Infinity Group

Over the past few years, the Company has partnered with large institutional real estate private equity investors such as The Carlyle Group and Citigroup Property Investors, and with institutional lenders such as Prudential, JP Morgan and Wachovia. IRE also has a sizeable pool of individual investors, developed throughout Infinity Principals’ long history of syndication and strategic partnering. These include high net worth individuals with family ties to Infinity’s principals, owners or CEOs of strategic partner companies, and 1031 investors interested in the firm’s retail syndication program.

To ensure the responsible stewardship of its partners’ capital, IRE adheres to a disciplined investment and management process aimed at minimizing risk and at screening opportunities best positioned to maximize investor returns.

Investment Sourcing & Screening

Our principals have deep existing relationships in our markets, with brokers and owners alike. While we occasionally pursue opportunities coming from unknown sellers or sources, we primarily leverage the relationships we have developed to create off-market investment opportunities.

We apply the following thought process to the pipeline of opportunities available to us in determining what fits inside the “Strike Zone” for Infinity Real Estate.

IRE’s Value Investing Rule: Identifying Under-Valued Real Estate.
 
  • Does the opportunity offer over-discounted risk and/or an abnormally low investment basis?
  • Can we find an asset with great physical and location attributes that is inefficiently priced by the market because it is temporarily flawed, under-managed, or under-improved?
  • Can we find an asset with great physical and location attributes that is inefficiently priced by the market because it is temporarily flawed, under-managed, or under-improved?
  • Can we find great real estate assets in superior locations, with physical, structural, leasing or branding challenges that can be remedied by IRE’s management and value-add strategies?
IRE’s Macro Thesis Rule: Capitalizing on insights about emerging long term trends.
 
  • Can we find great real estate assets in superior locations, with physical, structural, leasing or branding challenges that can be remedied by IRE’s management and value-add strategies?
  • Is the investment taking advantage of macro trends in migration and population growth?
  • Are we investing into early stages of growing demand wave for a product type or location?
  • Are we investing into early stages of growing demand wave for a product type or location?
IRE’s Strike Zone Rule: Building around our Expertise and Strengths.
 
  • Does the Investment Profile fit for our strategy, business plan, and long term goals?
  • Is the Property in a Regional Market where we want to be growing?
  • Is the Deal Size and Structure comfortable for Infinity Real Estate’s Portfolio?
  • Does the Property Type Leverage our Skills and Experience?
 
Investment Underwriting & Due Diligence

In order to stress-test our valuation and risk assessment, we complete a rigorous underwriting of every investment and conduct a thorough financial, technical, and qualitative due diligence early in the process.. This involves (i) a detailed market analysis of competitive supply and drivers of market demand, (ii) an in-house analysis of all property level forecasts and operating assumptions against available historical data, (iii) an independent technical review of building systems and construction quality, deferred maintenance, and environmental issues, and (iv) an analysis of all legal, tax, and deal structure issues associated with the investment.

We conduct this disciplined risk assessment for each and every investment. We stress-test the proposed value add execution plan with our operating teams, venture partners, and third-party consultants, and ensure that our risk assessment conclusions provide a significant margin of safety.

IRE’s Market Health Analysis: The Supply-Demand Underwriting
 
  • As part of our assessment of any property investment, we review updated macroeconomic data including area economic drivers and large industries, employment growth, migration trends, population characteristics, and income.
  • We analyze the most recent real estate sub-market and property sector specific data (supply of new product, regulatory environment for new additions, demand trends, relevant lease RFPs in the market, lease terms prevailing, rent levels and trends, concessions, etc).
  • We complete a competitive market analysis (identifying competing properties, their location, physical and leasing attributes), and we gather relevant insights from local brokers, owners, developers, and City Planning department officials to complement our research.
  • We assess the local market’s appeal to the investor marketplace by evaluating the pool of active investors, reviewing recent transactions, and compiling data on comparable asset sales.
  • This competitive supply and market demand review may include a combination of in-house research, third party consultant reports, and specialized target market surveys.
IRE’s Financial Asset Analysis: The Valuation Underwriting
 
