Fund Investments Strategy
- Single Asset Transactions
- Complex Ownership Situations
- Illiquid Assets
- International Ventures
- Targeted Development
- Entity Recapitalizations
- Private Equity Platform Investments
Investment and Management Philosophy
Monarch Capital invests and manages with the philosophy that real estate is a commodity subject to cycles, both in terms of its underlying supply and demand fundamentals and its pricing relative to other financial assets. Through the Principals’ relationships, experience and discipline, Monarch Capital has consistently demonstrated its ability to identify opportunities to create and maximize value, while minimizing risk, through: opportunistic investing, which correctly identifies capital voids, market and operating inefficiencies and anticipated cyclical recoveries; value-added asset management, which aggressively seeks to redevelop or reposition under-managed and under-capitalized assets to appeal to a broader, institutional marketplace; and a disciplined disposition strategy, which identifies an exit strategy before an investment is made and is continuously evaluated to seek an optimal and efficient result.
Within discretionary funds seeking higher returns, Monarch Capital believes it is critical that those making the investment and management decisions invest significant personal capital alongside investors. Underscoring this philosophy, our first fund of $100 million of total equity commitments received by the Funds, the Principals of Monarch Capital will also personally invest a percentage into the fund itself.
The importance of a disciplined disposition strategy dictates Monarch Capital's investment focus on well-located institutional quality assets within desirable markets, which are likely to have greater liquidity by appealing to a wider range of potential buyers. On a portfolio basis, Monarch Capital utilizes only moderate levels of leverage through the use of predominantly first mortgage, non-recourse debt, which is structured to give Monarch Capital the greatest flexibility so as not to impede an asset's timely exit. Typically, Monarch Capital seeks investments that meet the return objectives of the Funds over an expected average holding period of three to five years.
Investment Strategy
In seeking to deliver attractive risk-adjusted returns for its Fund investors, Monarch Capital employs several proven and focused investment strategies.
STRATEGY: Single Asset Transactions
Monarch Capital utilizes the Principals’ substantial real estate experience, expertise and long-term relationships in sourcing and selectively acquiring single asset investments, with an emphasis on well located assets with institutional quality potential. Monarch Capital will focus on three primary strategies within single asset transactions:
i. Value Creation: Monarch Capital acquires real estate assets which have significant cash flow and residual value enhancement potential through creative and aggressive asset management, including targeted capital improvements, tenant lease-up opportunities and operating efficiencies.
ii. Value Investing: Monarch Capital targets the acquisition of real estate assets at a discount to their replacement cost or, in some cases, below their current market value.
iii. Larger Transactions: The emphasis on overseas markets from most of the major real estate opportunity funds and the capital constraints upon REITs and highly leveraged investors have created a capital void for larger transactions in the U.S., particularly for assets with significant scheduled tenant rollover and/or capital improvement requirements. Thus, larger U.S. transactions ($100 million and up) are generally more likely to provide attractive pricing today for credible buyers with identified and discretionary sources of capital.
STRATEGY: Complex Ownership Situations
Monarch Capital seeks opportunities to acquire real estate assets which are under-valued due to the complexity or illiquidity of the existing ownership or capital structure. In such situations, Monarch Capital will seek to actively work through the complexities, gain control of the asset and prepare such asset for sale, without the prospective risks of bankruptcy, fragmented ownership or property-level issues.
STRATEGY: Illiquid Assets
Managers such as Monarch Capital who possess real estate investment and management expertise, in combination with financial and corporate skills, can capitalize upon unwilling owners in illiquid structures. Monarch Capital will seek:
(i) passive opportunities in which the interests of an entity can be acquired at a significant discount to the underlying net asset value with the knowledge that the underlying assets are nearing their disposition; and
(ii) owners of assets or holders of interests who seek to sell in an illiquid market.
STRATEGY: International Ventures
While the Funds’ primary investment focus remains in the U.S., Monarch Capital has a demonstrated access to opportunities within global markets. Unlike our typical domestic investment strategy, Monarch Capital accesses these global opportunities through experienced, sophisticated local partners and operators who have established, long-term relationships within their markets and have access to proprietary transaction flow.
STRATEGY: Targeted Development
Monarch Capital participates in selected land acquisition and development opportunities to capitalize on an imbalance between the supply and demand of space for a particular property type in specific markets which possess proven barriers to entry.
STRATEGY: Entity Recapitalizations
Monarch Capital seeks to capitalize on pricing arbitrage opportunities within and between the public and private markets. Monarch Capital will make investments in entities which require additional capital to restructure their ownership, recapitalize their portfolios, fund additional acquisitions in order to achieve the more attractive multiples of larger, well-capitalized entities in the public market or, in some cases, capitalize upon the significant spread between the private net asset value of a public entity’s underlying real estate and the public entity’s share price.
STRATEGY: Private Equity Platform Investments
Monarch Capital will consider private equity investments in experienced real estate operators or operating companies which require capital to expand or create an enterprise with a significant asset base. Monarch Capital will seek to build enterprises that it cannot build efficiently on its own, in areas that possess public and/or private exit opportunities and significant upside through:
(i) the consolidation of a fragmented asset ownership base; and (ii) the potential for attractive returns on cost due to an enterprise's leading expertise or specific industry profile.