Rising construction costs mean real estate developers are relying on complex—and potentially costly—finance structures more often. Smarter modeling will help keep borrowing costs low.
Where are we now in the commercial real estate cycle? We analyze current market dynamics, risks, yield expectations, and trends to determine potential well-positioned commercial real estate investments in 2020.
Waterfalls are an integral part of real estate investment terms, dictating the hierarchy of how cash is distributed to investors and the transaction’s sponsors. When structured correctly—with aligned incentives—they ensure that the deal is set up to achieve outsize success.
Traditional approaches to valuing real estate can lean towards the qualitative side, relying more on intuition over sound rationale. Linear regression analysis, however, can offer a robust model for using past transactions in an area, to provide better guidance on property valuations.
Daniel Barr, CFA, CAIA
The extent of investing in real estate for most individuals is in the bricks and mortar of their own house. For braver investors, there are a range of other options, the most notable being private real estate offerings. Similar to PE and VC funds, these structures can allow for tailored investments in skilled management teams undertaking complex projects.
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