Our investment philosophy is built around the concept of value recognition and capital preservation. Build or buy, we continually look for the opportunity to create value or acquire assets at less than their intrinsic value. We rely on our many years of experience in property and asset management to help us determine when a property is mis-priced, mismanaged, misunderstood or is just in need of some attention and capital investment.

The success of each investment we make is determined by our ability to correctly bring together and optimize the four critical elements of most real estate investment opportunities:

• First, the ability to recognize the opportunity to add or create value,
• Second, the knowledge to develop and the ability to execute on a plan to add or create value,
• Third, the ability to respond to the opportunity by maintaining financial strength
  and applying creativity. And,
• Fourth, the ability to protect and/or lock in created value and preserve investor
  capital in the process

Our ability to recognize and create value is a product of our experience and the team of knowledgeable, hard working people we have assembled. Value recognition is an involved process that is generally more art than science. This process is complicated by the fact that quality real estate rarely trades at a discounted price. Finding value creation opportunities requires a deep understanding of an asset, including its physical characteristics and its competitive position in the market, in order to recognize an opportunity to add value. The goal of this process is to develop a firm understanding of the intrinsic value - or potential value - of a property and its relative current value. In the end, we look to invest in those opportunities with the greatest differential in potential versus perceived value.

Many real estate investment companies are satisfied paying a fair price for quality assets. So long as their assessment of the property is accurate, this formula works well and can lead to highly successful real estate investments over time. Our preference, however, is to find opportunities to pay less than fair value for quality real estate. To do this, it is often necessary to find ways to add additional value rather than waiting for assets to be priced attractively. Adding, or creating value, can come in many forms, most of which we have employed at one time or another. The key for us, however, is to find value creation opportunities that make sense. We work hard to find opportunities that match up with the skills of our organization and equally hard to avoid situations that require enormous effort with little guarantee of success. We do understand that this approach can be very limiting. As a result, we are not high volume investors; opting instead, to invest in a fewer number of great opportunities rather than a higher number of merely good ones.

Financial strength is fundamental to our company and critical to the success our investment discipline. We go to great lengths to ensure that we are always financially prepared to meet the next opportunity. Because of this, it is important that each investment we make not have the potential to be a financial drain or an operational distraction to the company. We favor investments that offer predictable cash flows and identifiable capital needs so that our last deal won’t prevent us from doing the next.

Value Protection and capital preservation is the last critical element in the process, but it is by no means the least important. Like the anchor in a relay, Value Protection can be the most important contributor to success. Often it is the difference between winning and losing. As long term real estate investors, we must be able to protect value as well as create it. Short term investors and merchant builders are primarily concerned with their ability to recognize near term value creation. Our success has been built largely upon taking advantage of opportunities that allow for the long-term, compounding growth of equity. For this to work, we must assess the ability of each of our investments to generate steadily improving cash flows over time.

Unfortunately, the real estate business is a highly cyclical business heavily influenced by capital flows and characterized by lengthy periods of supply/demand imbalance. Even properties with protected locations experience periodic weakness due to oversupply and recession. The key differentiator between a solid long term investment property and a commodity property is the presence of Value Protectors. Value Protectors limit oversupply and drive demand. Value Protectors also create ’20-year’, renewable locations that encourage investors to continually upgrade and maintain their properties. When evaluating any new investment opportunity we actively search for reliable Value Protectors that enable us to be committed to the investment. Without them, too much emphasis is placed on rushing to recognize near term profit. With them, we are capable of withstanding any short term economic issue, often exiting stronger. In addition, this focus allows us to make sell decisions strategically rather than by necessity.

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