  • We capture the quantitative risk-reward profile and attractiveness of an investment using a cost model, and a discounted cash flow model that measure the investment’s (i) all-in cost after redevelopment and repositioning, (ii) expected cash on cash yield upon stabilization, (ii) total profit potential and equity multiple, and (iii) expected total return over our investment horizon.
  • To confirm our financial underwriting assumptions, we review several years of historical financial statements, rent rolls, lease abstracts or other forms of income contracts, , lease correspondence and estoppels, analyze other billings, and interview major tenants.
  • We complete a detailed analysis of current year budgets, analyze operating expense forecasts both against historicals and service contracts, and investigate expected real estate taxes, utility and insurance costs, tenant reimbursables, receivables and payables.
  • Our capital expense review is based on an engineering expert’s Property Condition Assessment.
  • All of this information and analysis is captured in our final financial underwriting model, which focuses solely on the investment’s expected cash flows.
IRE’s Physical Property Condition Analysis: The Engineering Due Diligence
 
  • Our due diligence of all acquisition assets includes an expert technical review of the foundation system(s), structural frame, exterior skins and facades, vertical transportation systems, heating, ventilation and air conditioning systems, as well as a full assessment of deferred maintenance and potential exposure to up-coming capital expense.
  • Our due diligence of any development project that IRE did not manage from inception would include an in-house review of all construction plans and specifications, construction schedules, hard and soft cost budgets, in-place regulatory development approvals, utility availability documents, and a full assessment of contractor qualifications.
  • Our physical due diligence always includes an environmental site assessment, and a review of Fire Code and ADA compliance, and of all required Licenses, Permits, Warranties, and Certificates of Occupancy.
IRE’s Legal Investment Analysis: The Legal Due Diligence
 
  • Our Legal Diligence of property investments includes a review of all title insurance policy and underlying documents, site ALTA surveys, zoning compliance and entitlements, operating permits, business licenses, and certificates of occupancy.
  • Our transaction and local counsels review leases and other revenue-producing agreements, operating service contracts, third party estoppels and consents, and any development related documents proposed or assumed at purchase.
  • We also review any historic litigation and insurance losses on the property, complete litigation searches on acquired or partner entities, and prepare legal memoranda and opinion as required.
 
Project Management & Asset Management

Our team employs a hands-on management style to control the development and management of our properties. This mindset is imbedded in our partnership culture and family history, and is reflective of the skill sets of our principals. Our expertise lies in our ability to execute a complex production process with steadfast discipline, while making swift and flexible adjustments to enable product improvements when opportunities to enhance our cost-quality relationship arise.

Hands-On Project Management
 
  • IRE’s development project management protocols are aimed at imposing its quality control and results-focused culture onto all of its construction partners and service providers.
  • Our management systems are designed to provide early warning signals for any deviations from budgets and schedules, and to monitor any opportunity that may arise to improve the cost-quality relationship of our finished product.
  • Each project or asset is under the supervision of an IRE Project Manager who acts as the Asset CEO, and of an IRE Principal who acts as the Asset Owner on behalf of IRE’s partners.
  • These individuals provide a hands-on daily and weekly focus on the development or redevelopment process, reviewing construction progress reports, approving all change orders, preparing monthly draw requests, tracking milestones and execution issues, monitoring construction schedules, lease-up targets, and operating ramp-up objectives.
Aggressive Asset Management
 
  • Deals are managed from acquisition/development to exit by the same Principal and Project Manager in order to ensure continuity, accountability, and consistency in our execution.
  • For every asset we acquire, we develop an 18-24 month Value Creation Plan and Execution Timeline with key risk mitigation milestones, and an interim operating plan.
  • Along with their teams, our Asset Principals conduct monthly and quarterly “deep dives” on different issues affecting the property’s repositioning and value enhancements, in order to proactively address any potential challenges and opportunities.
  • Project Managers are responsible for the day-to-day oversight of their projects, with responsibility for approving leases that conform to the business plan, approving annual property budgets, reviewing monthly operating reports, and monitoring leasing market conditions.
  • We aggressively market our assets, and invest considerably in the thinking behind branding and positioning of our properties relative to their competitors.
  • Our development personnel, leasing brokers, and property managers adhere to strict guidelines throughout the value creation process, with the aim of maximizing cash flow, improving the tenant profile, and controlling expenses.
Investor Reporting & Financial Controls
 
  • Whether investments are made by IRE on its own or in partnership with other investors, we always invest considerable time in the production of Clear, Concise, and Candid investor reports.
  • These quarterly reports are focused on delivering transparent, insightful, and timely updates to our partners, not on overwhelming them with onerous project information.
  • We will from time to time offer our assessment on changes to the asset or investment’s current market value, only if a milestone or material event has occurred in the life cycle of the investment (certificate of occupancy, new long term lease, etc.)
 
