INVESTMENT PROCESS

We aim to maximize asset value through a vertically integrated approach to running our business – an approach that we adopted more than two decades ago and have been continuously refining since.  From market research to sourcing and acquiring deals, to financing and asset management – we control and manage the process with our in-house expertise and hands-on teams.

THE FOUR CORNERSTONES OF OUR INVESTMENT PROCESS

Focus

on what we do best: invest in high-quality commercial real estate in high-demand, tech hubs

Target

investment strategies based on current macroeconomic, microeconomic, and real estate market trends

Create

long-term value through exacting execution and active investment management

Identify

opportunities to create value at every point along the investment lifecycle

INVESTMENT GUIDELINES

Menlo seeks to deliver superior risk-adjusted returns, while placing a premium on preserving capital. The team performs a comprehensive risk/return analysis on each potential transaction, and only invests in assets that Menlo believes have a defensible return potential. When evaluating investment opportunities, we target assets that provide for or exhibit some (or all) of the following characteristics:

Technology-Driven, Innovation-Hub Markets

Robust technology markets where people want to live, businesses want to locate and institutions want to invest.

Location does matter.  That is why we focus on select geographic markets whose economies are meaningfully impacted by technology and should outperform during all phases of an economic cycle.

Buy at the Right Cost Basis

Buy at a cost basis that provides potential for value creation.

Acquiring a property at the right cost basis mitigates risk in a downturn and puts the building in a great position for value creation during an upturn.

Mission-Critical Facilities

Properties with an “entrenched” tenancy that is “mission critical” to the existing tenant’s business.

One of the most important aspects of evaluating a real estate investment opportunity is determining whether the existing tenancy will renew or vacate when its lease matures. Acquiring properties with an “entrenched tenancy” that is mission critical to the existing tenant’s business significantly mitigates downside risk when a tenant’s lease matures. We evaluate the importance of the property to the tenant’s broader business operations, the amount it has invested in the property, and how easy it would be for the tenant to relocate to another property.

Geographic Diversification

Diversification mitigates downside risk during market and economic fluctuations.

Local real estate markets do not always move in parallel with the broader real estate capital markets. Commercial real estate can be affected positively or negatively by local dynamics, including the economic outlook of its businesses and major industries, the amount of new development coming online, or local politics.

Large Corporate Campus-Styled Buildings

Measurable impact to the bottom line, with buildings attractive to large anchor tenants.Fewer tenants who assume property operating costs. 

It takes just as much work to lease 5,000 square feet as is does to lease 200,000 square feet. Furthermore, the leases for large corporate tenants are generally structured as triple-net (NNN), where the operating costs are largely borne by the tenant.

Institutional Quality Assets

High-quality, Class A buildings in high-demand locations.

We invest in high-quality properties in locations where knowledge workers want to live and businesses want to locate. These are the same markets that attract institutional buyers should a sale be executed.

High-Barriers-to-Entry Locations

Desirable locations with favorable supply/demand fundamentals bolster rent growth potential. 

Desirable locations close to housing and amenities that have limited or no remaining development sites and/or require lengthy entitlement timelines typically outperform commodity locations with lower barriers to entry. These properties generally lease faster, maintain higher rents in market downturns, and appreciate more during upcycles because they cannot be duplicated.

Functional Improvements

Assets that are functional, readily reusable, and easy to re-tenant.

The most significant real estate capital outlays typically result from re-tenanting a building. While we always endeavor to maintain stable tenancies at our properties, we recognize and plan for tenants’ changing circumstances. Acquiring assets that are functional, readily reusable, and easy to re-tenant both limits potential future capital outlays and minimizes prolonged downtime risk.