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Real Estate Investment and Finance: Strategies, Structures, Decisions 2nd edition [Hardback]

(University of Reading), (University of North Carolina)
  • Formāts: Hardback, 592 pages, height x width x depth: 252x178x41 mm, weight: 885 g
  • Sērija : Wiley Finance
  • Izdošanas datums: 26-Nov-2020
  • Izdevniecība: John Wiley & Sons Inc
  • ISBN-10: 1119526094
  • ISBN-13: 9781119526094
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Real Estate Investment and Finance: Strategies, Structures, Decisions 2nd editionPalielināt
  • Formāts: Hardback, 592 pages, height x width x depth: 252x178x41 mm, weight: 885 g
  • Sērija : Wiley Finance
  • Izdošanas datums: 26-Nov-2020
  • Izdevniecība: John Wiley & Sons Inc
  • ISBN-10: 1119526094
  • ISBN-13: 9781119526094
Citas grāmatas par šo tēmu:
Permanent link: https://www.kriso.lv/db/9781119526094.html
Keywords:
"By 2016 global real estate markets have generally recovered as real estate asset prices have increased beyond pre-crisis levels. Whereas debt and equity capital was scarce at the time we wrote the first edition, capital is now abundant. In addition, many institutions who had completely exited the real estate markets in the downturn now realize that they were out of the market when they should have been acquiring property at distressed prices"--

The fully revised and updated version of the leading textbook on real estate investment, emphasising real estate cycles and the availability and flow of global capital

Real Estate Investment remains the most influential textbook on the subject, used in top-tier colleges and universities worldwide. Its unique, practical perspective on international real estate investment focusses on real-world techniques which measure, benchmark, forecast and manage property investments as an asset class. The text examines global property markets and real estate cycles, outlines market fundamentals and explains asset pricing and portfolio theory in the context of real estate. 

In the years since the text’s first publication, conditions in global real estate markets have changed considerably following the financial crisis of 2008-2009. Real estate asset prices have increased past pre-crisis levels, signalling a general market recovery. Previously scarce debt and equity capital is now abundant, while many institutions once averse to acquiring property are re-entering the markets. The latest edition – extensively revised and updated to address current market trends and practices as well as reflect feedback from instructors and students – features new content on real estate development, improved practical examples, expanded case studies and more. This seminal textbook:

  • Emphasises practical solutions to real investing problems rather than complex theory
  • Offers substantial new and revised content throughout the text
  • Covers topics such as valuation, leasing, mortgages, real estate funds, underwriting and private and public equity real estate
  • Features up-to-date sections on performance measurement, real estate debt markets and building and managing real estate portfolios
  • Includes access to a re-designed companion website containing numerous problems and solutions, presentation slides and additional instructor and student resources

Written by internationally-recognised experts in capital management and institutional property investing strategies, Real Estate Investment, Second Edition: Strategies, Structures, Decisions is an indispensable textbook for instructors and students of real estate fund management, investment management and investment banking, as well as a valuable reference text for analysts, researchers, investment managers, investment bankers and asset managers.

Acknowledgements xxi
About the Authors xxiii
Preface xxv
PART ONE Real Estate as an Investment: An Introduction
