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TA Realty's commingled funds are comprised of direct investments in small- to medium-sized assets in major markets throughout the United States. At any given time, TA Realty is invested in over 35 US markets and follows another ten to fifteen potential investment markets. Portfolios are assembled to be strategically diversified by geographic and economic factors with an average deal size of approximately $20-30 million. TA Realty focuses on supply constrained markets where barriers to entry are high. TA Realty's value-added techniques include:
- Purchasing properties off market at discounts to replacement cost
- Leasing-up or re-tenanting buildings
- Renovating well-located properties
- Aggregating market portfolios for cap rate arbitrage
- Developing land acquired with property purchase
- Pre-sales - purchasing select properties prior to completion from regional and national developers
Property Type Distribution
TA Realty's Funds focus on industrial, suburban office, multifamily and select retail properties purchased at or below replacement cost. Additionally, portfolios are developed so that the balance between capital-intensive properties (primarily office) and less capital-intensive properties (industrial and multifamily) is complimentary. Developing portfolios comprised of these four property types with their unique tenancy and return characteristics has provided TA Realty with flexibility in responding to varying capital market and real estate cycles.
Office: TA Realty pursues multi-tenant suburban office properties in major employment and population growth regions such as Metropolitan Washington, DC (including Virginia and Maryland), California and other select high barrier to entry markets throughout the United States. Office product typically requires more capital over projected hold periods than the other property types in the form of building improvements, leasing commissions and tenant improvements. However, these multi-tenanted properties include moderate-term tenancies to a diverse tenant base and can provide substantial returns in the form of rental rate growth and property appreciation while minimizing the risks associated with individual tenant credit.
Industrial: TA Realty focuses on acquiring warehouse and distribution space in major markets including Chicago, New Jersey, South Florida, Dallas, Houston and Southern California. Industrial product provides stable income in a balanced portfolio, while minimizing capital outlay, as the costs associated with owning and operating this product are generally lower than those of office or retail product.
Multifamily: TA Realty typically seeks garden style apartment product located in growth markets throughout the United States. Barriers to entry are critical to the success of apartment investing. By reducing the amount of similar product developers can produce, competition for renters is limited. Multifamily product allows for rental rates to be adjusted quickly while maintaining occupancy, therefore increasing the net operating income when expenses are controlled. Well-located multifamily investments can provide a low-volatility source of returns as a result of these rental increases and limited capital needs thus providing stable cash returns and appreciation over time.
Retail: TA Realty focuses primarily on well-located neighborhood and community shopping centers with strong grocery-anchored tenants. The best centers are located in markets with limited new development sites, established clientele and strong retail sales history. TA Realty will typically focus on centers that include the top one/two grocery store franchises within a geographic area. These centers have consistently withstood the various real estate cycles due to the strength of long-term leases to top grocery providers who typically exercise options and remain at locations that have proven historical sales.
TA Realty targets a property-type distribution in its existing Funds with a 40-50% concentration in Office; 40-50% in Industrial; 10-25% in Multifamily and 0-10% in select Retail. In addition to assessing the individual risk/reward aspects of each property type, we evaluate their role in the overall portfolio. The inclusion of the four property types provides diversified tenancy, cash flow and portfolio management flexibility during various economic cycles.
Below is a composite of our invested commingled funds relative to property type as of 9/30/07:
TA Realty Commingled Funds (Funds V - VIII)
Diversification by Product Type
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