REITs Investment & Management Focuses

Real estate asset management companies rely on extensive professional experience to lead all stages in real estate investments, from acquisition to management to termination. These companies may differ in strategies for achieving target returns.

 

A.I.M. Asset Management Company (“A.I.M.”) considers the following three values in selection of real estate properties to achieve maximum values.

 

Selection of Commercial Real Estate Properties for Investments

 

Large commercial real estate properties provide relatively stable incomes as their intrinsic values do not significantly fluctuate. However, in order to achieve high returns, meticulous selection processes are crucial.   

 

Therefore, commercial real estate investments require building solid sources of profits over a short period of time. In order to achieve and stabilize target cash flows, selection of properties and appropriate purchase timings are the key factors that must be paid attention to.

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  • Large office buildings, with gross floor areas greater than 34,000㎡ that have reliable key tenants and relatively low vacancy rates and are located in core commercial areas in Seoul or the five metropolitan cities in Korea;     

  • Office buildings, with gross floor areas greater than 23,000㎡, that have long-term master leases contracted with reliable key tenants and are located in core commercial areas in major North American or European cities (within top 10 commercial cities);

  • Large retail facilities, with gross floor areas greater than 17,000㎡, that have long-term master leases contracted with retail managers of outstanding credit scores and are located in core commercial areas in Seoul or the five metropolitan cities in Korea;

  • Upscale hotels and their auxiliary facilities located in Seoul or the five metropolitan cities in Korea, being operated or rented by hotel chains or operators that are experienced and reliable;

  

  • Large logistics properties that long-term master leases contracted with well-credited businesses;

  • Major industrial properties in which businesses with excellent credit scores (A or better) have made a sale-and-leaseback  

Target Return Achievement

 

A.I.M. takes advantage of “Core Plus” and “Value added” strategies to thrive in the rapidly fluctuating economic environment of the 21st century. A.I.M. considers the traditional return rates of these two investment strategies in order to achieve our own target investment returns. The 5-year government bond was used as a reference point in determining the following target returns (as of 6/1/2020).

  • Core Plus 

We selectively purchase commercial real estate properties where tenant mixes can be strategically restructured and rent revenues are likely to increase in future. We make such purchases at market or lower prices and at the most appropriate time. When purchases are made, property value enhancement plans are put into effect, strategically and incrementally strengthening the tenant mixes and renovating the properties for increased values. Through this process, target returns are accomplished and the property resale prices are maximized.

 

Target annual cash dividend yield from operations:

- 3~4% higher than government bond return rates for the same period (on average)

Target annual cash investment returns (including sales of the properties):

- 8~10% higher than government bond return rates for the same period (on average)

Debt-to-asset ratio:

- 50-60%

  • Value Added

We first determine our target real estate properties, and then perform meticulous analysis of the properties in order to make purchases at market prices below their intrinsic values. Once our investments take place, we immensely increase cash profitability and seek for large capital gains at sales by aggressively restructuring the tenant mixes and carrying out major renovations of the properties.

Target annual cash dividend yield from operations:

- At Minimum, 5-5.5% higher than the annual treasury bond yield during the same period (on average)

Target annual cash investment returns (including sales of the properties):

- 1500 basis points or 10% higher than government bond return rates for the same period (on average)

Debt-to-Asset ratio:

- 55-65%

REITs as Private Investment Vehicles and Public Investments

A.I.M. is a real estate investment trust company (REIT), officially approved by the Korean Ministry of Land, Infrastructure and Transport, that acts as an investment vehicle. Unlike normal real estate trust funds, REITs, just like mutual funds, can issue not only simple loan debts but also debt securities (convertible bonds, repurchase agreements, etc.) as well as different types of stocks (preferred, common) depending on the legal structure of the company.

A.I.M. aims to improve the REIT in stages of: 1) a closed-type investment vehicle for private equity that accepts pension funds and large financial institutions as investors, 2) a publicly-traded indirect investment which invites corporations and HNWIs to make, and 3) listing the REIT on the securities market so that more investors can participate.

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