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| Preface | |
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| Acknowledgments | |
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| Introduction to Real Estate Economics | |
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| Real Estate Space and Asset Markets | |
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| Space Market | |
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| Asset Market | |
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| Chapter Summary | |
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| Real Estate System | |
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| Commercial Property Development Industry | |
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| Overview of the Real Estate System | |
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| Four-Quadrant Model | |
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| Using the 4Q Diagram to Help Understand Boom and Bust in Real Estate Markets | |
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| Chapter Summary | |
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| References and Additional Reading | |
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| Urban Economics and Real Estate Market Analysis | |
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| Central Place Theory and the System of Cities | |
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| Pattern of City Size | |
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| Pattern of City Location | |
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| Factors Underlying the Pattern: Centripetal and Centrifugal Forces | |
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| Economic Base and the Growth of Cities and Regions | |
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| Classification of Cities for Real Estate Investment Analysis | |
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| Chapter Summary | |
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| Inside the City: Some Basic Urban Economics | |
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| A Threshold Concept: Urban Form | |
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| Some Basic Economic Principles of Urban Land Value and Use | |
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| Classic Monocentric City Model | |
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| Chapter Summary | |
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| Inside the City II: A Closer Look | |
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| From Land Rent to Land Value: The Effect of Rent Growth Expectations | |
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| Effect of Uncertainty on Speculative Land Value | |
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| Let's Get Real: New Twists to the Old Model | |
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| Property Life Cycle and the Effect of Structural Depreciation | |
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| Chapter Summary | |
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| Real Estate Market Analysis | |
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| General Features of Real Estate Market Analysis | |
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| Formal Model of Space Market Equilibrium Dynamics and Cyclicality | |
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| Chapter Summary | |
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| References and Additional Reading | |
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| Basic Financial Economic Concepts and Tools | |
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| Real Estate as an Investment: Some Background Information | |
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| Investment Industry, and Real Estate's Role Therein | |
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| Real Estate as an Asset Class | |
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| Chapter Summary | |
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| Present Value Mathematics for Real Estate | |
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| Single-Sum Formulas | |
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| Multiperiod Problems | |
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| Chapter Summary | |
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| Measuring Investment Performance: The Concept of Returns | |
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| Investment Returns: Basic Definitions and Classification | |
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| Periodic Returns | |
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| Multiperiod and Dollar-Weighted Returns | |
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| Chapter Summary | |
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| References and Additional Readings | |
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| Real Estate Valuation and Investment Analysis at the Microlevel | |
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| The Basic Idea: DCF and NPV | |
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| Relation between Return Expectations and Property Values in the Asset Market | |
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| Discounted Cash Flow Valuation Procedure | |
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| Ratio Valuation Procedures: Direct Capitalization and GIM as Shortcuts | |
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| Typical Mistakes in DCF Application to Commercial Property | |
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| Is DCF Really Useful in the Real World? | |
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| Capital Budgeting and the NPV Investment Decision Rule | |
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| Chapter Summary | |
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| Microlevel Investment Performance Attribution: Parsing the IRR | |
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| Nuts and Bolts for Real Estate Valuation: Cash Flow Proformas and Discount Rates | |
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| Proformas and Cash Flow Projection | |
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| Discount Rates: The Opportunity Cost of Capital | |
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| Chapter Summary | |
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| Advanced Microlevel Valuation | |
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| Market Value and Investment Value | |
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| Danger and Opportunity in Market Inefficiency | |
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| Dueling Asset Markets: The REIT Market versus the Property Market | |
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| Chapter Summary | |
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| Basic Valuation Concepts: Transaction Prices and Market Values | |
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| References and Additional Reading | |
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| Completing the Basic Investment Analysis Picture | |
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| Use of Debt in Real Estate Investment (Part I): The Effect of Leverage | |
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| The Big Picture | |
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| Basic Definitions and Mechanics of Leverage | |
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| Effect of Leverage on the Risk and Return to Equity | |
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| A Useful Formula: The WACC | |
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| Positive and Negative Leverage | |
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| Effect of Leverage on Growth and Yield | |
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| Chapter Summary | |
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| Income Tax Considerations and After-Tax Cash Flows for the Equity Investor | |
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| General Effects of Income Taxes and Debt | |
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| Numerical Example of After-Tax Proforma | |
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| Note on the Value of Leverage and Tax Shelter | |
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| After-Tax Equity Valuation and Capital Budgeting | |
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| Chapter Summary | |
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| Use of Debt in Real Estate Investment (Part II): Capital Structure | |
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| Debt When There Is an Equity Capital Constraint | |
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| Debt and Taxes in the Real Estate Context | |
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| Other Considerations Regarding the Role of Debt in Real Estate Investments | |
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| Chapter Summary | |
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| Practical Mechanics for Calculating After-Tax NPVs and OCCs | |
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| References and Additional Reading | |
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| Mortgages from an Investment Perspective | |
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| Mortgage Basics I: An Introduction and Overview | |
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| Basic Typology of Mortgages and Overview of the U.S. Mortgage Industry | |
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| Basic Legal Concepts and Terminology for Mortgages | |
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| Default, Foreclosure, and Bankruptcy | |
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| Nonlitigious Actions and Workouts | |
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| Limited Liability and Foreclosure Costs: The Borrower's Put Option and Strategic Default | |