Chapter 1 Real Estate - The Global Asset
3(30)
1.1 The Global Property Investment Universe
3(3)
1.2 Market Players
6(5)
1.2.1 Investors
6(3)
1.2.2 Fund Managers
9(1)
1.2.3 Advisors
9(2)
1.3 Property - Its Character as an Asset Class
11(17)
3.3.1 Property Depreciates
12(1)
1.3.2 Lease Contracts Control Cash Flows
13(1)
1.3.3 The Supply Side is Inelastic
13(1)
1.3.4 Valuations Influence Performance
14(1)
1.3.5 Property is Not Liquid
15(1)
1.3.6 Large Lot Sizes Produce Specific Risk
16(2)
1.3.7 Leverage is Commonly Used in Real Estate Investment
18(1)
1.3.8 Property Appears to be an Inflation Hedge
19(2)
1.3.9 Property is a Medium-Risk Asset
21(1)
1.3.10 Real Estate Cycles Control Returns
22(2)
1.3.11 Property Appears to be a Diversifying Asset
24(3)
Specific Risk
27(1)
Leverage
27(1)
Illiquidity
28(1)
Taxes, Currency, and Fees
28(1)
1.4 Conclusion
28(5)
Chapter 2 Global Property Markets and Real Estate Cycles, 1950-2020
33(50)
2.1 Introduction and Background
33(1)
2.1.1 The Property Cycle
33(1)
2.2 A Performance History
34(38)
2.2.1 Before 1970: Real Estate Becomes a Medium-Return Asset
34(2)
2.2.2 The 1970s: Inflation, Boom, and Bust
36(1)
The USA
36(1)
The UK
37(1)
2.2.3 The 1980s: New Investors Flood the Real Estate Capital Market
38(1)
The USA
38(4)
The UK
42(1)
2.2.4 The 1990s: The Rise of REITs
43(1)
The USA
43(2)
The UK: Deep Recession, Low Inflation, and Globalization
45(2)
2.2.5 2002-7: A Rising Tide Lip All Boats
47(1)
The USA
47(12)
The UK
59(1)
2.2.6 The Global Real Estate Credit Crisis Hits
60(1)
The USA
60(7)
The UK
67(3)
2.2.7 The Markets Recover Post-crisis
70(2)
2.3 The Global Market
72(8)
2.3.1 The European Market Develops
72(3)
2.3.2 Asia Emerges
75(5)
2.4 Real Estate Cycles: Conclusion
80(3)
Lesson 1 Too Much Lending to Property is Dangerous
80(1)
Lesson 2 Yields are Mean-Reverting - Unless Real Risk-Free Rates Change
81(1)
Lesson 3 Look at Yields on Index-Linked
81(2)
Chapter 3 Market Fundamentals and Rent
83(26)
3.1 Introduction: The Global Property Cycle and Rent
83(1)
3.2 The Economics of Rent
84(17)
3.2.1 Rent and Operational Profits
84(2)
3.2.2 Theories of Rent
86(1)
Ricardo
86(1)
Von Thiinen
87(2)
Fisher
89(1)
3.2.3 Rent as the Price of Space
90(1)
3.2.4 Supply
91(2)
3.2.5 Demand
93(1)
The Cyclical Demand for Space
93(1)
The Structural Demand for Space
94(1)
Variations in Locational Demand by Use
95(2)
3.2.6 The Relationship Between Rental Value and Rental Income
97(2)
3.2.7 The Impact of Currency Movements on Rent
99(1)
3.2.8 Property Rents and Inflation
99(2)
3.3 Forecasting Rents
101(6)
3.3.1 Forecasting National Rents
101(1)
Model Types
101(1)
Price
102(1)
Demand
102(1)
Supply
102(2)
Building the Model
104(1)
An Historical Model
104(1)
A Forecasting Model
105(1)
3.3.2 Forecasting at the Local Level
105(1)
Conceptual and Modelling Problems
106(1)
Data Issues
106(1)
3.4 Conclusion
107(2)
Chapter 4 Asset Pricing, Portfolio Theory, and Real Estate
109(36)
4.1 Risk, Return, and Portfolio Theory
109(6)
4.1.1 Introduction
109(1)
4.1.2 Risk and Return
110(1)
4.1.3 Portfolio Theory
111(1)
The Efficient Frontier
111(1)
4.1.4 Risk and Competitors
112(1)
4.1.5 Risk and Liabilities
113(1)
4.1.6 Property Portfolio Management in Practice
113(1)
The Investment Strategy
114(1)
4.2 A Property Appraisal Model
115(8)
4.2.1 Introduction: The Excess Return
115(1)
4.2.2 The Cap Rate or Initial Yield - A Simple Price Indicator
116(1)
UK Terminology
116(1)
US Terminology
117(1)
How are Cap Rates Estimated in Practice?
118(1)
Cap Rates are the Inverse of Price/Earnings Ratios
118(1)
What Drives the Cap Rate?
119(2)
4.2.3 The Fisher Equation
121(1)
4.2.4 A Simple Cash Flow Model
121(1)
4.2.5 Gordon's Growth Model (Constant Income Growth)
122(1)
4.2.6 A Property Valuation Model Including Depreciation
122(1)
4.3 The Model Components
123(7)
4.3.1 The Risk-Free Rate
123(1)
4.3.2 The Risk Premium
124(1)
What is Risk?
