What are Core, Core Plus, Value-Add and Opportunistic Investments?

When we evaluate investment opportunities we categorize them into one of 4 categories: Core, Core Plus, Value-Add and Opportunistic. The different categories are defined by:

  1. the physical characteristics of the property (for example the length and term of the in-place leases, the credit worthiness of the tenants, and the physical condition and location of the building or land) and 
  2. the amount of debt used to capitalize a project as this defines the risk of the project.

The categories range in risk from conservative to aggressive. 

Graph mapping investment types

Here’s what you need to know about each one:

Core Real Estate Investments 

  • Risk profile: Conservative
  • Investor type: For investors looking to generate stable income with very low risk. 
  • What defines the risk level?  A Core investment usually requires very little management from owners and are usually occupied with tenants on long-term leases. Core investments are typically acquired and held. This type of investing is as close as one can get to passive investing when buying properties directly.
  • Example: Our Starbucks and North Vancouver properties

Core Plus Real Estate Investments 

  • Risk profile: Low to moderate
  • Investor type: For investors looking for little risk with some upside
  • What defines the risk level? A Core Plus investment can typically increase cash flows through light property improvements, management efficiencies or by increasing the quality of the tenants. Similar to core properties, these properties tend to be of high-quality and well-occupied. 
  • Example: addy has not offered a property in this category yet!

Value-Add Real Estate Investments 

  • Risk profile: Moderate to high
  • Investor type: For investors willing to take on more risk to achieve high returns and are willing to wait longer before they begin receiving returns for their investment.
  • What defines the risk level?  A Value-Add investment often has little to no cash flow at acquisition but has the potential to produce a tremendous amount of cash flow once the value has been added (for example physical upgrades, better management, added services or more effective marketing).
  • Example: Our Calgary and Toronto Properties

Opportunistic Real Estate Investments 

  • Risk profile: High
  • Investor type: For investors willing to take on the most complicated projects and may not see a return on their investment for three or more years. 
  • What defines the risk level?  An Opportunistic investment often has little to no cash flow at acquisition but has the potential to produce a tremendous amount of cash flow once the value has been added. Examples include developments, acquiring an empty building, land development and repositioning a building from one use to another.
  • Example: Our Trout Lake property in Vancouver

It’s very important to understand the different types of real estate investments when making an investment decision and weigh these characteristics against your own risk/return tolerance or speak with a professional for advice about what is best for you. 

How can addy help?

The great thing about addy is that you can dabble in many different types of investments with a dollar amount that fits your budget and risk tolerance level. When we all invest together the risk is diversified.

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