We will seek to acquire a portfolio of retail and mixed-use retail real estate by utilizing the following criteria:
Mix of stable-yield investments and value-add opportunities: We will focus on two classifications of investments, being "stable-yield" investments and "value-add" opportunities.
(a) Stable-yield investments are those that produce a stable cash flow, and would encompass both triple net single tenant assets requiring minimal property management focus and well-leased multi-tenant shopping centres. With respect to triple net assets, we will focus on generating sale-leaseback transactions with traditional retailers, financial institutions, restaurant operators and non-traditional retailers where property ownership is not part of the operator's core strategy. We will also identify transactions with regional developers or property owners that have accumulated triple net single-tenant portfolios. In terms of multi-tenant shopping centres, we will focus on acquiring centres that have one or more traditional anchors with long-term leases, high occupancy levels with primarily national and regional tenants, strong tenant sales performance and stable cash flow.
(b) Value-add opportunities may be characterized by investments in shopping centres with lower initial occupancy rates, lower initial yields, tenant roster deficiencies (i.e. a high proportion of local tenants) and inadequate retail sales performance, or a combination of the foregoing. Charter would seek to add value to the property through a combination of leasing activity, re-merchandising the existing tenant mix and re-developing the shopping centre to increase the centre's gross leasable area or improve the physical nature of the centre, thereby increasing property lease rates and net operating income.
By focusing on both "stable-yield" investments and "value add" opportunities, management believes that Charter will be able to create a real estate portfolio with a stable income stream with opportunities for organic growth over time.
Community centre focus: We believe that we can obtain high-quality, retail and mixed-use retail properties with the potential for value-add opportunities by focusing on both enclosed and open-air community shopping centres. These centres would typically be anchored by department stores, discount retailers and/or supermarkets. In particular, we believe that enclosed centres frequently present undervalued opportunities in terms of the risk-reward ratio they offer. Enclosed centres will always have a place in a cold weather climate such as Canada. Furthermore, we believe that the cost of building these centres today is high and the ability to obtain municipal approval for these centres continues to be difficult. We intend to maximize the value of both enclosed and open-air centres by executing the appropriate re-merchandising and re-development strategy wherever possible.
Combination of primary and secondary markets: We believe that secondary real estate markets offer us the opportunity to acquire well-tenanted retail properties at attractive capitalization rates. By combining assets in the secondary market with high yielding primary real estate market assets, we believe that we will generate higher returns at lower risk than if we were to focus exclusively on primary real estate markets.
National/regional retailer focus: We will focus primarily on acquiring retail properties with strong national and regional retail tenants, increasing the likelihood of those tenants fulfilling the lease terms to which they have committed and thereby providing Charter with stable cash flows.
Mid-market deal size: We will focus on acquiring properties valued between $10 million and $40 million, allowing us to differentiate ourselves from small public and private real estate investors, who we believe generally look for smaller investments, while also acquiring properties that are small enough to minimize competition from large real estate investment trusts and institutions. We will also look at larger acquisitions that do not fall into the investment parameters of larger real estate investment trusts or institutions but still provide good investment opportunities.