Principal Investing

Jump to Menu: Primary Investment ProfilesTacticsGeneral Investment Guidelines

Ridge Capital Investors, LLC (“Ridge”) is a San Francisco based real estate firm that has consistently generated superior risk-adjusted returns, while offering first rate service to both our institutional partners and our property tenants. The Company seeks opportunities where the team can capitalize on its extensive market and investment knowledge through creative transaction sourcing, broad relationships and operating expertise, and development and construction management capabilities, all within the context of building an asset portfolio in some of the best markets in the country.

Collectively, the team has developed and invested in over $1.6 billion of apartment assets across the US and $1.6 billion of office assets, primarily on the West Coast. The majority of these investments were focused on meaningful asset repositioning or ground-up development in order to achieve attractive risk-adjusted returns. Since the creation of Ridge Capital Investors, the team has acquired over $300 million of real estate in thirteen investments.

Ridge’s primary investment profiles include the following:

  • Requires management, operational and asset reposition
  • Significant lease-up
  • Opportunistic Pricing
  • Entitlement and development

Core Plus

Value-Added

Opportunistic

Investment Profile

  • Higher Quality, stabilized assets
  • Market Pricing
  • Requires physical reposition
  • Management Reposition
  • Discounted Pricing
  • Major reposition (mgmt/physical)
  • Entitle/develop
  • Off-Market

Target Markets

Core markets

Core to transitional

Core to transitional

Return Expectation

12% -14% levered

15% -17% levered

18% -20%+ levered

Profits Ratio:
Cash Flow vs. Exit Proceeds

High Cash/Low Exit

(~50%/50%)

Low Cash/Higher Exit

(~30%/70%)

Low Cash/High Exit

(~20%/80%)

Hold Period

Five to Ten Years

Three to Seven Years

Three to Five Years

Common threads among Ridge’s targeted investments are a keen focus on attractive risk-adjusted return and appreciation potential, meaningful opportunity to apply the team’s expertise and strong location fundamentals.


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Tactics

Investments range from single assets to portfolio acquisitions and the investment profile varies across all phases of the property life cycle, from development to major repositioning.

OpportunisticAcquisition Source attractive discount-to-market pricing on target assets through the team’s broad network of relationships.
Distressed NotesRidge would venture with debt fund(s) to serve as the asset manager for performing loans, or would acquire notes with capital partners with the intent of taking ownership of the targeted asset(s).
Reposition/RenovationProperties that are under-managed by their owners or starved of capital due to operating or investment distress. In particular, the team looks for below-market rates, poor tenant credit quality, unnecessarily low occupancy, deferred maintenance, lack of competitive amenities, or failure to effectively promote the property to prospective tenants.

The team augments property value by:

  1. Improving common areas, rentable space and street appeal by correcting deferred capital issues to draw improved leasing traffic and higher closing rate
  2. High ROI physical repositioning to suit the needs of renters in the local market area and to improve property cash flow potential
  3. Multiple media channel marketing to improve leasing and tenant quality
  4. Thorough cost containment through improved management
  5. Ancillary income maximization
Re-developmentRidge will seek properties that can be adaptively re-used or substantially redeveloped to maximize the income potential for well located, good quality properties. An example of this would be the conversion of brick and timber warehouse space to an office use, or a substantial redevelopment of an existing apartment property to improve the unit mix or unit/property amenities.
DisaggregationDis-aggregation involves the purchase of a portfolio of assets or the acquisition of a larger property that can be sold off incrementally to unlock higher property value.
Development/ExpansionWe do not believe that current market conditions warrant new development, with the exception of a few core locations with strong job growth (eg. close-in Bay Area, Seattle). Ridge will take advantage of such opportunities when/where the cycle permits. Our strategy would be to target development opportunities in undersupplied markets with demand trends and good real estate fundamentals (e.g. low vacancies, low supply and strong rental growth).Properties with excess land that presents the possibility of additional development, or assets that will facilitate the addition of units/square footage to existing structures will also be pursued. Properties would be acquired for their current cash flow and appreciation potential while development potential would be viewed as an upside scenario.

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General Investment Guidelines

Product typesClass A and B properties
PricingPurchase price plus renovation/redevelopment capital expenditure of less than 70% of replacement cost and attractive pricing relative to marketGoing-in or repositioned yield will be targeted to be at least 50-75 bps higher than then current debt rates and several hundred basis points above the 10-year treasury rate
Gross InvestmentReturn target An average of mid to high-teens levered Internal Rate of ReturnCore Plus investments would fall in the 12-14% levered range; whereas, value-added to opportunistic investments would likely range between 15% and 20%, levered
Transaction Size$10 million to $30 million purchase price. Primary focus on mid-market investment size will reduce competition with institutional players and increase the number of under-managed/distressed properties for consideration as many of these properties will not have institutional ownership
LeverageUp to 70% of all-in investment cost
Hold PeriodThree to seven years
Market FocusWest Coast

 


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