scholarly journals Financial geography II: Financial geographies of housing and real estate

2018 ◽  
Vol 43 (2) ◽  
pp. 376-387 ◽  
Author(s):  
Manuel B. Aalbers
Keyword(s):  
Real Estate ◽  
Hedge Funds ◽  
Private Equity ◽  
Rental Housing ◽  
International Investment ◽  
Commercial Real Estate ◽  
Housing Associations ◽  
Residential Housing ◽  
Mortgage Securitization ◽  
Financial Geography

Geographers have started studying residential (housing) and commercial real estate (offices, retail, leisure) at the intersection of financial and urban geographies to understand how the built environment – chunky and spatially fixed – has been turned into a (quasi-)financial asset – ‘unitized’ and liquid – through a range of regulatory and socio-technical changes and constructions. The financialization of real estate is not limited to the rise in household debt, mortgage securitization and international investment in office markets, but increasingly also affects rental housing: private equity, hedge funds and REITs buy up large portfolios of social and private rented housing, while housing associations use derivatives and other financial instruments. This report surveys the most recent research on finance, real estate and housing.

The Trouble with Lenders: Subtleties in the Debt Financing of Commercial Real Estate

2016 ◽  
pp. 1-14
Author(s):  
Craig Furfine
Keyword(s):  
Real Estate ◽  
Interest Rates ◽  
Private Equity ◽  
Commercial Real Estate ◽  
Strategic Decision ◽  
Holistic View ◽  
Operating Income ◽  
Final Property ◽  
Retail Shopping ◽  
Management Issues

With interest rates near all-time lows in late 2015, Stanley Cirano knew it was an opportune time to consider the financing on his portfolio of commercial real estate. Cirano Properties was the general partner on three separate private equity investments of retail shopping centers in suburban Chicago. The first, Brookline Road Shopping Center, had been acquired in 2006 and had been managed through the financial crisis and real estate downturn. The property was performing well and Cirano wondered whether it made sense to refinance or sell. The second property, Columbus Festival Plaza, had been acquired in a 2010 bankruptcy auction. Although the property had needed a good amount of capital improvements, Cirano was proud of the growth in net operating income he had been able to generate. The final property, Deerwood Acres, had been developed by Cirano himself after acquiring the property in 2013 from the previous owner, who had been operating a go-cart track and drive-in theater on the land. Cirano expected great things from the property, though his lease-up had been slower than anticipated. Although the three properties had different levels of performance and presented different management issues, they all shared the fact that they were all significantly financed, in part, with debt. As the properties were acquired at different times, Cirano had simply selected what seemed like reasonable financing at the time. With his concern that interest rates would soon be rising, Cirano thought it made sense to take a holistic view of his portfolio, consider what debt options were available to him, and make a sound strategic decision on the financing of all his assets at the same time.

scholarly journals INVESTMENT STRATEGIES OF INSTITUTIONAL INVESTORS: SOVEREIGN WEALTH FUNDS VS ENDOWMENTS

2013 ◽  
pp. 117-126
Author(s):  
E. S. Biryukov
Keyword(s):  
Real Estate ◽  
Hedge Funds ◽  
Institutional Investors ◽  
Private Equity ◽  
Investment Strategy ◽  
High Yield ◽  
Income Volatility ◽  
Sovereign Wealth Funds ◽  
The World

The paper considers two main original approaches to investing the assets of institutional investors (the total amount of their assets in the world is about 100 trillion dollars) – the one of Norway's sovereign wealth fund Global and approach of Yale's endowment fund. Fund Global with assets of $ 716 billion dollars is the largest institutional investor in the world, its strategy is based on the assumption that markets are efficient and their long-term growth lies in the balance of investment in stocks , bonds, and , since more recent time - in real estate. Financiers of Yale in the 1990s revolutionized the approach to investment, firstly, by reducing the proportion of stocks and bonds in favor of private equity and real estate, and secondly , by shift from investments in the domestic market to foreign markets. Not all institutional investors are ready to follow these strategies because of the risk of negative returns in times of crises, but in the medium- and long-term, these approaches allow to beat inflation. For example, Yale's endowment has grown since 1985 to 2012 from 1.6 to 19 billion dollars, and high yield allows to transmit 1 billion dollars (!) to the budget of the university annually. Endowment funds are one of the key sources of revenues of leading American universities. Analysis of the investment policy of endowment funds and sovereign wealth funds shows that fundamental changes in the concept of investing began to occur since the late 1980s - early 1990s . Institutional investors of both these types ceased to focus on conservative instruments - bonds and deposits , and use other options: Global - stocks , Yale – private equity , hedge funds, real estate investments , etc. With the expand of the spectrum of instruments in which the funds are invested the income volatility increases either, and therefore the institutional investors should be both transparent and explain to the public the motives of investment strategy changes.

