novel phenomenon – our entire country is a byproduct of lots of people deciding they wanted to live somewhere different (European settlement, Immigration, Westward migration, etc.). What’s new is the ease with which people can pick up their lives and plant them in a new location.
If you’ll allow a bit of a tangent, for most of history (before the invention of the rail & automobile), moving more than fifty miles was a commitment to uproot your family and livelihood and restart from scratch. For long-distance moves, like those of the initial settlers of the American Frontier, it was also a commitment to give up seeing your family and community (not to mention the high risk of losing your life on the journey). That dynamic changed with technology to travel long distances faster and easier.
This new dynamic, brought about by the invention and distribution of trains and automobiles, drastically lowered the difficulty of migrating to a new place. You still had to get a new job and integrate into a new community, but you no longer had to risk life and limb to make the trip or say a permanent goodbye to friends and family staying behind. We saw this change exemplified in California’s record inbound migration during the 20th century. During this period, by the way, they led the nation in average home price appreciation by a wide margin.
The twenty-first century ushered in a “third wave” of migration ease that accelerated over the last two years in particular. The last major hurdle to migration – giving up one’s livelihood and community – has been eliminated for a large percentage of the population. Even proponents of office-based workforces (like myself) have to acknowledge that many companies can function with a distributed workforce with minimal loss to productivity. On top of this, the same communication technology that is powering productive remote teams has lowered much of the friction of keeping up with families and communities that are distributed across the globe. Whether it’s regular Facetime calls with loved ones or hanging out in social media with online-only communities, the friction of moving long distances continues to decrease.
So what does this have to do with investing in real estate in Idaho? The environment described above makes it easier to choose where you live, which means the best places to live will asymmetrically outperform other locations in population growth. This sounds like it would lead to a handful of cities dominating population growth, but it’s actually the opposite. This creates more distribution in population growth as the quality of “best place to live” can mean so many things to different people.
The markets that will grow in this environment are the places that possess qualities that a large number of people find attractive. On top of this, these qualities will become more engrained in the identity of the population as more people move to that place because of those qualities.
The markets in Idaho (and neighboring states) offer a distinctive set of qualities that appeal to many people:
Each of these items can be found in other places, but the combination in Idaho creates a distinctive, attractive product that we believe will continue to attract immigrants for many years to come.
This one is pretty simple. In the context of the regional evaluation above, the Treasure Valley checked the most boxes for our business and personal preferences:
Why Our Strategy?
An investment strategy should answer three questions:
A basic indexing strategy in the stock market, for example, would be purchasing market-index ETFs at market price and rebalancing every month.
For us, this translates to buying and developing real estate at a good value in growing markets and selling when it makes sense. I covered the location aspect of our strategy above (why we invest in Boise, ID). There are three other significant aspects of our strategy here – which assets to focus on, when to buy them, and when to sell them.
In a market where many struggled with deal flow, we were blessed with some great opportunities to execute the strategy detailed above. At a high level, we raised $5mm in capital to purchase and/or develop $13.5mm worth of industrial, retail, and residential properties. Those projects were:
While this represents only a fraction of the activity in the Treasure Valley last year, we are grateful for the opportunity to establish a presence in the market and start to develop the network and processes we’ll need to grow in the coming years.
2021 gave us a great foundation to build on. In 2022, we have two main focuses:
Paul Graham once advised that “it’s better to have a product that 100 people love than 1,000 people like.” Measuring a “product that people love“ often feels like aiming at a moving goalpost. Despite the subjectivity, however, it’s a useful filter to decide where to invest time and effort in a business. We made progress on this front in 2021, but before we get serious about scale, it’s our main focus in 2022.
A rough estimate suggests that the total value of commercial real estate in the Treasure Valley would be around $40bn-$50bn. We’re nowhere close to being limited on growth in this area. One of the aspects of a great product (mentioned above) is deal flow, and improvements in this process should result in more great opportunities to add properties to the portfolio.
We’re focused on finding deals at good value across all asset classes. Two big ones that we did not get exposure to last year are office and multifamily, so we’re putting additional effort toward finding acquisition and/or development opportunities for these.
In closing, we were blessed with a fruitful year in 2021: starting a business, acquiring and building some great properties, meeting lots of fantastic people (in Boise and abroad), and building a foundation to grow on for many years to come. As Solomon taught, “The heart of man plans his way, but the Lord establishes his steps” (Prov. 16:9). We have a vision and plan accordingly, but know that the future holds plenty of surprises. We’re excited to be along for the ride.