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Innovative legal strategy: Avis Berg’s key to generating millions for real estate portfolio owners

Avis Berg’s legal strategy, known as CapEx Recapture, is one way he uses novel approaches to make his clients money

Photo courtesy of Avis Berg
Photo courtesy of Avis Berg

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If there’s one thing Avis Berg, the CIO of Berg Capital, a hedge fund and portfolio manager, knows, is that the financial system and the economy as we know it now is unlike anything we’ve seen before. The volume of debt in the system is without precedent. The interest rates have never been this high in decades, and the current cost of capital is very high.

“We’ve never been at this current juncture we are at today. No crystal ball to navigate this landscape,” he says. “And because of that, I must utilize out-of-the-ordinary strategies to make money in this market.”

Fortunately for the enterprises he works with, Berg has become adept at making money in strange markets. Taking his first steps in the world of finance when he was 17 years old, he was able to accrue experience beyond his years: that and a knack for seeing things others don’t.

“I like finding unique strategies that create value. I think there’s a lot of folks always running with the herd, which is fine because it works,” he says. “You can still do well — follow the herd most of the time as long as you take risks accordingly. But I enjoy finding anomalies that have not been tapped into that can generate value.”

Berg’s legal strategy, known as CapEx Recapture, is one of the best examples of his way of using novel approaches to make his clients money. Devised to help real estate portfolio owners recover some capital expenditures spent, it leverages expertise from several professionals to generate a convincing and legitimate origination of an insurance claim.

The strategy can be applied before a large purchase, before selling, or for current real estate holders. It starts with a meticulous inspection of the properties that make up the portfolio. The aim is to locate issues or damages that the owners might have missed. Next, the damages are compared with the subject property’s last two years of meteorological data. 

“Most states in the United States have a statute of two years when it comes to property damage. So we analyze the last two years,” he says. “If there were adverse weather events that could have been overlooked, we do a thorough analysis. The reality is, as a property owner, you don’t get on the roof of your building nor inspect the structure every day.”

When damage is found, a team of engineers, commercial appraisers, and meteorologists write up a report. The legal team packages it, sends it to the insurance company, and, more often than not — gets money for their clients. “Without a competent law firm that has mastered the execution of this strategy, none of this would be possible. We are fortunate to have teamed up with the best in the business for the past five years.”

“So essentially, you pay insurance companies hundreds of thousands of dollars every year as a portfolio owner,” Berg says. “With over $200 million of commercial real estate under management, imagine the amount lost annually in premium payments, property upkeep, and maintenance. We are currently within an inflationary vacuum of soaring labor costs, declining insurability rates, and rising premiums as insurance companies rebalance, so you need to be proactive. This is my strategy to recapture capital expenditures. Every property will experience some level of deterioration. Why not get ahead of the curve?” 

The CapEx Recapture strategy’s field of use extends beyond portfolio owners. It can also help private equity firms, REITs, and small banks, following Berg’s vision of creating long-term value for real estate investors by recapturing funds that were previously operational costs. It’s a proactive strategy very much in line with Berg’s view of the financial landscape as it is today as something that requires thinking outside of the box and staying ahead of the curve. 

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Jon Stojan is a professional writer based in Wisconsin. He guides editorial teams consisting of writers across the US to help them become more skilled and diverse writers. In his free time he enjoys spending time with his wife and children.

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