Penwood’s value-added investment strategy includes rehabilitation, repositioning, redevelopment and development of low-risk property types, including industrial. Penwood targets supply-restricted markets with diverse demand generators.
We combine the experience of our principals with the local market expertise of our operating partners to develop and execute innovative value-added strategies. Penwood focuses on acquisitions at or below replacement cost, controlled downside risk and clearly defined exit strategies intended to maximize fund value and investors’ returns.
We only consider rehabilitation, repositioning, redevelopment and development investments with a projected value at stabilization of typically 20%-30% more than the cost to deliver the product. By delivering properties at cost or buying below replacement cost – typically with local operating partners, in an “off-market” situation rather than an open market, broker-directed bidding process – our partnerships establish a value-added margin that Penwood anticipates will deliver above-market returns for investors.
Incremental Risk Strategies
Penwood uses its structuring expertise and risk management experience to effectively manage incremental risk in its funds. We do this in several ways:
- Minimize pre-development risk by investing only in land appropriately zoned.
- Limit construction risk by actively value-engineering construction costs and by obtaining guarantees from the development partner and/or general contractor for the final cost of the building shell and the timely delivery of the product.
- Reduce real estate market risk by focusing our management expertise on maximizing income and judiciously assessing the impact of capitalization rates on property values.
Implementing Investment Strategies
Critical to the successful execution of a focused strategy is the skill and experience of our investment professionals. Penwood pursues the investment returns that its investors expect by following a disciplined process that focuses on adding value throughout acquisition, ownership, and disposition of an asset.
At the time of sourcing a transaction, we undertake a stringent, in-depth underwriting analysis of the property, its competition and market position. In all instances, we use consultants with specific skills in areas such as engineering (structural, roof, and HVAC) and environmental, to identify and quantify specific underwriting issues.
After acquisition, we manage each property to maximize its operating performance and ultimately its value and yield over the life of the investment. We achieve this by developing a proactive annual business plan that details property-level operations and capital investment based on portfolio objectives and market conditions. Penwood professionals implement these plans by working closely with our local/operating partners to carry-out the day-to-day leasing and property management services.
The ultimate goal is to sell an asset after the value-creation process is complete and in a favorable capital market environment. We review assets for possible disposition each quarter through a comprehensive hold/sell analysis process.
Our attention to investor needs through knowledgeable and responsive communication is a hallmark of our firm. Our highly trained principals meet personally with investors to review fund performance, provide insight into investment decisions and interpret market trends. We also provide investors with quarterly and annual reports detailing the performance and status of each fund, client level financial information, and special updates summarizing property acquisitions and portfolio information. These timely communications are available by conference call, mail or e-mail.