124(1)
The Capital Asset Pricing Model
125(2)
4.3.3 Inflation
127(1)
4.3.4 Real Rental Growth
128(1)
4.3.5 Depreciation
128(1)
4.3.6 `Correct' Yields
129(1)
4.3.7 An Analysis in Real Terms
129(1)
4.4 The Required Return for Property Assets
130(5)
4.4.1 The Sector Premium
130(1)
4.4.2 The City Premium
131(1)
4.4.3 The Property Premium
131(1)
4.4.4 Example
131(1)
Tenant
131(1)
Tenure
132(1)
Leases
132(1)
Building
132(1)
Location
132(3)
4.5 Forecasting Real Estate Returns
135(6)
4.5.1 The Origin and Uses of Property Forecasts
135(1)
4.5.2 Forecasting Cap Rates
136(2)
4.5.3 Forecasting Property Cash Flows
138(1)
4.5.4 The Portfolio Model
138(1)
4.5.5 Example
139(2)
4.5.6 Fair Value Analysis
141(1)
4.6 Conclusion: A Simple Way to Think About Real Estate Returns
141(4)
PART TWO Making Investment Decisions at the Property Level
Chapter 5 Basic Valuation and Investment Analysis
145(14)
5.1 Introduction
145(3)
5.1.1 Cash Flow
146(1)
5.1.2 Risk and the Discount Rate
147(1)
5.1.3 Determining Price
147(1)
5.1.4 Determining Return
148(1)
5.2 Estimating Future Cash Flows
148(5)
5.2.1 Introduction
148(1)
5.2.2 Holding Period
149(1)
5.2.3 Lease Rent
149(1)
5.2.4 Resale Price
149(1)
Estimated Rental Value at Resale
150(1)
Going-Out Capitalisation Rate
150(1)
5.2.5 Depreciation
150(2)
5.2.6 Expenses
152(1)
Fees
152(1)
Taxes
152(1)
Debt Finance (Interest)
153(1)
5.3 The Discount Rate
153(3)
5.4 Conclusion
156(3)
Chapter 6 Leasing
159(28)
6.1 Introduction
159(1)
6.2 Legal Characteristics of Leases
160(1)
6.3 The Leasing Process
161(1)
6.4 Important Economic Elements of a Lease
161(16)
6.4.1 The Term of the Lease
162(1)
6.4.2 Base Rent and Rent Escalation Provisions
162(1)
6.4.3 Options
163(1)
Renewal Options
163(1)
Expansion, Contraction, and Termination Options
163(1)
6.4.4 Measurement of Space
164(1)
6.4.5 Expense Treatment
165(1)
Gross Lease
165(3)
Triple Net Lease
168(2)
6.4.6 Concessions: Tenant Improvement Allowance and Rental Abatement
170(1)
Tenant Improvement Allowance or Tenant Upfit/Fitout
170(1)
Rental Abatement (Rent-Free Periods)
171(1)
6.4.7 Brokerage Commissions
172(2)
6.4.8 Other Key Elements of a Lease
174(1)
6.4.9 Leasing Differences Across Property Types
175(2)
6.5 Lease Economics and Effective Rent
177(6)
6.5.1 Comparing Leases with Different Expense Treatment
177(1)
The Landlord's Perspective
177(1)
The Tenant's Perspective
178(1)
6.5.2 Comparing Leases with Different Concession Allowances
179(1)
Landlord's Perspective
180(1)
Tenant's Perspective
181(2)
6.6 Conclusions
183(4)
Appendix: Modeling Lease Flexibility In The Uk
183(2)
Example
185(1)
Assumptions
185(1)
Result
185(1)
Explanation
186(1)
Chapter 7 Techniques for Valuing Commercial Real Estate and Determining Feasibility: The Unleveraged Case
187(18)
7.1 Introduction
187(1)
7.2 Background on the Investment Opportunity
188(2)
7.2.1 Project Details
188(1)
7.2.2 Where Do You Find Information About Income and Expenses?
189(1)
7.3 Developing a Pro Forma Income Statement
190(3)
7.3.1 Calculating Total Revenues
191(1)
7.3.2 Estimating Vacancy Loss
191(1)
7.3.3 Estimating Operating Expenses
192(1)
7.3.4 Calculating Net Operating Income
193(1)
7.4 Valuation Using Net Operating Income: Single-Year Cash Flow
193(4)
7.4.1 An Aside on Capitalization Rates
194(1)
Estimating the Market Cap Rate
194(1)
Cap Rates are the Inverse of Price/Earnings Ratios
195(1)
Using Cap Rates to Value the Apartment Project
195(1)
Calculating the Implied Cap Rate for the Apartment Investment Opportunity
196(1)
7.5 Investment Analysis Using Operating Income: Multiple-Year Cash Flows
197(3)
7.5.1 Operating Cash Flows from Leasing
197(1)
7.5.2 Cash Flows from Disposition
198(2)
7.6 Applying Discounted Cash Flow to Analyze Investment Feasibility
200(2)
7.6.1 Determining Feasibility
200(1)
7.6.2 Equity Multiple
200(1)
7.6.3 Partitioning the Internal Rate of Return
201(1)
7.6.4 Calculating the Maximum Price to Pay
202(1)
7.7 Sensitivity Analysis
202(1)
7.8 Conclusion
203(2)
Chapter 8 Mortgages: An Introduction
205(24)
8.1 Introduction
205(1)
