Core plus real estate strategy sits between core and value add portion of the real estate investment risk spectrum.
Core real estate are usually located in prime locations, new or recent construction and in a sense shiny buildings managers always proud to show the investors. Capital appreciation plays an important factor for core but these assets were purchased for its consistent cash flow.
Core plus investments includes a higher degree of risk due to leasing or market risks compared to core real estate however the risk can be contained and managed easier compared for value add real estate.
The definition of core plus real estate changes depending on the point in the cycle but we have listed out some common characteristics:
- Degree of leasing risk only a portion of the property (less than 30% of the total building).
- Older building with greater degree of capital expenditure risk
- Secondary or suburban locations
The above factor which will define an investment as core plus is dependent on the market perception of the importance of the specific factor on income or capital value growth.