“Investment grade” is used loosely. At Carey it has a working meaning: a property whose income, tenure, location and condition can be relied on by an institution, a fund or a careful private investor.
Income that can be relied on
Who pays the rent, for how long, on what terms, and what happens when the lease ends. A single long lease to a strong tenant and a building with many tenants are both investable. They are different risks and should be priced differently.
Tenure, Title and Planning
We review the property’s tenure and any express conditions or restrictions in interest recorded on the title to understand its permitted use and development potential.
We also examine the applicable planning provisions and consult the relevant authorities on permissible changes to the land category and title conditions.
Long-term capital appreciation and property investment
Rental income forms one component of a property’s overall investment return. Location and market supply and demand play a significant role in shaping its potential for capital appreciation over time. A patient, long-term approach allows investors to benefit from rental income while positioning for future growth in the property’s value.
A buyer on exit
An investment-grade property can be sold again. Its size and location suit a known group of buyers: funds, REITs, companies and family offices.
The numbers
Finally, the return has to make sense against the cost of money, the risk and the time held, with long-term capital appreciation counted alongside the income. A property is investment grade when its return is fair for the risk it carries.