 | | |  | | Strategy definition Real estate portfolio strategy
The definition of a portfolio strategy is based on the preferences of the investor. We like to encourage our clients to keep it as open as possible to enable a somewhat opportunistic approach by investing in line with the skill set of specific asset managers. Furthermore, real estate markets are very illiquid and fragmented. The narrower the criteria (e.g. mezzanine retail deals in Scandinavian capital cities), the slimmer the chances of building a portfolio of performing investments within a reasonable timeframe due to the lack of deals on the market.
The three dimensions of a real estate portfolio strategy are:
| - | Geographic segmentation:
continents, countries and/or regions
| | - | Sector segmentation:
retail, residential, office, warehousing etc.
| | - | Investment type:
The type of investment is determined by whether its a development project, optimization project or completed product and the rank of the invested capital (standard equity, mezzanine finance, coupon deals, 3rd party debt, mortgage-backed dept)
| Before defining the overall portfolio strategy investors need to consider the illiquid nature of the private real estate market. The holding periods of assets in an actively managed portfolio range from 2 to approx. 8 years. The minimal size of investments with Real Future ranges from approx. CHF 100‘000 to CHF 1‘000‘000 depending on the project. In order to reach a decent level of diversification an investor should plan to allocate at least about CHF 2 mil. to his private real estate portfolio (also incl. non-Real Future investments).
Real estate investment strategy
A clearly defined investment strategy is a precondition for a proper financial plan that supports maximizing investment returns. The five basic strategies are:
| - | Buy & hold
(optimizing capital and tenant structure and lowering operating costs while waiting for the right time to sell with regards to the real estate cycle)
| | - | Buy, re-market & sell
(leasing up empty space)
| | - | Buy, renovate & sell
(after completion of renovations existing leases are either increased or replaced, empty space is re-marketed)
| | - | Buy, re-develop & sell
(the use and/or structure of existing space is adjusted and/or new space is added to the property)
| | - | Build, lease up & sell
(standard real estate development project)
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