The objective of the strategy is to deliver a stable, consistent flow of income supplemented by capital appreciation with a minimal risk of capital loss.
Philosophy and Process
The essence of our philosophy is “Buy right, own right”. The heart of good performance is to buy high quality assets at a reasonable price relative to replacement cost. Overpaying for an asset, no matter how attractive it may be, will inevitably erode returns.
Key elements of our selection criteria minimize the exposure to changing economic circumstances. For example, we tend to avoid special purpose buildings that cannot easily be re-configured or re-purposed. We also avoid heavy manufacturing and tenants that have excess reliance on exports or a high foreign exchange exposure.
We are not formula driven. Investments are selected based upon cash flow and value, and, in particular, the growth potential of both. Key selection criteria include:
- Discount to replacement cost
- Solid income characteristics
- Minimal functional / economic obsolescence
- Contract rates at or below market levels
- Careful evaluation of tenant credit
- Good market demand for vacant space
- Well-balanced lease maturities
- Favorable economic / demographic growth
- Proven market liquidity
- Under-market rents, poor management, poor leasing, extra land
- Re-positioning / re-development opportunities
Once a property is acquired, there is a detailed strategic plan developed for each property. The plan is reviewed and updated on an annual basis and subjected to peer review.
This process is an essential component of not only preserving and protecting asset value, but also identifying means and opportunity to enhance the value with a view to maximizing return.
Our only business is asset management. As we are not primarily property managers, we are free to hire the best local managers in every market and hold them accountable to the asset plan.
The cornerstone of risk management is asset selection, i.e. buying good quality buildings, at a reasonable price (never over-paying), ensuring that they are fully occupied by good tenants with the capacity and will to pay their rent, and then consistently adding value through active management. The asset selection process incorporates exhaustive due diligence to determine that every potential risk is well understood, fully documented and managed.
Portfolio construction parameters ensure that portfolios are well diversified by asset type, size and location. Critical elements of our risk management include:
- Comprehensive environmental assessment of every property
- Limited exposure to a single asset/tenant
- Avoiding special purpose buildings
- Limited use of leverage
- Never buying on covenant alone
- Limited exposure to smaller markets