INVESTMENT PHILOSOPHY

Champion continues to maintain a disciplined approach to its investment philosophy, which is consistently focused on generating attractive risk-adjusted equity returns, profits, and multiples, typically over 2-year to 5-year investment horizons. The success of this consistent Champion investment philosophy can be attributed to five key factors:

Nimble Investment Strategies Champion has developed an excellent reputation for being able to implement successful investment strategies typically at the beginning of a particular market cycle or trend.
Joint Ventures Champion has significant expertise and a proven track record in structuring successful joint venture transactions with large-scale institutional investors, private equity funds, private individuals and family offices.
Capital Markets Expertise By closely tracking the real estate debt and equity marketplace, Champion has successfully completed a variety of complex real estate capital markets transactions, using its expertise to pursue the optimal capital structure for each investment.
Long-Term Relationships Nationally within various disciplines of the real estate industry, Champion has developed extensive relationships that generate attractive business opportunities, including sourcing investments, acquiring properties, identifying equity partners and debt lenders, and securing leasing, management and other services.
Efficient Operating Structure Champion has an efficient operating structure focused on pro-active asset management and hiring the best-suited third parties in each local market for leasing and property management under terms with proper incentives to produce attractive operating results.
STRATEGY

Champion continues to selectively pursue value-add and opportunistic real estate investments primarily in the office, industrial and land sectors in Texas and the Southwest U.S., typically sourced on a "limited-market" or "off-market" basis. Commercial real estate assets with occupancy and/or operating challenges have limited investor competition, which translates into pricing levels at significant discounts to replacement on a projected all-in cost basis. Under this investment strategy, Champion is targeting well-located and functional commercial properties and loans currently facing occupancy and/or operational challenges, but which can be renovated, re-leased, re-branded, and then re-capitalized typically within a 2-year to 5-year timeframe, at an all-in investment basis significantly below replacement cost, thereby generating outsized risk- adjusted returns on equity invested. The following key points represent the central tenets of this opportunity from the Champion perspective.

Invest Below Replacement Cost Investing below replacement cost has been one of the best strategies historically for both limiting downside risk and generating future capital appreciation. Champion believes this ability to invest below replacement cost in quality assets will continue for the next few years.
Attractive Risk/Reward Profile Most real estate investors are focused on institutional quality assets in core U.S. markets. The public REIT market and multi-billion dollar private equity funds are competing for these in-favor assets, which comprise around one- third of all commercial real estate nationwide. In contrast, capital remains scarcer for the remaining larger pool of assets, resulting in value discounts.
Disproportionate Employment Growth Job growth is the key element affecting everything from office tenant demand to apartment absorption to increasing retail sales. While the U.S. population has continued its steady growth, when it comes to job growth, the recovery continues slowly on a national basis. Certain regions, such as the Southwest, are vastly outperforming the rest of the nation, with Texas clearly being the leader.
Continued De-leveraging Certain lenders still need to liquidate a significant portion of their outstanding real estate debt. These lenders include smaller commercial banks and insurance companies, CMBS trusts, specialty finance organizations, private money lenders, and others. These debt re-structuring and liquidation opportunities are expected to continue for at least the next few years.
Limited New Construction New commercial real estate construction, even in those regions now experiencing recovery, remains at historically low levels. This lack of new construction should continue into the foreseeable future thanks to the cost/basis differential compared to acquiring existing assets, coupled with constrained debt and equity financing markets for speculative new developments. With real estate supply and demand fundamentals continuing to improve, investors/owners of existing assets are well-positioned for significant resulting increases in income and value.

Going forward, as the current economic recovery continues, Champion is also selectively pursuing new development opportunities within the office, industrial, and mixed- use commercial real estate sectors. Consistent with past development programs and strategies pursued by the firm, Champion is focusing its new development efforts on unique/niche opportunities that are driven first and foremost by their high-quality locations, typically along major freeways/highways and transportation corridors. Such development projects are typically speculative in nature on land sites that allow for growth/expansion via multi-building and/or multi-phased projects. Regardless of the product type (office, industrial, mixed-use), Champion will develop functional, high- quality assets that will be attractive to both corporate tenants/users for operational purposes and the institutional capital markets for long-term investment purposes.

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