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| Chapter Summary | |
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| Mortgage Basics II: Payments, Yields, and Values | |
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| Calculating Loan Payments and Balances | |
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| Loan Yields and Mortgage Valuation | |
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| Refinancing Decision | |
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| Chapter Summary | |
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| Commercial Mortgage Analysis and Underwriting | |
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| Expected Returns versus Stated Yields: Measuring the Impact of Default Risk | |
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| Commercial Mortgage Underwriting | |
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| Participating Mortgages | |
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| Chapter Summary | |
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| Commercial Mortgage Economics and Investment | |
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| Some Basic Characteristics of Bonds | |
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| Commercial Mortgage Returns: Ex Ante and Ex Post | |
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| Chapter Summary | |
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| Introduction to Commercial Mortgage-Backed Securities | |
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| What Are CMBS? | |
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| CMBS Structure: Tranching and Subordination | |
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| CMBS Rating and Yields | |
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| Chapter Summary | |
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| References and Additional Reading | |
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| Macrolevel Real Estate Investment Issues | |
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| Real Estate and Portfolio Theory: Strategic Investment Considerations | |
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| Numerical Example of the Portfolio Allocation Problem: Real Estate in the Mixed-Asset Portfolio | |
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| Basic Mean-Variance Portfolio Theory (MPT) | |
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| Allowing for a Riskless Asset: The Two-Fund Theorem and the Sharpe-Maximizing Portfolio | |
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| Some Broader Considerations in Portfolio Allocation | |
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| Chapter Summary | |
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| A Review of Some Statistics about Portfolio Returns | |
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| Equilibrium Asset Valuation and Real Estate's Price of Risk in the Capital Market | |
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| Review of Classical Asset Pricing Theory | |
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| Applying the CAPM to the Private Real Estate Asset Class as a Whole | |
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| Attempting to Quantify Sectoral Risk and Return within the Private Real Estate Asset Class: The Cutting Edge | |
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| Chapter Summary | |
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| Arbitrage Pricing Theory and the Multifactor Model of Equilibrium Ex Ante Risk Premiums in the Capital Market | |
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| Macrolevel Valuation I: Static Property Portfolios | |
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| Macrolevel Property Valuation: The Basic Idea | |
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| Macrolevel Valuation Based on Optimal Microlevel Valuations | |
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| Mass Appraisal: The Use of Modern Regression Analysis in Macrolevel Valuation | |
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| Chapter Summary | |
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| Macrolevel Valuation II: REITs | |
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| REIT Valuation in the Stock Market | |
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| REIT Analysis, Terminology, and Issues | |
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| Some Considerations of REIT Management Strategy | |
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| Fundamental Nature and Value of REITs: Two Models | |
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| Chapter Summary: Some REIT Investor Considerations | |
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| Data Challenges in Measuring Real Estate Periodic Returns | |
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| From Value Levels to Returns: The General Nature of Performance Measurement Errors | |
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| What Is Truth? Lags and the Time Line of Price Discovery in Real Estate | |
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| What Is to Be Done?: Dealing with Temporal Lag Bias in Appraisal-Based Returns | |
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| Chapter Summary | |
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| Introduction to Regression Analysis as a Solution of Simultaneous Equations | |
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| Repeated-Measures Regression (RMR) Procedure for Real Estate Return Index Estimation | |
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| Zero Autocorrelation Delagging Procedure: A Typical Application | |
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| Comparing Reverse-Engineered and Pure Transaction-Price-Based Versions of the NCREIF Appreciation Index | |
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| Real Estate Investment Management, Part I: The Institutional Landscape | |
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| Real Estate Investment Management | |
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| Salient Features of Real Estate Investment Management | |
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| Responsibilities and Functions of the Investment Manager | |
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| Private Real Estate Investment Products | |
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| Real Estate Investment Management Firms: Objectives and Strategic Considerations | |
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| Chapter Summary | |
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| Real Estate Investment Management, Part II: Performance Attribution and Evaluation | |
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| Macrolevel Investment Performance Attribution | |
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| Investment Performance Evaluation and Benchmarking | |
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| Chapter Summary | |
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| References and Additional Reading | |
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| Real Estate Development and Other Selected Topics | |
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| Real Options and Land Value | |
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| Call Options: Some Basic Background and Definitions | |
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| Real Options: The Call Option Model of Land Value | |
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| Simple Numerical Example of OVT Applied to Land Valuation and the Development Timing Decision | |
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| Samuelson-McKean Formula Applied to Land Value as a Development Option | |
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| Chapter Summary | |
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| Financial Analysis of Real Estate Development Projects | |
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| Overview of the Development Decision-Making Process | |
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| Basic Information: Enumerating Project Costs and Benefits | |
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| Construction Budget Mechanics | |
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| Simple Financial Feasibility Analysis in Current Practice | |
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| Applying the NPV Rule to Development Projects | |
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| Chapter Summary | |
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| Leases and Leasing Strategy | |
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| Commercial Property Lease Terminology and Typology | |
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| Lease Characteristics Affecting Value or Rent | |
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| Effective Rent | |
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| Broader Leasing Strategy Considerations: Term Length and the Space Market Term Structure of Rent | |
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| Other Leasing and Rent Issues | |
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| Chapter Summary | |
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| Valuing a Lease Renewal Option | |
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| Numerical Example of Landlord Lease Term Indifference Rent | |
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| Simple Model of Optimal Landlord Search for Tenants | |
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| References and Additional Reading | |
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| Real Estate Transaction Price Indices Based on Regression Analysis | |
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| Answers to Selected Study Questions | |
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| Index | |