Author: Adam Williams
Adam D. Williams is the director of investments at Trademark Property Company in Fort Worth and sits on the Associate Council of the Real Estate Finance and Investment Center at the University of Texas at Austin.
Articles by Adam Williams
- Value-Add and Opportunistic Investment
Published on May 01, 2010 in Capital Markets
The primary conversation in the commercial real estate market today revolves around the substantial amount of equity capital chasing high-quality core investments as prospective buyers exhibit a high level of interest in the stability of income and an overall lower risk level. For reasons that have yet to be fully explored, there is comparatively little discussion of value-add and opportunistic space.
Value-add and opportunistic investments traditionally have been considered higher-risk strategies that use significant degrees of leverage to maximize the total return of an investment. Value-add opportunities generally involve Class B or C assets in high-quality locations that can be significantly improved operationally or rehabilitated to increase cash flow. Leverage approaching 65 percent can be used both to enhance returns and to finance part of the renovation capital.