Expect the Unexpected: Risk Measurement and Management in Commercial Real Estate

2017 ◽  
pp. 1-16
Author(s):  
Craig Furfine
Keyword(s):  
Real Estate ◽  
Private Equity ◽  
Foreign Currency ◽  
Cash Flows ◽  
Commercial Real Estate ◽  
Risk Measurement ◽  
High Quality ◽  
Logistics Market ◽  
Overseas Investment ◽  
Future Condition

In early December 2013, Roxann Biller, Associate at the Chicago-based private equity firm Delta Quantitative Real Estate Capital, was asked to assess the risk associated with the firm's first potential overseas investment. Haifu Sentā Gendaino (HSG) was a large multi-tenant logistics property located in the Gaikando area of Tokyo. High-quality tenants currently occupied the property, so at first glance the risks of investing in the property seemed minimal. However, Biller knew that she had to consider the potential drawbacks. This would mean gaining a better understanding of each tenant, trying to forecast the future condition of the Tokyo logistics market, and considering what new risks her firm would face because the property's cash flows were in a foreign currency.

Overviewing the findings: the Technical Panel Review of the Pension Insurance Modeling System

2014 ◽  
Vol 14 (2) ◽  
pp. 115-124 ◽  
Author(s):  
OLIVIA S. MITCHELL
Keyword(s):  
Interest Rates ◽  
Hedge Funds ◽  
Value At Risk ◽  
Private Equity ◽  
Commercial Real Estate ◽  
Conditional Value At Risk ◽  
Pension Benefit ◽  
List Type ◽  
Defined Benefit ◽  
Pension Insurance

AbstractThe Pension Benefit Guaranty Corporation's (PBGC) Pension Insurance Modeling System (PIMS) is used to evaluate the financial security and resilience of the national program backstopping private defined benefit plans. The Pension Research Council of the Wharton School at the University of Pennsylvania recently convened a Technical Review Panel of experts to review key inputs, outputs, and model assumptions. Our review was intended to provide a formal evaluation of the technical adequacy of the model by outside experts. The papers herein summarize views of each expert on this project. Key findings are as follows: •The PIMS models are an important and valuable tool in modeling the Pension Benefit Guaranty Corporation's liability risk. To the best of our knowledge, there is no other model that can do a comparable job.•Nevertheless, some improvements could be integrated in the Agency's approach to modeling. Those deserving highest priority attention, in the experts’ view, include incorporating systematic mortality risk (i.e., treat mortality and longevity as stochastic variables); including new asset classes increasingly found in defined benefit plan portfolios (e.g., commercial real estate, private equity funds, infrastructure, hedge funds, and others); developing a more complex model for the term structure of interest rates; and incorporating an option value approach to pricing the insurance provided.•The Agency could also do more to communicate the range of uncertainty and potential for problems associated with the PBGC's financial status. This could include additional information including the conditional value-at-risk, and perhaps an ‘intermediate,’ ‘optimistic’, and ‘pessimistic’ set of projected outcomes, as well as the expected ‘date of exhaustion’ for assets backing pension benefits insured by the PBGC.

Asset-Level Risk and Return in Real Estate Investments

2020 ◽  
Author(s):  
Jacob S Sagi
Keyword(s):  
Real Estate ◽  
Private Equity ◽  
Structural Model ◽  
Commercial Real Estate ◽  
Liquid Asset ◽  
Equilibrium Search ◽  
Asset Pricing Model ◽  
Holding Period ◽  
Real Estate Investments ◽  
Illiquid Asset

Abstract In stark contrast with liquid asset returns, commercial real estate idiosyncratic return means and variances do not scale with the holding period, even after accounting for all cash flow-relevant events. This puzzling phenomenon survives controlling for vintage effects, systematic risk heterogeneity, and a host of other explanations. To explain the findings, I derive an equilibrium search-based asset-pricing model that, when calibrated, provides an excellent fit to transactions data. A structural model of transaction risk seems crucial to understanding real estate price dynamics. These insights extend to other highly illiquid asset classes, such as private equity and residential real estate.

scholarly journals Private-equity commercial real estate, timberland, and farmland: market integration and information transition dynamics

