Achieving the best investments for our clients requires a number of different investment strategies, dependent upon the project and the goal of the investment. Below are the types of strategies we employ.
The purpose of this type of strategy is to produce a stable cash flow with minimal risk. This type of acquisition diversifies the portfolio and counter-balances the riskier investment strategies. The main reason to pursue this type of strategy is the ability to obtain a favorable going-in acquisition price.
The focus of this strategy is properties with a fairly stable existing net operating income (“NOI”), and an opportunity to increase it. For example, extending existing leases that do not have pending expirations.
Buy Vacancy/Renewal Strategy
This strategy is employed for relatively stable properties that have short-term NOI problems, such as existing vacancy or pending renewals. The risk associated with this type of asset will typically result in obtaining an attractive acquisition price.
Credit Risk Strategy
This strategy involves the acquisition of an attractive asset at a discount due to the credit status of the primary tenant. This strategy requires the consideration and analysis of a number of mitigating factors. These include, but are not limited to:
- The nature of the tenant’s use (importance of the tenant’s facility, e.g. headquarters);
- Tenant’s tenure at the property;
- Extent and timing of tenant’s capital investments in the property;
- Location (difficulty of finding a replacement tenant if the existing tenant defaults); and,
- Underlying financial characteristics of the tenant.
This strategy is used when involving a property with numerous issues, in addition to a NOI problem. Such issues could include deferred maintenance, capital improvements and facility upgrades (e.g., improving a Class “C” asset to a “B”). This strategy is typically employed in conjunction with a Yield-Oriented Buy Vacancy/Renewal Strategy.
This involves the expansion of an existing facility.
This is used when raw development or re-development of an existing facility is involved.
Change of Use Strategy
This strategy involves the conversion of an existing facility to another product type use through re-development, e.g., turning an industrial facility into office suites.
REAL ESTATE OPERATING COMPANIES
Investment in Real Estate Operating Companies
A portion of the investments may be made in other real estate entities as a passive investor. This allows us to strategically diversify the Fund’s portfolio of assets acquired from its direct investments in real estate.
This is accomplished by making investments in other companies, entities or funds that specialize in a particular asset class, such as medical office building, or a debt/equity fund focusing on making high interest loans where the underlying principal is the collateralization of the borrower to secure the risk. These investments are made with a focus on seeking higher returns.
The Fund’s direct investments in real estate are made with the goal of enhancing the capitalized rate of return through the application of debt at rates that are lower than a specific project’s capitalized rate of return.