Value-Add Property

Motivated sellers or unrealized value-add opportunities create a wealth of potential bargains for real estate investors that stock market investors could only dream of. The fact that real estate isn’t as liquid as a stock is usually seen as a disadvantage to real estate, but because that makes the real estate market inefficient, it’s actually an advantage.

Value Add real estate acquisitions require improvements which will enhance the asset's value and ultimately increase its cash flow. We target these properties in an effort to earn higher returns than normal, stabilized properties. This type of investment requires great knowledge, identifying the areas of the property where value can be added and failure to determine accurate costs, timelines and absorption to stabilization can result in lower or disastrous returns. However, buying at the right price after identifying areas to increase the value, can result in much higher yields.

Value-add components of a property deal can include renovations, repairs, building reconfiguration, additions, subdivisions, vacancy lease ups, assemblage of other properties, zone changes, debt restructuring to name a few. The analysis can be substantial and if done too quickly may result in missed items or underestimation of costs.

  Office Buildings

The "office building" asset class is composed of buildings with high, mid or low-rise structures that account for roughly 20% of the total commercial real estate market. The office asset class presents unique set of challenges given that historically it has been the most volatile sector relative to other real estate asset classes. Office investments are a low Sharp Ratio investment class, driven by a high volatility due to a combination of macro-economic, supply and demand and property specific factors.

Just as in multifamily/apartments, office assets are typically assigned quality rating (Class A, B or C) depending on the property characteristics and local market definition of class levels. The quality ratings are far from universal as they vary depending on local market standards.

XRG is currently seeking Class B & C to acquire, improve and increase cash-flow and property values.

  Multi-Family Property

There are typically three classes of multi-family properties. There are your residential multi-family which are your duplex, triplex and quadriplex (or just quads) - all of which can be purchased in a residential lending structure. Once you get above 4 units, it become commercial, in which there are two classes - small apartment buildings and large apartment buildings. The small are typically between 5 and 50 units and the large would be anything over 50.

Currently, we are investing in the small apartment class, typically seeking 20-50 unit assets.

Instead of being priced based on comps, the value of these properties are based on the income they bring in. This creates a huge opportunity for adding value by increasing rent, decreasing expenses, and managing effectively. These properties are a great place to utilize on-site managers who manage and perform maintenance in exchange for free or decreased rent.

  Mixed-Use Property

Citizens, politicians, and planning officials have embraced the need to allow for walkable neighborhoods across North America and mixed-use is an essential component for achieving walkability. However, the term mixed-use has held different meanings in different places over the past 40 years or so.

Today, the most common misunderstanding about mixed-use is that most people think it equates, on any street or in any context, to be retail with residential above.

Mixed-use makes for three-dimensional, pedestrian-oriented places that layer compatible land uses, public amenities, and utilities together at various scales and intensities. This variety of uses allows for people to live, work, play and shop in one place, which then becomes a destination for people from other neighborhoods. Mixed-use is multiple functions within the same building or the same general area through superimposition or within the same area through adjacency… from which many of the benefits are… pedestrian activity and traffic capture.

Hospitality

Investment in Boutique Hotels is among the most profitable hospitality investments. More and more investors are flocking to boutique hotels as they see the amount of additional revenue it takes to justify a brand and realizing they are not necessarily the conservative choice in ensuring a successful project. Properties with excellent locations where demand is demonstrated simply no longer need to rely on the generic marketing efforts of chains. Thanks mostly to Online Travel Agencies (like Hotels.com) and review sites (like Tripadvisor.com) hotels are now able to level the playing field more effectively.

XRG is primarily interested in hotels where we can add value whether that be through a reposition (renovations or going from a brand to independent) or where seasoned boutique hoteliers can increase value/NOI through efficiencies or marketing.

  Retail Center

Buying retail shopping centers for investment is a great way to invest. Buying a strip center or shopping center with five or more tenants is much better than buying one with only two tenants. If one leaves you have a big hole in the rent.