Global Property Investment

Developments in the sophistication of global real estate markets mean that global real estate investment is now being executed professionally. Thanks to academic enquiry, professional analysis and entrepreneurial activity, backed by the globalisation of all investment activity, there is now an available body of material which forms the basis of this scholarly but practical summary of the new state of this art. The measurement, benchmarking, forecasting and quantitative management techniques applied to property investments are now compatible with those used in other asset classes, and advances in property research have at last put the ongoing debate about the role of real estate onto a footing of solid evidence. The truly global scope and authorship of this book is unique, and both authors here are singularly well qualified to summarise the impact and likely future of global innovations in property research and fund management. Between them, they have experienced three real estate crashes, and have observed at first hand the creation of the real estate debt and equity instruments that led to the global crisis of 2008-9. Global Property Investment: strategies, structure, decisions offers a unique perspective of the international real estate investment industry with: a close focus on solutions to real life investment problems no excessive theoretical padding a target of both students and professionals highly qualified dual-nationality authorship With many cases, problems and solutions presented throughout the book, and a companion website used for deeper analysis and slides presentations (see below), this is a key text for higher-level real estate students on BSc, MSc, MPhil and MBA courses worldwide as well as for practising property professionals worldwide in fund management, investment and asset management, banking and real estate advisory firms.

Autorentext
Andrew Baum was appointed Professor of Land Management at the University of Reading, UK in 1989. He is now Professor of Real Estate Investment at the University of Cambridge and a Fellow of St John's College, Cambridge. He is former Head of Research, Prudential; CIO Property and Head, International Property, Henderson Global Investors, and has chaired the investment committee for the CBRE Global Investors Multi-Manager business since 2008. David Hartzell is Steven D. Bell and Leonard W. Wood Distinguished Professor in Real Estate and Professor of Finance at the Kenan-Flagler Business School, University of North Carolina, USA. He is a former vice president at Salomon Brothers Inc. in New York and is now a board member with Highwoods Properties, a REIT.

Inhalt
Preface x Acknowledgements xv

PART ONE REAL ESTATE AS AN INVESTMENT: AN INTRODUCTION 1

Chapter 1 Real estate the global asset 3

1.1 The global property investment universe 3

1.2 Market players 6

1.3 Property its character as an asset class 11

1.4 Conclusions 28

Chapter 2 Global property markets and real estate cycles 32

2.1 Introduction 32

2.2 The United States 34

2.3 The UK property market a performance history 67

2.4 Continental Europe 80

2.5 Asia 83

2.6 Conclusions 91

Chapter 3 Market fundamentals and rent 94

3.1 Introduction: the global property cycle 94

3.2 The economics of rent 95

3.3 Forecasting rents 109

3.4 Conclusions 116

Chapter 4 Asset pricing, portfolio theory and real estate 117

4.1 Risk, return and portfolio theory 117

4.2 A property appraisal model 124

4.3 The model components 132

4.4 The required return for property assets 140

4.5 Forecasting real estate returns 142

4.6 Conclusions: a simple way to think about real estate returns 151

PART TWO MAKING INVESTMENT DECISIONS AT THE PROPERTY LEVEL 155

Chapter 5 Basic valuation and investment analysis 157

5.1 Introduction 157

5.2 Estimating future cash flows 161

5.3 The discount rate 166

5.4 Conclusions 170

Chapter 6 Leasing 171

6.1 Introduction 171

6.2 Legal characteristics of leases 173

6.3 The leasing process 174

6.4 Important economic elements of a lease 174

6.5 Lease economics and effective rent 192

6.6 Conclusions 199

Chapter 7 Valuing commercial real estate: the unleveraged case 203

7.1 Introduction: the investment opportunity 203

7.2 Developing a pro-forma income statement 206

7.3 Valuation using the cap rate 210

7.4 Valuation using cash flows 212

7.5 Applying discounted cash flow to analyze investment feasibility 219

7.6 Conclusions 221

Chapter 8 Mortgages: an introduction 222

8.1 Introduction 222

8.2 What is a mortgage? 223

8.3 The risks and returns of mortgage investment 225

8.4 The fi nancial components of a mortgage 226

8.5 The mortgage menu 229

8.6 An introduction to mortgage mathematics 231

8.7 Conclusions 247

Chapter 9 Commercial mortgage underwriting and leveraged feasibility analysis 248

9.1 Introduction 248

9.2 The mortgage underwriting process 248

9.3 Investment feasibility with leverage: before-tax analysis 256

9.4 Investment feasibility with leverage: after-tax analysis 263

9.5 Global variations in real estate debt 270

9.6 Conclusions 272

Chapter 10 Valuing the private real estate entity 274

10.1 Introduction: the four quadrants and private equity 274

10.2 Sponsor economics 276

10.3 The life cycle of a private equity fund 277

10.4 Fund economics 279

10.5 Waterfall structures 282

10.6 Private equity structures in the credit crisis 289

10.7 Conclusions 291

PART THREE REAL ESTATE INVESTMENT STRUCTURES 293

Chapter 11 Unlisted real estate funds 295

11.1 Introduction to unlisted real estate funds 295

11.2 The growth of the unlisted real estate fund market 299

11.3 Unlisted fund structures 303

11.4 Characteristics of unlisted real estate funds 307

11.5 Liquidity and valuation issues 310

11.6 The case for and against unlisted real estate funds 312

11.7 Conclusions 317

Chapter 12 Public equity real estate 319 12.1 Introduction ...