Asset Refinancing & Harvesting

While our investment holding period typically ranges between five and ten years, IRE has a track record of successfully executing its value added strategies, and harvesting them through early refinancing, recapitalization, or outright disposition within a one to three year period. In all cases however, when recycling part or all of its capital out of an investment, IRE ensures that the asset remains conservatively financed, and that our new lenders or capital partners receive attractive economics in the its long term value.

Financing & Refinancing Investments
 
  • Our basic financing philosophy aims to match the term of our assets with the term of the leverage associated. We will initially finance a property with significant near-term redevelopment or lease roll-over, and potential for short-term value appreciation, with short-term debt. Once stabilized, we finance long-dated assets with fixed rate long term debt.
  • Our initial financing is structured based on our asset value add strategy. It reflects our business plan for managing the asset’s reinvention process and its underlying risks. It usually involves a phased loan balance draw down, limited debt service, and flexible initial terms.
  • After the initial redevelopment and repositioning is complete, and long-term stable leases are in place, we may seek to sell a partial interest in the asset, or simply to refinance and get additional loan proceeds in order to recapitalize based on the market value created.
  • At all times, irrespective of where our individual assets are in their life cycle, we continuously monitor our portfolio to take advantage of refinancing opportunities that enhance our investment capital’s risk reward profile.
  • IRE develops and maintains close relationships with lenders with different specialty and focus, including Wall Street banks, life insurance companies and portfolio lenders, local banks with a regional focus, and mezzanine investors and lenders focused on higher yielding bridge loan opportunities.
Harvesting Investment Value
 
  • On each investment, the Principal’s role is to provide proactive oversight, management, and strategic guidance to ensure consistent results on the operations of our underlying properties.
  • The team also reevaluates the asset’s business plan annually, reviewing all asset-level milestones, and re-assessing market conditions to determine if adjustments should be made to address new risks or opportunities.
  • We seek to optimize capital structure throughout our ownership term, by maximizing our flexibility to accommodate capital events, and minimizing debt service costs.
 
Asset Sale & Investment Dispositions

IRE continually re-evaluates resale opportunities for its assets. Appropriate holding period and capital strategy are first determined at acquisition, and later adjusted based on the alignment between property-level value creating events (a refurbishment, a large new lease, or large lease renewal) and market level liquidity. When we decide to resell an asset, our disposition strategy seeks to take advantage of prevailing capital market conditions and to maximize investment profits. However, we approach a sale as a partner selection process, choosing to view a buyer as an entity we are associated to by extension, as we turn over our tenants and clients to this new owner’s stewardship.

Asset Disposition Decisions
 
  • To kick start a disposition process, the Project Manager presents a brief disposition memorandum to the IRE Partners for approval, articulating the rationale for the recommended sale and showing the investment’s resulting return and profit metrics compared to our original underwriting.
  • We generally have a bias towards holding assets, informed by the extensive empirical data demonstrating the superior returns achieved by long term holders. However we recognize the impetus for value creation imposed on our organization by having defined potential exit horizons.
Asset Disposition Execution
 
  • If we decide to move forward with a sale, we interview some of the best local intermediaries, with a focus on selecting the brokers perceived as most credible in the asset’s targeted investment community.
  • We remain directly involved in the selection of a potential buyer, conducting interviews with, and reference checks on its principals to assess their reputation, and reviewing financial statements to support their credit-worthiness.
  • We actively manage the sale transaction, facilitating due diligence, and ensuring a smooth transition of operations to a new ownership group, in order to avoid any disruptions for our tenant partners.