Explanation

In private real estate investing, strategies are typically categorized by risk and return profiles:

A. Core strategies - Lowest risk and lowest expected returns. These involve stable, income-producing properties with minimal leverage and low vacancy rates.

B. Value-add strategies - Moderate risk and moderate returns. These involve properties that require some renovation, repositioning, or management improvements to increase value.

C. Opportunistic strategies - Highest risk and highest expected returns. These involve:

• Development projects (ground-up construction)
• Major redevelopment
• Distressed properties
• High leverage usage
• Properties in transitional markets

Opportunistic strategies typically target returns of 15%+ IRR (Internal Rate of Return), while core strategies target 8-10% and value-add strategies target 10-15%.

The risk-return hierarchy in private real estate is:

1. Opportunistic (highest risk, highest return)
2. Value-add (moderate risk, moderate return)
3. Core (lowest risk, lowest return)

Therefore, private real estate investors expect to generate the highest returns from opportunistic strategies.