Value-Add
A real estate and infrastructure investment strategy targeting underperforming assets that require active management, renovation, or repositioning to increase value.
Value-add sits between core (stabilized, income-producing) and opportunistic (higher risk, development-stage) on the risk-return spectrum, typically targeting net IRRs of 12-18%. Returns come from a combination of income and capital appreciation.
Value-add strategies involve acquiring assets with operational inefficiencies, vacancy, or deferred maintenance and implementing improvements to increase occupancy, rental rates, and asset value. The GP's operational expertise is the primary driver of returns.
Frequently Asked Questions
What is a value-add investment strategy?
Value-add targets underperforming real estate or infrastructure assets requiring active management, renovation, or repositioning — sitting between core (stable) and opportunistic (high-risk) strategies, typically targeting 12-18% net IRR.
How do value-add returns compare to core strategies?
Value-add targets 12-18% net IRR versus 6-9% for core strategies. The higher return comes from capital appreciation through active improvements, not just stable income.
What makes a good value-add investment?
Good value-add targets have identifiable operational inefficiencies, vacancy, or deferred maintenance that can be remedied through the GP's expertise — creating measurable value improvement within a 3-5 year hold period.
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