Investing in commercial real estate (CRE) can be a key component in developing a successful, diversified portfolio. At Caliber, we build wealth by forming and managing real estate private equity investments and specialize in commercial, residential, multi-family, self-storage and hospitality properties. We know a thing or two about commercial real estate. Below is a quick reference guide for new investors to learn the benefits of CRE and working with a private equity firm.
What is Commercial Real Estate?
Commercial Real Estate references tangible property that is used for business, not individual residential purposes. Examples include office buildings, hotels, shopping centers and even multifamily communities. One of Caliber’s recent CRE acquisitions was the Holiday Inn Ocotillo in Chandler, Arizona. The property is anticipated to provide steady income and increase in value as we complete renovations that will turn the asset into a top performer in its booming, upscale neighborhood.
Unlike stock, real estate investments often provide stable cash flow in the form of rental income. While monthly income is an attractive incentive for investors, managing CRE or even single-family home rentals can be extraordinarily time-consuming. Commercial real estate funds, like those offered by Caliber, present a more hands-off approach for investors to gain income without going into the property management business.
The opportunity for potential return on a commercial real estate investment often comes from an increase in the property’s value. The “value-add” approach includes making improvements to a property that substantially increases its ability to earn income. This value-add model is well demonstrated in the transformation of Caliber’s GC Square apartments. The former Class C “workforce” apartment site was converted after Caliber’s acquisition into Class A student housing for Grand Canyon University and has become a trendy but affordable residence for local students and community members.
Newly formed Opportunity Zones offer huge potential for value-add projects by incentivizing development in distressed, but growing communities. One of Caliber’s first Opportunity Zone projects will bring a top-tier branded hotel to the Tucson Convention Center. The property – like most Opportunity Zone developments – is part of a larger plan to revitalize Downtown Tucson.
Caliber’s new Tax Advantaged Opportunity Zone Fund, LP offers accredited investors the ability to invest realized capital gains into designated real estate projects, and take advantage of the considerable tax reduction programs created by Opportunity Zones.
Commercial real estate will always be in demand as people will continue to need a place to work, shop and live. According to a study by the NAIOP Research Foundation, in 2017 more than 524 million square feet of new space was constructed, that’s enough to house 1.3 million workers.
Looking again at Caliber’s strategy for hospitality assets, we focus on mid-to-upper scale and full-service hotels, specifically properties catering to business travelers. This allows for stronger recession resilience as no matter what is happening in the economy, professional travel will remain a business necessity.
Investors seeking capital gains, monthly income and overall portfolio stability have historically turned to real estate, but the high cost of entry makes direct CRE investment out of reach for most individuals. Our answer is The Caliber Diversified Opportunity Fund II, LP which delivers direct access to large deals, without investors having to take on the upfront costs and hassle of ownership. The fund allows individual, accredited investors (and their advisors) to passively generate attractive, risk-adjusted returns typically only seen by a select few professional and institutional investors. Learn more about CRE investments and Caliber funds by contacting us today.