8.2 What is a Mortgage?
206(1)
8.2.1 Promissory Note
206(1)
8.2.2 Mortgage Instrument
206(1)
8.3 The Risks and Returns of Mortgage Investment
207(1)
8.4 The Financial Components of a Mortgage
208(2)
8.4.1 The Bond Component
208(1)
8.4.2 The Call Option Component
208(1)
8.4.3 The Put Option Component
209(1)
8.5 The Mortgage Menu
210(2)
8.5.1 Fixed or Floating-Rate Loans
210(1)
8.5.2 Fully or Partially Amortizing Loans
211(1)
8.6 An Introduction to Mortgage Math
212(8)
8.6.1 Calculating the Monthly Payment
212(1)
8.6.2 The Mortgage Loan Constant
213(1)
8.6.3 The Amortization Schedule
213(4)
8.6.4 Converting from the Contract Rate to the Compounded Rate
217(1)
8.6.5 Determining the Cost of Borrowing
217(1)
Borrowing Cost without Up-front Fees
217(2)
Borrowing Costs when the Lender Charges Fees
219(1)
Borrowing Costs when the Loan is Prepaid Prior to Maturity
220(1)
8.7 Calculating Prepayment Penalties
220(8)
8.7.1 Lockout Periods
221(1)
8.7.2 Step-down Prepayment Penalties
221(1)
8.7.3 Yield Maintenance Penalties and Yield Calculations
222(3)
8.7.4 Treasury Fiat Prepayment Penalty
225(3)
8.7.5 Defeasance
228(1)
8.8 Conclusion
228(1)
Chapter 9 Commercial Mortgage Underwriting and Leveraged Feasibility Analysis
229(18)
9.1 Introduction
229(1)
9.2 Mortgage Underwriting and the Underwriting Process
229(9)
9.2.1 Ratios and Rules of Thumb
230(1)
Loan-to-Value Ratio
230(1)
Debt Coverage Ratio
230(2)
Debt Yield
232(1)
9.2.2 Determining the Maximum Loan Amount
232(4)
Operating Expense Ratio
236(1)
Breakeven Ratio
236(1)
Debt Yield
237(1)
9.3 Investment Feasibility with Leverage: Before-Tax Analysis
238(6)
9.3.1 The Two-Part Nature of Cash Flows: Operating Income and Disposition Income
238(1)
9.3.2 Financing Impact on Investor Income Statements: Adding Debt Service Cash Flows
238(1)
Income from Disposition
239(1)
9.3.3 Determining Investment Feasibility: The Leveraged Before-Tax Case
240(1)
Static or Single-Year Measures of Investment Performance
240(2)
Determining Investment Feasibility Using Multiple Year Cash Flows
242(1)
Equity Multiple
242(1)
Partitioning the IRR and NPV
242(1)
Determining the Maximum Price to Pay with Leverage
243(1)
9.4 Sensitivity Analysis
244(1)
9.5 Conclusion
245(2)
Chapter 10 Real Estate Development
247(30)
10.1 Introduction
247(1)
10.2 The Development Process
248(2)
10.3 Preliminary Analysis of "The Station" Development
250(7)
10.3.1 "Back-of-the-Envelope" Analysis
250(1)
Estimating Construction Costs
251(1)
Estimating Market Value
251(2)
10.3.2 Adding Construction Financing
253(1)
10.3.3 Sensitivity Analysis
254(3)
10.4 Formal Analysis of Development of "The Station"
257(1)
10.5 Budget for "The Station" Office Project
258(1)
10.6 Financing Development
259(6)
10.6.1 Stage One: Pre-construction
260(1)
10.6.2 Stage Two: Construction
260(1)
Construction Loan Calculations
260(3)
10.6.3 Stage Three: Lease-Up
263(1)
10.6.4 Stage Four: Operations
264(1)
Lender Yield Calculation for the Construction Loan
264(1)
10.7 Developer Profit and Return
265(1)
10.8 Comparison to "Back-of-the-Envelope" Analysis
266(1)
10.9 A London Office Development Through the Cycle
267(7)
10.10 Conclusion
274(3)
PART THREE Real Estate Investment Structures
Chapter 11 Unlisted Real Estate Funds
277(24)
11.1 Introduction to Unlisted Real Estate Funds
277(3)
11.1.1 The US Market
278(1)
11.1.2 The Global Market
278(2)
11.2 The Growth of the Unlisted Real Estate Fund Market
280(4)
11.2.1 The Global Unlisted Property Market Universe
281(2)
