Targeted Properties

Prescott acquires individual properties and portfolios of assets as well as operating and investment entities with significant property holdings. Prescott invests in a comprehensive range of real estate asset classes in the U.S. and internationally and brings extensive experience and a thorough understanding of market returns and operating performance across multiple property sectors to each investment considered. Prescott acquires office, industrial, retail, hospitality, and residential properties, as well as land.

Property Types

Each sector of the property market is subject to unique constraints and opportunities relative to market performance. In considering investments in income producing properties, Prescott evaluates significant factors in each asset’s ability to generate attractive risk adjusted returns, including the near and longer term supply and demand characteristics of the marketplace; an asset’s specific location relative to its target market; its potential for appreciation and redevelopment; the character and economic terms of its tenancy or business base; its physical condition and adaptability to upgrading or reuse; and the effectiveness and cost of property management. These considerations allow Prescott to properly evaluate an asset’s market position and pricing relative to current and projected future value as well as to other appropriate parameters in addition to an asset’s anticipated ability to generate attractive ongoing returns.

Prescott is willing to invest counter-cyclically, but only acquires assets if they have appealing return characteristics and are appropriately priced relative to the market and underlying property value. Prescott sees attractive opportunities to acquire properties in multiple property sectors.

Despite elevated vacancy levels in some markets, office property remains the most widely sought investment property type. In North America, the investment market for institutional quality properties has become increasingly segmented. Prime assets in major gateway “24/7” markets such as New York, Washington, D.C., Boston, and Chicago, and attractive properties in significant growth markets such as South Florida and Southern California, account for the majority of U.S. office property investment by both U.S. and international investors. These assets often command substantial premiums over assets located in secondary and tertiary markets. In London, as well as in major European financial centers such as Frankfurt, Amsterdam, Milan, and Paris, investment in office properties has expanded significantly over the past decade, driven by growth of the European financial markets and increasing levels of cross-border property investment.

Investors can achieve attractive returns in multiple segments of the office market. In major metropolitan areas, top quality urban properties in prime locations with stable current returns and the promise of appreciation over time as well as older properties with the potential for improvement and redevelopment offer attractive investment opportunities. Newer, first class properties in major suburban and “edge city” locations are also attractive. All these types of assets offer various alternative ways in which to realize value at multiple points in the investment cycle.

Prescott also targets well located urban and suburban properties in attractive secondary and tertiary markets. These assets can represent especially appealing investment opportunities, offering the potential for enhanced current income and appreciation. Prescott also focuses on opportunities to acquire office properties and portfolios from corporate entities. Many of these assets are available due to changing operating or investment strategies and can be purchased at advantageous pricing levels.

The industrial property markets have become increasingly more sophisticated as manufacturing and distribution patterns have continued to evolve. “Just-in-time” inventory management practices, the growth of express shipping, and the continuing transfer of manufacturing activity to areas with lower production costs have all changed industrial development. Technical advances in logistics initiated in one market are now spread rapidly throughout the developed and developing world. Today, distribution facilities in Dallas, Texas; Monterrey, Mexico; and Manchester, England all exhibit many more similarities than differences. Climate controlled facilities designed to maximize the timely and efficient assembly and transfer of goods through the use of sophisticated racking and transport systems as well as computerized inventory management procedures have become increasingly commonplace in the U.S. and internationally.

In the U.S., a growing proportion of the country’s first class industrial property inventory is developed and owned by large, publicly held companies with extensive relationships with major multi-national tenants. Prescott carefully differentiates among industrial properties for investment, as the market is widely segmented by property type, target tenancy, and function. In the industrial sector, Prescott focuses on properties and portfolios located in major national or regional distribution hubs. Prescott sees multiple opportunities to advantageously invest in the current market, taking into account each asset’s market niche, its leasing and releasing prospects, its geographic location, its suitability for alternate tenants, and the quality and flexibility of its construction.

Changing demographic patterns and the rapid growth of e-commerce have remade the retail industry over the past decade. In the U.S. and other developed countries, multiple new product types have emerged, including entertainment and leisure oriented retail properties; outlet centers and other value retail properties; hypercenters; themed retail properties; upper tier specialty centers; and volume discounters. At the same time, large department store chains, mall store operators, and “high street” retailers have all revamped the way they approach their business, responding to increasing competitive pressures. Owners and operators of more traditional property types, such as regional malls and neighborhood, community, and specialty centers, have had to adapt to an increasingly challenging competitive environment and the exponential growth of internet retailing by expanding, upgrading, and redeveloping existing facilities.

Prescott targets retail assets which have unique attributes relative to location, target market, and merchandising strategy; are well positioned to benefit from growing or changing demographics; have well balanced tenancy for the marketplace; and can benefit from experienced management with proven retail capability. In the retail sector, Prescott is particularly focused on the acquisition of unique, upper tier retail properties in prime locations in major markets that are expected to experience significant appreciation; well located community and specialty centers that can capitalize on strong local and regional economic and demographic expansion; and other properties in various retail sectors that are well positioned to benefit from robust continuing growth in income due to location, market, or other specific attributes. The ongoing challenges faced by the retail industry in the current economic climate also create further attractive acquisition opportunities often at a significant discount to cost and inherent longer term value.

The lodging industry continues to be challenged due to ongoing economic retrenchment in many markets and demand sectors. The industry’s present emphasis on the separation of fee oriented management activities from property ownership, along with continuing consolidation and reorganization following significant merger and acquisition activity and increasing product segmentation, creates a unique opportunity to selectively purchase well performing hotel properties in both urban and resort locations at a significant discount to cost. These developments enable investors to control prime assets which typically trade infrequently. Additionally, despite the growth of large, publicly held international investment and operating companies in the hospitality sector, hotel ownership remains highly fragmented in many markets.

Prescott considers investment in strong hotel properties that benefit from sound competitive, locational, and operating characteristics; as well as assets that have attractive fundamental attributes but will significantly increase in value through market repositioning or redevelopment. The participation of capable operating management with a meaningful financial commitment and significant experience in the relevant sector of the hospitality market is a prerequisite to Prescott’s participation in hotel and resort investments. In hospitality investments, Prescott is especially attentive to opportunities to acquire portfolios of assets, particularly in circumstances where such acquisitions may support or complement specific strategic and operating objectives.

Despite continuing uncertainty in many North American residential markets, significant inflows of institutional investment capital continue to occur in the multi-family sector. Prescott sees multi-family rental apartment projects, as well as condominium projects with unsold units, as desirable investments if they can be acquired at attractive pricing levels relative to underlying value.

Prescott considers acquiring assets in the residential sector if regional and local economic and job growth statistics are favorable, fundamental occupancy and absorption characteristics of a market are sound and improving, and the specific location and design of a project are well suited to its competitive position and market demographics. Prescott is particularly attentive to circumstances where property economics can be significantly improved by changes in management or the implementation of specific property improvement programs. Prescott also targets specific market anomalies and special situations in the highly fragmented residential sector. Prescott also considers investment in planned unit developments, which may include both single and multi-family components as well as recreational amenities, in conjunction with experienced land and community developers.

Land holdings in prime locations in growing markets can be attractive long term investment vehicles if advantageously acquired. In purchasing land for future development, Prescott carefully evaluates the property’s realistic prospects for appreciation and identifies the appropriate steps to be taken to enhance its value, including securing or expanding zoning and regulatory approvals and entitlements as well as identifying potential tenants or other users for the property.

To realize value, Prescott may form a development partnership, structure a ground lease to participate in the property’s development, or sell the land following the receipt of development approvals. To moderate risk, Prescott typically invests in land on an unleveraged or moderately leveraged basis.