Value-Add vs. Core / Core-Plus / Opportunistic

CRE strategies are sorted into four risk-return profiles, from safest to most aggressive:

• Core — stabilized, well-leased assets in strong markets. Low leverage, durable cash flow, the lowest target returns. You're buying current income.
• Core-plus — core assets with a light touch of upside (modest lease-up, minor improvements). Slightly more risk and return.
• Value-add — properties needing renovation, repositioning, or lease-up to reach their potential. Most of the return comes from forced NOI growth, not current yield.
• Opportunistic — development, major repositioning, or distress. The highest risk (and leverage) for the highest target return; cash flow may be negative for years.

How it's used: the profile sets the expected return band and the appropriate leverage. Core might target high-single-digit IRRs; opportunistic targets the high teens or more to compensate for execution and market risk.

Why it matters: mismatching the profile to the capital is how investors get hurt — financing a development deal like a core asset, or paying a core price for value-add risk. Value-add and opportunistic deals live or die on the yield-on-cost spread and are sized on loan-to-cost, not just the going-in cap rate.

The strategy also shapes the interest-only and reserve structure of the loan. See the underwriting guides for how each profile flows through the model.