MSCG primarily focuses on investments in the residential (multi-family or condos) and retail sector. In line with the Company’s investment philosophy, MSCG employs the following main strategies:
Stabilized Assets – The Company seeks stabilized, cash flowing real estate investments with a leveraged cash on cash return of 9%+ and total leveraged return of 12%+. The primary purpose of this strategy is to generate stabilized leveraged yields that are attractive relative to other financial assets.
Value Enhancing Properties – The Company seeks real estate properties with the potential for significant cash flow or residual value enhancement through creative and aggressive asset management, including targeted capital improvements. Examples include rent controlled multi-family with below market rents or properties with high vacancy with owners who don’t have sufficient capital to improve apartments. The ultimate goal of this strategy is to either sell or hold the property upon stabilization.
Value Investing/Distress – Value investing attempts to capitalize on dislocations in the current market value of a property from its underlying true value. Such properties may be trade at a significant discount to replacement cost or current market value due to financial distress (i.e. overleveraged/under-capitalized owners, capital market inefficiency, etc.), environmental distress (i.e. underground storage tanks, asbestos, etc.) or other distress (i.e. abandoned properties, banked owned, etc.).
Development – The Company seeks its own development opportunities or partners with experienced, knowledgeable local developers with a focus on locations with high barriers to entry and limited competing supply for such product. For partnership investments, MSCG typically requires that the developer invest capital alongside MSCG to align interests, and that the developer not receive any incentive compensation until return hurdles are achieved. Based on conservative underwriting, MSCG seeks investments with an unleveraged development spread of 200+ basis points for income producing properties, and 25%+ net margins for condo projects. MSCG’s development projects may include adaptive re-use, major rehabs or ground-up new construction, and may also include strategies that involve conducting the pre-development work and selling the project to another developer/builder.