Tangible assets. Stable investment opportunities. A diverse portfolio that can weather dips in the stock market.
These are the main reasons that a group of Central Pennsylvania investors, mostly friends and family, started pooling money together in 2012. They began with investments in U.S. farmland, a step that led eventually to building luxury vacation villas in the Caribbean and condominiums in South America.
The private group led by Joshua Hershey, a Dillsburg-area resident and president of Hershey’s Investments LLC, said it is looking for other real estate investments. And that could mean more international moves.
The group is comprised of about a dozen people who participate in some or all of the real estate deals. Each deal is set up as a separate limited partnership that Hershey manages through his small investment firm.
The common thread among the investors, many of whom own regional businesses, is a concern about volatility in the financial markets as they close in on retirement.
“I don’t want to worry about market jumps,” said Mike Aiello, vice president of Adams County-based PSI Pumping Solutions Inc., one of the principal investors in the group. “At this point, I want to make sure I’m not losing.”
And like many investors, they don’t want to risk putting too much money into one basket, and they don’t want to blindly throw their savings into big real estate investment funds run by strangers.
“I would rather invest in myself or the people that I know and trust,” Aiello said.
Slow and steady
Hershey understands the concerns. The 36-year-old said he, too, is more comfortable investing and managing money for people he already knows. He intends to keep the group small and grow slow.
Currently, he oversees five properties owned by the group, including three farms, a multimillion-dollar villa in Turks & Caicos and a condo project in Chile.
“Deep down, I think a lot of people would like to know that they own something a little more diverse, something they can see and touch versus stocks or CDs,” he said. But, he added “I think there is a lot of people who are just not sure how to do it.”
He started out simple. He said his dad, Quincy Hershey Jr., the owner of wholesale leather supplier Hershey’s International in York Springs, wanted to diversify and get into farmland.
So he did. Friends liked the idea and wanted in. Domestic Land Group LP was born.
Using a national marketing firm that specializes in farmland auctions, the group has been able to buy and sell operating farms over the last four years, mostly corn and soybean farms in North Dakota and Minnesota.
They buy farms with a couple hundred acres and typically rent them back to the farmers, hoping for steady profits that might be used to buy additional properties.
Investments in the partnership range from about $50,000 up to a couple hundred thousand. Hershey collects an annual management fee of 1.75 percent, plus he gets 10 percent of the profits if the group decides to sell a property.
Farmland prices have leveled out over the last few years, prompting Hershey to begin looking for international rental opportunities.
He scanned the globe and kept coming back to Turks & Caicos, a British territory that is convenient to the U.S., uses U.S. currency and has a stable government.
Turks & Caicos is a series of 40 islands and cays, eight of which are inhabited, near the Bahamas in the Caribbean. The most populated island is Providenciales.
It’s a growing vacation destination for high-net-worth individuals, with one of the most desirable beaches in the world: Grace Bay Beach.
And there’s still plenty of room for development, unlike the Bahamas, Jamaica or Bermuda, said Robert Greenwood, co-founder of Regency, an affiliate of Christie’s International Real Estate in the Turks & Caicos. The opportunities draw a lot of North American investors.
Through a separate partnership, Hershey’s group spent about $4.5 million to build a luxury beachfront villa on Providenciales called Cascade.
At roughly 9,300-square-foot, the villa features six master bedrooms, eight bathrooms, two pavilions and three swimming pools. It opened last year and rents for an average of $14,500 to $22,700 per week, according to a website for the property.
The price puts the property in the middle of the pack for the area. Some places rent for up to $150,000 a week, Greenwood said. “It’s quite easy to rent them because it’s a more exclusive set of islands. It’s not as cheap as the Bahamas or other parts of the Caribbean.”
Hershey’s group works with rental agents on the island to handle bookings and maintain the villa, while it collects monthly profits.
“We can invest and we don’t have to be hands on,” said Steve Smith, another investor and president of Industrial Service and Installation Inc. in Manchester Township, York County.
However, that doesn’t mean the investors aren’t paying attention to their money. To avoid overextending themselves, properties are paid for the day they become operational, he said. “We are definitely looking for new projects, but at the end of the day, it’s about cash flow.”
Hershey is looking for more opportunities in Turks & Caicos. He’s also scouting other countries and regions of the world.
“Down the road, maybe we’ll look at the Middle East or New Zealand,” he said.
Investing in the local community
Mike Aiello hopes his investments in Joshua Hershey’s real estate group will help support local projects he’s passionate about, including his redevelopment of a defunct nursing home that was once home of the York Springs Elementary School.
Aiello, the vice president of PSI Pumping Solutions Inc., a company that builds, repairs and maintains water and wastewater treatment facilities and pumping stations, acquired the 32,000-square-foot Adams County property in 2013. It had been vacant about six years prior to the purchase, he said.
The property, at 400 Main St., was used by the Bermudian Springs School District up until the end of 1990 when it opened a new elementary school.
A church currently occupies part of the building, along with PSI. Aiello wants to build a warehouse behind it and he’s hoping to attract nonprofits and other community groups that need office space.
The project represents an investment of about $2.4 million, he said. “We’re trying to build up York Springs. We want to invest back in the community.”