Strategies
Private equity real estate funds generally follow core, core-plus, value added, or opportunistic strategies when making investments.
Core: This is an unleveraged, low-risk/low-potential return strategy with predictable cash flows. The fund will generally invest in stable, fully leased, multi-tenant properties within strong, diversified metropolitan areas, owned with little or no mortgage debt.
Core Plus: This is a moderate-risk/moderate-return strategy. The fund will generally invest in core properties; however, some of these properties will require some form of enhancement or value-added element.
Value Added: This is a medium-to-high-risk/medium-to-high-return strategy. It will involve buying a property, improving it in some way, and selling it at an opportune time for a gain. Properties are considered value added when they exhibit management or operational problems, require physical improvement, and/or suffer from capital constraints.
Opportunistic: This is a high-risk/high-return strategy. The properties will require a high degree of enhancement. This strategy may also involve investments in development, raw land, and niche property sectors. Investments are tactical.
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