In terms of metrics, we focus on same store net operating income (S/S NOI) as the most important measure of the business plan and portfolio of a real estate company. Consistent growth in this measure means tenants are willing to pay more to rent space. Strong S/S NOI is most highly correlated with the attributes described in our Investment Philosophy (i.e., frustrated tenant)
We wear out lots of shoe leather on the road visiting companies and touring properties. We have found that there is much to be learned from talking to tenants and understanding why a tenant chooses to occupy a certain space in a certain building. There is simply no substitute for this on-site due diligence.
We have access to substantial databases of real estate operating data and company-level data and use these databases to help us frame the valuation issues surrounding companies. We have 30 years of in-place relationships with real estate operators, sell side analysts, CEOs and directors, buy-side analysts (yes, this would be our competition) and this network of information works 24/7 to dig up, digest and understand what’s driving the fundamentals. We are skilled at adding empirical data to subjective data and reaching sound conclusions.
We are disciplined regarding risk. Position sizes, attention to balance sheets and understanding the motives and capabilities of management and the board are critical in controlling risk.