One of the valuable services Capital REIT provides our clients is the unique investment vehicles we structure and the prudent selection and on-going management of the residual assets we acquire under the individual entities. Our capital investments and that of our clients' are held under the following structures:
Real Estate Funds - These are diversified entities that have a predetermined lifespan, investment objective, and cash disbursement structure. They can be referred to as a "blind pool" because the assets are acquired subsequent to investors making cash commitments.
Each fund has a minimum and maximum offering amount. Once the minimum offerings are committed, the advisor of the fund can begin drawing on the commitments and deploying capital into individual asset or portfolio investments. The investors’ cash is tendered into the fund to purchase an ownership interest of the entity.
As operating cash flows are collected from the properties and proceeds are generated via financing and/or the sale of the properties, the cash is then disbursed to the investors/owners of the fund.
Investment Trusts - A Real Estate Investment Trust (REIT) is a corporation whose primary business is to own, operate, and manage real estate properties. The REIT is set up as an operating company in which investors purchase and own shares of the company’s common stock.
A REIT uses the investment dollars to purchase individual assets or portfolios. The shareholders then own a proportionate share of each of the properties within the REIT collectively. The income and cash flows generated (funds from operations) are distributed to the shareholders as dividends.
REITs can be private or registered. If registered they can be non-listed or listed on a public exchange. The stringent reporting and disclosure requirements for each distinction allow for favorable corporate income tax avoidance and consistent income streams to the shareholders. REITs provide investors a vehicle to invest in a diversified portfolio that is professionally managed while creating greater liquidity.
Private Placements - A private placement is an ownership structure designed for an individual real estate asset. There are several structures that will accommodate a private placement. The most common are limited partnerships (LP), limited liability companies (LLC), and tenants in common (TIC).
Limited Partnerships are structures that typically have a general partner who manages the asset and has unlimited liability and limited partners who provide capital. The limited partner is passive when it comes to management and has limited liability but does receive income and a percentage of the gains from asset appreciation.
A Limited Liability Company is an organization structured as a corporation allowing for limited liability without the onerous reporting, required management meetings, and income tax filings. Limited liability companies have very flexible tax structures which can be established to compliment the number of investors.
A Tenant In Common vehicle is the fractional ownership of a real estate asset by two or more investors with survivorship rights. This ownership arrangement allows for buyers to pool equity to buy a larger or better positioned asset than they could on their own. Investors can leverage the asset with financing in which the note and deed are fractioned among the borrowers or owners. TICs can also claim the tax benefits from an owner-occupant perspective.
The ownership structures will align our investors' goals and strategies with the various portfolio and/or individual assets being offered. Capital REIT is currently pursuing and offering the following asset classes to our clients:
Assets with Existing Cash Flow - These assets are currently producing positive cash flow with strong growth potential over the investment period. The income growth is forecasted based off calculated and conservative rental and expense assumptions. The income has a lower probability for volatility. The appreciation of the assets and their potential gains are enhanced by rental revenue increases, continuous expense control, and favorable market conditions. The assets’ residual value is protected by utilizing professional day to day management and proficient, expert leasing.
This asset class will include core and core-plus opportunities. The assets are newer in age and are in vibrant markets with competitive advantages over similar assets within the same market.
Value Add Assets - There are opportunities for value creation and enhancement in existing assets which may require turnaround efforts and creative leasing. This asset class includes opportunities that are under-performing due to mismanagement, passive leasing, or a dated presentation or configuration.
Capital REIT's goal is to identify opportunities in stable markets that have the potential to increase returns through our concentrated and strategic repositioning plan.
Land - Capital REIT’s focus on land investments is the exploitation of current market conditions, placement of capital before growth, and/or value creation through improvements. The opportunity for potential gains are very high, however may require longer hold periods with minimum initial cash flows.
This investment class is speculative and requires an opportunistic vision and a keen entrepreneurial focus by our professional team and partners.