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Commercial Real Estate Analysis and Investments

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ISBN-10: 0324136765

ISBN-13: 9780324136760

Edition: 2001

Authors: David M. Geltner, Norman G. Miller

List price: $222.95
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Commercial Real Estate Analysis and Investments presents the essential concepts, principles, and tools for the analysis of commercial real estate (income producing) from an investment perspective. The book integrates relevant aspects of urban and financial economics to provide learners with a fundamental analytical understanding of real estate investments. In addition, it bridges the gap between mainstream finance and the cutting edge of professional real estate practice, in order to address the implications of their key difference.
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Book details

List price: $222.95
Copyright year: 2001
Publisher: Cengage South-Western
Publication date: 9/1/2000
Binding: Hardcover
Pages: 720
Size: 8.00" wide x 10.25" long x 1.75" tall
Weight: 4.048
Language: English

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