These investors intervene in the medium to long term throughout their ownership cycles. Investments are financed over a long period of time with a small leverage, using a leverage of less than 30%, often at the expense of equity. The goal is to preserve the value of real estate assets by collecting rental income during asset ownership for redistribution. This generic strategy is usually found among institutional investors who prefer mature and safe real estate markets for quality buildings: office buildings in central business districts, enterprises in the city center, and technology parks.
Value-added property investors are looking for real estate assets on which to create or restore value, either by revising lease agreements with tenants, or by conducting small construction works. They also interfere with the promotion or development of real estate. Required assets are generally more risky and less expensive than fixed assets. As a result, the expected return is higher than that of the main investor, about 13-20%. This category of investors is especially active when the economic cycle is in a phase of upward growth, that is, when the opportunities for creating value are most important.
The shelf life of assets varies depending on the capabilities, usually from 3 to 6 years. On the contrary, the so-called opportunistic investors are looking for real estate with very high added value, which by their nature are more risky and create a significant increase in capital, which was made possible due to market inefficiencies.
Their strategy is to analyze the real estate cycle, buy buildings in white, pre-rent them, and then resell them to the “main” long-term investors with high returns.
Property investment in the Far East. Assets are acquired with the risk of the lowest of their value held for a short period of time, the time required to restore the market and realize capital gains, as measured by return on capital. The goal is to maximize IRR, which is very sensitive to the duration of asset ownership (the shorter the period of ownership, the better the IRR). Thus, opportunistic management is a dynamic and active management, which, combined with the use of financial leverage to increase efficiency (more than 60% leverage), is aimed at achieving a capital return of 18%. at 20% per annum for an investment period of an average of 5 years. It was in 1995-1996 that these opportunistic financial investors really revolutionized the real estate investment market, especially in the corporate sector, thanks to their financial vision of real estate, which led them to define new strategies. Their main product is the office, but they do not hesitate to invest in other types of goods (warehouses, shopping centers or hotels), as long as there are prospects for creating value. Accepting a high level of risk, opportunistic investors can invest in areas completely abandoned by traditional investors.
This is a sudden and massive arrival of North American investment funds since 1996 during the crisis in the real estate market, accompanied by their Anglo-Saxon investment banks, which marks profound changes in the real estate sector. in France. Becoming the largest investors in the market, having nearly two-thirds of foreign investment on French soil and almost half of all real estate investments in France, these new real estate players are frustrating investment methods in Europe by introducing new methods and financial indicators.
Called opportunistic investors, they modify investment strategies using a purely financial countercyclical strategy, which is to invest at the bottom of the cycle, when prices are in their lowest and most depressed real estate markets, to resell real estate assets. a cycle when prices rise to maximize the value of real estate. This new financial approach to real estate assets encourages most international investors to use and apply special financial instruments from the world of finance to real estate assets.
New investors mainly focus on the office sector, commercial premises, logistics platforms, hotels and shopping centers, to the detriment of the residential sector, which avoids, especially in France, this new approach.