Core-Plus Strategies: Moderate Risk, Some Value Creation
Core-plus investments blend the reliability of stabilised assets with opportunities for incremental improvements, offering moderate-risk investors both steady income and room for growth.
Introduction
Core-plus investments sit comfortably in the middle ground between low-risk core strategies and the more aggressive, higher-risk value-add plays. These investments involve acquiring stable, income-generating assets that already produce predictable cash flow but also present opportunities for incremental improvements. Through better leasing, operational upgrades, or light renovations, investors can enhance performance and returns.
For those seeking a balance between reliable income and modest growth, core-plus investments represent an attractive option. They appeal to investors who want stability but are also willing to take on some measured risk to capture additional upside.
What Are Core-Plus Investments?
Core-plus investments typically consist of quality, well-located properties that are already delivering steady income but also show clear potential for further improvement. Unlike core assets, which require little active management, core-plus properties invite a degree of operational involvement to unlock additional value.
These assets are usually located in prime or near-prime markets with solid tenant demand. They often enjoy a good tenant base, though leases may be slightly shorter or include a mix of tenant profiles compared to the longer contracts found in core properties. Importantly, they present opportunities for improvement, such as upgrading facilities, repositioning vacant space, reducing operating costs, or renegotiating leases to increase rental rates. Moderate leverage is often employed, with a conservative amount of debt used to boost returns without creating excessive financial strain.
Benefits of Core-Plus Investments
The strength of core-plus lies in its balanced risk-return profile. Investors enjoy the stability of ongoing rental income while also having the opportunity to enhance returns through targeted improvements. This dual characteristic creates a steady income stream paired with potential for capital appreciation.
Another advantage is flexibility. Investors and managers can decide how aggressively to pursue improvements depending on market conditions. In a rising market, active upgrades may deliver outsized returns, while in slower conditions, managers can scale back to focus on maintaining stable income. This adaptability makes core-plus a versatile addition to a portfolio.
Potential Risks
As with any strategy that involves active management, core-plus investments come with certain risks. Execution risk is foremost: if the planned improvements fail to increase income or attract higher-quality tenants, returns may underperform expectations. Market risk is also a factor, since broader economic shifts could affect demand before the value creation strategy is realized. Finally, tenant turnover is generally higher than in fully stabilised core assets, creating some exposure to vacancy risk.
Typical Investors in Core-Plus Assets
Core-plus investments are well suited to institutions and funds that are comfortable with modest operational risk in exchange for enhanced returns. Pension funds looking for slightly higher yields than traditional core assets, REITs with experienced asset management teams, and private equity real estate funds seeking moderate growth are among the most common participants in this strategy.
Core-Plus in a Portfolio Strategy
Core-plus investments often serve as a complement to core holdings, providing an extra layer of return potential without introducing the high volatility associated with value-add or opportunistic investments. By blending stability with measured growth, they help investors create a more balanced portfolio that can weather market cycles while still pursuing incremental gains.
How RealVantage Offers Core-Plus Opportunities
At RealVantage, we identify and curate core-plus opportunities by targeting income-producing assets in strong locations that show clear potential for incremental improvements. We work alongside experienced asset managers to execute upgrades, refine leasing strategies, and unlock operational efficiencies.
Our rigorous underwriting process ensures that risks are carefully balanced against potential rewards. Through this approach, our investors have been able to participate in core-plus deals across Australia, the UK, and Southeast Asia, benefiting from both the steady income associated with stabilised properties and the upside generated by strategic value creation.
Next in the Series
📖 Read next: Value-Add Investments: Renovation, Repositioning, Moderate to High Risk — Explore how more intensive improvements can drive higher returns.
About RealVantage
RealVantage (operating as RV SG Pte. Ltd. in Singapore) is a leading real estate co-investment platform, licensed and regulated by the Monetary Authority of Singapore (MAS), that allows our investors to diversify across markets, overseas properties, sectors and investment strategies.
The RealVantage team comprises professionals across real estate, corporate finance, technology, venture capital, and startup growth. The platform combines institutional deal sourcing with structured underwriting and portfolio diversification capabilities. The team is led by a distinguished Board of Advisors and advisory committee who provide cross-functional and multi-disciplinary expertise to the RealVantage team.
The company's philosophy, core values, and technological edge help clients build a diversified and high-performing real estate investment portfolio.
Get in touch with RealVantage today to see how they can help you in your real estate investment journey.
Disclaimer: The information and/or documents contained in this article do not constitute financial advice and are meant for educational purposes. Please consult your financial advisor, accountant, and/or attorney before proceeding with any financial/real estate investments.