MARKET FACTORS

RISK:

There are many risk factors inherent in real estate ownership: economic, liquidity, political, legal, and environmental. Risks can be managed through various methods allowing an informed investor to forecast yield based on the amount of risk perceived in any purchase.

 

Low Risk:

Core Assets: High profile, well-located institutional quality buildings in high-demand locations with barriers to entry for competing development.

Single-tenant: Net leased properties such as restaurants, corporate retail stores, corporate headquarters, manufacturing facilities, distribution buildings, and strategic satellite corporate locations.

Medium Risk:

Multi-Tenant: Shopping centers, office buildings, industrial parks, multi-family buildings all with multiple tenants and varying lease maturities. The quality and location of the asset will further determine the perceived risk.

Value-Add:  An existing asset that has potential to increase value quickly through renovation, lease-up, lease renegotiation, property management or other method.

High Risk:

Development: Ground up development that has entitlement, construction and lease-up risks.

Repositioning: An asset that requires hands- on effort for a complete renovation, to correct a physical deficiency, change of use, significantly increase occupancy or additional development are generally considered higher risk due to many variable factors.

HOLDING PERIOD:

The holding period is part of the strategy generally determined at the time of acquisition. Core assets and net-leased properties are generally long term while redevelopment and renovated properties are generally targeted for sale once the asset is stabilized and market conditions favor disposition.

FINANCING:

The careful use of financing can greatly increase the yield and reduce the amount of equity required. Financing comes with risk and each asset should be carefully examined to ascertain the appropriate amount of leverage, if any, based on the hold strategy and the profile of the investor.

ASSET FUNCTIONALITY:

The quality of construction, the location, and the physical attributes of the asset all contribute to the ability to lease the asset, which translates into either a high or low degree of risk to attract and maintain good tenants.