Chairman’s Message: The Twenty-five Percenters’ Approach To Adding Value

Chairman’s Message: The Twenty-five Percenters’ Approach To Adding Value

We typically devote a portion of our January newsletter to an overview of our investment strategy, and we feel that it is constructive to do so again.

First and foremost, Westcore is a conservative, value-added investor that targets attractive, long-term performing assets that can be purchased at a fair price.

Beating Benchmarks

Every year, Westcore has beaten or exceeded every benchmark used by institutional investors by a wide margin. We have done so by being a “twenty-five percenter.” Since 75% of institutional Investors target stabilized, “latest-generation,” core product, the rest of us twenty-five percenters look around the corner to see what could be acquired in other niche markets.

This is where Westcore shines. We continue to focus our strategy on the Class B industrial middle market where we can source high-quality industrial buildings in protected, heavily-developed trade areas with strong demand for industrial, logistics and manufacturing space.

Once we identify and select these prospective properties, we develop a detailed asset strategy that includes leasing, rebranding, redevelopment, environmental remediation and design works to modernize and improve the performance of the project in its submarket. We also implement the same stringent discipline when we acquire office buildings, but we tend to buy fewer office buildings and we hold them for shorter periods of time.

Looking Forward and Lessons Learned

We believe that we will continue to outperform the marketplace by focusing our efforts on identifying underperforming, mispriced assets in markets such as Colorado, Washington, Nevada and Utah that are growing but that have not exceeded historical peak market pricing and can be purchased for less than the cost to replace these properties.

We have learned a few lessons from the multitude of transactions that we have closed in 2015, which will guide our strategy throughout the next year.

We have found that construction costs can tend to creep up when we are redeveloping older, more complex assets, so we plan to be more conservative in budgeting redevelopments.

We have also found that the high price of infill sites will drive us to be more creative with site planning urban redevelopment projects. Creating subterranean storage and parking along with multilevel industrial buildings may be a suitable solution for developing and redeveloping high-priced land and building parcels. This type of dense, adaptive use of infill land parcels is common throughout Europe and should become part of the development landscape in our core neighborhoods.

Honing our investment strategy in this manner for 2016 should allow us to better position Westcore Properties to identify, acquire and transform the properties that best fit with our goal to outperform the marketplace.

-Marc Brutten, Executive Chairman of Westcore Properties