11.2.2 How Much Global Real Estate is in Unlisted Funds?
283(1)
11.3 Unlisted Fund Structures
284(4)
11.3.1 Open-Ended Funds
285(1)
11.3.2 Closed-Ended Funds
286(1)
11.3.3 Funds of Funds
287(1)
11.4 Characteristics of Unlisted Real Estate Funds
288(3)
11.4.1 Style
288(1)
11.4.2 Investment Restrictions
289(1)
11.4.3 Property Sector and Geographic Focus
290(1)
11.5 Liquidity and Valuation Issues
291(3)
11.5.1 Liquidity
291(3)
11.5.2 Valuation
294(1)
11.6 The Case for and Against Unlisted Real Estate Funds
294(6)
11.6.1 The Case for Unlisted Real Estate Funds
294(1)
Unlisted Real Estate Funds can Diversify Real Estate-Specific Risk
294(1)
Unlisted Funds are Priced by Reference to NAV
294(1)
Unlisted Funds Provide Access to Specialist Managers
295(1)
11.6.2 The Case Against Unlisted Real Estate Funds
295(1)
The Drawdown Profile
295(1)
Gearing and the J-curve Effect
296(1)
Fees and Performance Persistence
297(1)
Do Trading Prices Track NAV?
297(3)
11.7 Conclusion
300(1)
Chapter 12 Real Estate Private Equity: Fund Structure and Cash Flow Distribution
301(22)
12.1 Introduction: The Four Quadrants and Private Equity
301(2)
12.2 Private Equity Fund Background
303(1)
12.3 The Lifecycle of a Private Equity Fund
304(3)
12.3.1 Initial Fundraising
304(1)
12.3.2 Acquisition Stage
305(1)
12.3.3 Asset Management
306(1)
12.3.4 Portfolio Management
306(1)
12.3.5 End of Fund Life
307(1)
12.4 Fund Economics
307(3)
12.4.1 Management Fees
307(1)
12.4.2 Limited Partner Distributions
307(1)
Return of Initial Capital
308(1)
Preferred Return
308(1)
Carried Interest
308(1)
Promoted Interest
309(1)
12.5 Waterfall Structures
310(9)
12.5.1 Introduction
310(1)
12.5.2 Pro-rata Investment and Distribution
311(1)
12.5.3 All Equity Provided by Limited Partner, 80%/20% Carried Interest
311(1)
12.5.4 Adding a Preferred Return
312(2)
12.5.5 Return of Capital, Simple Interest Preferred Return, Carried Interest
314(2)
Adding Management Fees
316(1)
12.5.6 Return of Capital, Compounded Interest Preferred Return, Carried Interest
317(2)
12.6 Private Equity Structures in the Credit Crisis
319(2)
12.7 Conclusion
321(2)
Chapter 13 Listed Equity Real Estate
323(22)
13.1 Introduction
323(1)
13.2 REITs and REOCS
324(1)
13.3 Listed Funds and Mutual Funds
324(1)
13.4 Exchange-Traded Funds
325(1)
13.5 The US REIT Experience
325(10)
13.5.1 Introduction
325(1)
13.5.2 Distributions
326(1)
13.5.3 Measuring REIT Net Income
327(1)
Defining Net Income
327(2)
Funds from Operations
329(3)
13.5.4 Performance
332(3)
Summary
335(1)
13.6 The Global Market
335(4)
13.6.1 The Global Property Company Universe
335(1)
13.6.2 The Global REIT Universe
335(3)
13.6.3 The UKREIT
338(1)
13.7 REIT Pricing
339(4)
13.7.1 Using Earnings to Value REITs
339(1)
13.7.2 Market Capitalization and Net Asset Value
340(1)
