Strategies
Fund managers can deploy capital across different tranches of the capital stack with varying risk and return profiles.
Direct ownership of real estate assets. This positions provides the highest upside potential for investors, while also being the riskiest position in the capital stack.
Debt
Debt investments can provide a lower risk investment at a lower return expectation. Debt investments are often collateralized by the property, as the investor is acting as the lender to the property.
Core
Lowest on the risk/return spectrum. This strategy focuses on investing into high-quality cash-flowing properties that are already operating and fully-leased.
This approach is the bridge between core and value-add strategies. While investors are typically looking for low-risk, high-quality properties, they will spend a light amount of capital to provide some upside in performance compared to current operations.
Investors with a value-add strategy in mind look for properties that have lacked capital expenditures in years past, where operators can invest and improve properties to increase revenue and profitability.
Investments can fit into this bucket for a variety of reason but boil down to one common theme - operators intend to spend significant time and capital to create value. This can mean ground-up development, adaptive re-use, distressed sellers, and many more. These investments have the highest upside potential with the most risk.