Investments

Philosophy

Castellan utilizes a value-added investment philosophy that focuses on seeking properties (i) that immediately provide positive cash flow, (ii) that were under managed by previous ownership and have below market rents and occupancy levels, (iii) that can be acquired at significant discounts to replacement costs, providing a margin of safety and (iv) whose value can be increased significantly through property enhancement and proactive asset management.

Objectives

  • Asymmetric risk/reward opportunities
  • Stable current income and capital appreciation
  • Growing cash yields
  • Prudent use of leverage
  • Value creation through enhancement of properties and proactive asset management
  • Target long run IRR of 15%+
  • Inflation hedge
  • Low correlation to other investment asset classes

Deal Sourcing

Castellan, through its reputation and relationships in the New York metro real estate market, has a significant competitive advantage in securing deals from sellers who value certainty of execution. The ability to close transactions quickly is particularly important in sourcing assets at favorable valuations given today’s difficult capital markets environment.  Castellan’s broad network of industry relationships enables us to source private-market transactions, promoting a strong pipeline of deal flow.

Value Enhancement

Castellan focuses on assets that have below market rents due to mismanagement by previous owners.  Castellan proactively manages, recapitalizes and repositions assets with the objective of raising rents toward market levels, increasing net operating income, therefore making the return profile less dependent on overall real estate market conditions.

Middle Market Niche

Castellan targets mid-sized properties generally between $5 million and $25 million and will avoid highly competitive auctions.  Castellan focuses on transactions either through off- market privately negotiated deals or other situations with limited competition.  Properties in this size range are generally too big for individual investors, eliminating aggressive speculation, and too small for institutional investors, eliminating increased competition.

Government Sponsored Programs

Castellan participates in certain government sponsored programs that provide tax credits, grants or favorable debt financing.  These programs are designed to provide incentive to owners to renovate buildings, make them more energy efficient or to preserve affordable rental housing.