Increasing NOI is the fundamental role of any commercial real estate sponsor. Many fly-by-night sponsors spend the majority of their time wining and dining investors in order to raise capital and then placing that capital in acquisitions. However these activities do not create any actual value.

 

True value creation is derived from increasing NOI post-acquisition by maximizing revenue and minimizing operating expenses. It's that simple. A good sponsor should spend the majority of their time building an efficient asset management operation and squeezing every last dime of NOI out of a given property. This both maximizes investor returns and limits the effects of external risks such as rising interest rates, inflation and expanding market cap rates.