2020 ◽  
Vol 50 (11) ◽  
pp. 1101-1112
Author(s):  
Bin Mei ◽  
Wenbo Wu ◽  
Wenjing Yao
Keyword(s):  
Real Estate ◽  
Market Integration ◽  
Private Equity ◽  
Real Estate Market ◽  
Commercial Real Estate ◽  
National Council ◽  
Transition Dynamics ◽  
Vector Error Correction ◽  
Market Fundamentals ◽  
Using Data

Using data from the National Council of Real Estate Investment Fiduciaries (NCREIF), we examine market integration of commercial real estate and timberland–farmland assets via the Fama–MacBeth two-step approach under the intertemporal capital asset pricing framework. In addition, we study the information transition dynamics between those markets via the vector error correction model (VECM). We find evidence of market segregation and one-way information flow from the timberland–farmland market to the commercial real estate market. We conclude that commercial real estate and timberland–farmland assets are driven by different market fundamentals and that lagged timberland–farmland returns can help predict current commercial real estate returns. The only exception is during market downturns when commercial real estate and timberland–farmland markets are somewhat integrated and driven by some factors that are not specified in this study.

The new waves of financialisation: vultures and REITs

Housing Shock ◽  
2020 ◽  
pp. 131-146
Author(s):  
Rory Hearne
Keyword(s):  
Real Estate ◽  
Asset Management ◽  
Hedge Funds ◽  
Private Equity ◽  
Large Scale ◽  
Residential Property ◽  
Third Wave ◽  
Real Economy ◽  
Equity Funds ◽  
Domestic Banks

This chapter describes and details the wave of global real estate and vulture investment in distressed assets and loans, as the second wave of financialisation of residential property (housing), following the first wave of financial market and equity involvement in mortgage lending and securitisation from the late 1990s to 2008. It then defines and details a third wave of financialisation is evident in the post-2010 period as global institutional investors have increasingly invested in the private rental ‘build-to-rent’ sector. This third wave is a further development in the restructuring of the finance–real estate relationship through the increased role of large-scale corporate finance and global private equity funds (pension funds, hedge funds, wealth funds, shell funds, private equity) in the provision of rental residential property. It shows how housing and land is providing another important vehicle for investing the global ‘wall of money’ searching for higher returns in a context of reduced profitability and rising risk in the wider ‘real’ economy. It details how the Irish state’s strategy to overcome the global property and financial crash of 2008 and achieve the recovery of financial institutions and the wider economy was based on the sale of ‘toxic’ and ‘non-performing’ loans and associated land and property, at a considerable discount, to international ‘vulture funds’ and property investors via the National Asset Management Agency (NAMA) and domestic banks. The strategy was based on a deepening of the financialisation of the Irish housing (and wider property) system.

Will Private Equity and Hedge Funds Replace Real Estate in Mixed-Asset Portfolios?

2007 ◽  
Vol 33 (5) ◽  
pp. 74-84 ◽  
Author(s):  
Shaun A. Bond ◽  
Soosung Hwang ◽  
Paul Mitchell ◽  
Stephen E. Satchell
Keyword(s):  
Real Estate ◽  
Hedge Funds ◽  
Private Equity

Wildcat Capital Investors: Real Estate Private Equity

2017 ◽  
pp. 1-12
Author(s):  
Craig Furfine
Keyword(s):  
Real Estate ◽  
Cash Flow ◽  
Private Equity ◽  
Financial Models ◽  
Cash Flows ◽  
Commercial Real Estate ◽  
Office Building ◽  
Equity Structure ◽  
Financial Model ◽  
Real Estate Investments

Wildcat Capital Investors is a small real estate private equity company. Its MBA intern, Jessica Zaski, is asked to develop a financial model for the purchase of Financial Commons, a 90,000 square foot office building in suburban Chicago. By simple metrics, the property seems to be a good value, but with credit conditions tight, Jessica must consider whether outside investors would be comfortable with the risks of investing in the midst of a severe commercial real estate downturn. Wildcat is designed to give students exposure to both the quantitative and qualitative aspects of investing in commercial real estate through a private equity structure. Beyond the numbers, the case allows for a discussion of the process of finding suitable real estate investments. The importance of the simultaneous negotiations that Wildcat must have with the seller, the lender, and the outside investor can be emphasized.By working through the financial models, students will take a given set of assumptions and analyze the cash flows expected to be received by the equity partners of Financial Commons. With a given deal structure, the students can then model the cash flow to both outside equity investors and Wildcat, learning the mechanics of private equity. The model will allow students to investigate how the variations in the underlying assumptions affect returns to the property and to the investors.

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