RE I – Course Overview
Copyright By PowCoder代写 加微信 powcoder
REAL ESTATE INVESTMENTS I: OVERVIEW
After all of the end-of-quarter urgency fades, I’d like you to recall certain highlights of Real
Estate Investments I as well as certain comments about your potential real estate career.
Real Estate Foundations:
Consider real estate in 3-D:
Leases as source of value:
• gross v. net leasable area
• base v. net rent
• percentage rents
• [consider ARGUS]
Valuations & Returns:
; and given certain simplifying assumptions, then:
for short-term leases: 1 10
for long-term leases:
Apartments
Cap-rate effects: 1
= + + ∆ [where: ( ),f N∆ = ∇ ]:
Remember that markets change (sometimes subtly and sometimes suddenly):
Leverage Effects:
Recall the effects of leverage (on return and volatility, respectively):
Market Values
Rescaled NOI
Average Capitalization
1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020
NCREIF Index: Market Values, Rescaled NOI and Capitalization Rates Based on a $100
Investment for the Period 1978 through (the Third Quarter of) 2022
Capitalization Rates
Leads to the no-free-lunch axiom (where JLP dissents from the consensus view):
Recall the impact of points on the effective interest rate:
Loan Mechanics:
Loan amounts based on the lower of: a) debt-coverage and b) loan-to-value ratio tests.
Remember debt constant:
← key to debt-coverage ratio.
The outstanding loan:
Principal and interest components change over time:
Strategically thinking about leverage: 0
λρ ≈ − (assuming no shifts in cap rates).
Probably the least understood aspect of real estate investing.
Don’t confuse the statistical and the “thinking” aspects of evaluating risk!
For example, Wall Street’s “three-sigma” event:
Approaches to estimating risk include:
• scenario forecasting (including a joint probability matrix), and
• Monte Carlo simulation.
Want to forecast E[k] and ][kEσ
Seeking positive risk-adjusted returns:
Express the probability of not reaching some threshold: ( )( )2,~| kkNXXxP σ< . • REITs are essentially portfolios of real assets, often concentrated by property type • REITs provide (particularly individual) investors instant access to the RE markets • Provided they meet certain regulatory requirements, REITs avoid double taxation • Recall FFO as well as AFFO, CAD and FAD (differ from private RE) • Consider what makes a project/acquisition “accretive” (can be different with respect to current income and total return) to a REIT • REITs trade at prices varying from NAV (note: GAV may be a better measure) • Should the “wrapper” matter? Certain arguments for “yes” (e.g., liquidity, discount to NAV, etc.) and for “no” (e.g., relinquish control, premium to NAV, etc.). These arguments change over the RE cycle, and matter differently to differing groups of investors (or clienteles). While it’s difficult, this is what you get paid to do as an investment professional. It’s Not All Conceptual: • You’ve applied these RE concepts to a variety of real-world situations (listed in terms of decreasing intensity): o Wells Offering Memo (week #2) ← governance o State & Main – Part I (week #4) ← small assumption ∆s ⇒ big valuation ∆s o State & Main – Part II (week #8) ← gross v. net returns (with leverage) o Forward Commitment (week #7) ← pervasive legalese o EOP/Blackstone/Macklowe/Deutsche Bank/Fortress (week #9) ← winners & losers Empire State Building (week #4) Owner’s underwriting package: o Medical office building development (week #4) Broker’s offering memorandum: o Prime Outlets at Edinburgh (week #3) o Bank of America Sale/leaseback (week#4) Your Real Estate Career: • Everyone’s RE career (should you choose so) will be different.† • You will need a blend of quantitative and qualitative skills. • That blend is a function of the job and personal preferences – there’s no “one thing.” • Over time, experience will morph into expertise and leadership. • RE investing/owning/managing/financing is a complicated business. It’s a people business (civility & humility matter) ← enjoy the people! Quiet confidence ← combined with crushing competence! It’s also about persistence & diligence ← get things done! • You’ll see/hear many “pitches,” don’t confuse the presenter’s glibness with the quality of • Think independently, critically and strategically!!! Real Estate Investments II: Not surprisingly, RE II (aka the “deuce”) is an extension of the current course. The topics include: • structuring and incentive fees, • tax issues (primarily as it relates to foreclosures), • joint ventures, • high-yield/mezzanine financing, • long/short RE strategies (primarily using the REIT market), • strategic leverage, and • non-core RE. † Consistent with differing careers, the course notes are voluminous and are meant to serve as reference materials for your post-Booth career. You may not believe it now, but several alumni ask for periodic updates of these course notes. “Education is not to reform students or amuse them or to make them expert technicians. It is to unsettle their minds, widen their horizons, inflame their intellects, teach to them think.” (the University of Chicago’s first president) As found in . Boyer, The University of Chicago: A History, The University of Chicago Press, Chicago, 2015 “I hear and I forget. I see and I remember. I do and I understand.” Real Estate Investments I: Overview After all of the end-of-quarter urgency fades, I’d like you to recall certain highlights of Real Estate Investments I as well as certain comments about your potential real estate career. Real Estate Foundations: Valuations & Returns: It’s Not All Conceptual: Your Real Estate Career: Real Estate Investments II: 程序代写 CS代考 加微信: powcoder QQ: 1823890830 Email: powcoder@163.com