REE-4313 Lecture Notes - Lecture 1: Cash Flow, Life Insurance, Transaction Cost
21 views3 pages
3 Oct 2018
School
Course
Professor
- Real Estate Investment Process
o The Investment Process (private investors’ perspectives)
▪ Identify the investors’ goals and objectives
• Wealth constraints
• Risk preferences
• Return requirements
• Competitive advantages
▪ Analyze the market conditions and environment
▪ Develop cash flow and return estimates
• Expected cash flow from operations and sale
• Expected returns (unleveraged and leverages)
▪ Apply decision criteria
- Real Estate Investment: Key Participants
o The Equity Investor
▪ The owner, landlord (lessor), borrower (mortgagor)
o The Debt Investor
▪ Mortgage lender (mortgagee)
o The User
▪ Owner occupant; tenant (lessee)
o The Government
▪ Federal, state, and local
- Market
o Who Are the Equity Investors?
▪ Individuals, Partnerships, PE Firms (about 50%)
▪ Pension Funds (about 20%)
▪ REITs (about 20%)
▪ Other Institutions and Corporations
• Life insurance companies
• Sovereign wealth funds
• Foundations
▪ Various goals, risk tolerances, expertise, capacities, tax structures
o Who Are the Debt Investors?
▪ Commercial Banks (about 45%)
▪ Investors in CMBs (about 20%)
▪ Life Insurance Companies (about 15%)
▪ Other Institutions and Corporations
• Government Agencies (loans secured by MF assets)
• Pension funds
• Mortgage REITs
• Pension Funds
o The Interaction between Space & Capital Markets
▪ Space (user) Market
• Where users of space compete for location