13.7.3 Premium or Discount to NAV?
340(1)
Instant Exposure
341(1)
Liquidity/Divisibility
342(1)
Asset Values are Higher than the Reported NAV
342(1)
Projected Asset Values are Expected to Exceed the Reported NAV
342(1)
Management Skills
342(1)
Tax
343(1)
Debt
343(1)
13.8 Conclusion
343(2)
Chapter 14 Real Estate Debt Markets
345(42)
14.1 Introduction
345(2)
14.2 A Brief History Lesson
347(2)
14.2.1 Banking in the 1960s and 1970s
347(2)
14.2.2 The Volcker Era of High and Volatile Interest Rates
349(1)
14.3 Wall Street Act I: The Early Residential Mortgage-Backed Securities Market
349(5)
14.3.1 The Securitization Process Explained 3
50(303)
14.3.2 Lender Profitability from Securitization
353(1)
14.4 Wall Street Act II: Senior-Subordinated Securities, the Advent of Structured Finance
354(5)
14.4.1 The Coast Federal Savings and Loan Deal
354(4)
14.4.2 Risk and Return Characteristics of the Senior-Subordinated Structures
358(1)
14.5 Wall Street Act HI: The Evolution of Structured Finance
359(4)
14.5.1 An Updated Look at the Senior-Subordinated Security
359(3)
14.5.2 Who Profits from these Transactions?
362(1)
14.6 Collateralized Debt Obligations
363(2)
14.7 Mezzanine Debt
365(3)
14.7.1 Mezzanine: The Background
365(1)
14.7.2 Mezzanine Structures
366(2)
14.7.3 AUKExample
368(1)
14.8 Whole Loans and Synthetic Mezzanine
368(1)
14.9 Income Strips
369(2)
14.10 Cash-out Refinancing
371(2)
14.11 All Good Things Must Come to an End
373(8)
14.11.1 The Cash-out Refinancing Example Extended
374(7)
14.12 Post-crisis Recovery
381(2)
14.12.1 A Final Update to the Cash-out Refinancing Example
382(1)
14.13 Conclusion
383(4)
PART FOUR Creating a Property Investment Portfolio
Chapter 15 Building the Portfolio
387(24)
15.1 The Top-Down Portfolio Construction Process
387(7)
15.1.1 Introduction
387(3)
15.1.2 Risk and Return Objectives
390(2)
The Relative Return Target
392(1)
The Absolute Return Target
393(1)
15.1.3 Benchmarks
394(1)
15.2 Strengths, Weaknesses, Constraints: Portfolio Analysis
394(3)
15.2.1 Current Portfolio Structure
394(1)
15.2.2 Strengths, Weaknesses, Constraints
395(1)
15.2.3 Structure and Stock Selection
395(2)
15.3 Portfolio Construction
397(12)
15.3.1 Top-Down or Bottom-Up?
397(1)
15.3.2 Mixing Listed and Unlisted Real Estate
398(2)
15.3.3 Can Real Estate Investors Build Efficient Portfolios?
400(3)
15.3.4 Possible Approaches
403(1)
Case 1 Large US Endowment Fund
403(3)
Case 2 UK Family Office
406(3)
15.4 Conclusion
409(2)
Chapter 16 International Real Estate Investment: Issues
411(40)
16.1 Introduction: The Growth of Cross-Border Real Estate Capital
411(2)
16.2 The Global Real Estate Market
413(2)
16.2.1 The Global Universe
413(1)
16.2.2 Core, Developing Emerging
413(1)
16.2.3 Transparency
414(1)
16.2.4 The Limits to Globalisation
414(1)
16.3 The Case for International Real Estate Investment
415(4)
16.3.1 The Case for International Real Estate Investment: Diversification
415(2)
16.3.2 The Case for International Real Estate Investment: Enhanced Return
417(1)
16.3.3 Other Drivers of International Property Investment
418(1)
16.4 The Problems
419(2)
16.4.1 Introduction
419(1)
16.4.2 Index Replication and Tracking Error
419(1)
16.4.3 Leverage
420(1)
16.4.4 Global Cycles, Converging Markets
420(1)
16.4.5 Execution Challenges
421(1)
16.4.6 Loss of Focus and Specialisation
421(1)
16.5 Formal Barriers
421(4)
16.5.1 Legal Barriers
421(1)
16.5.2 Capital Controls
422(1)
16.5.3 Tax
422(3)
16.6 Informal Barriers
425(4)
16.6.1 Introduction
425(1)
16.6.2 Currency Risk
425(1)
16.6.3 Legal and Title Risk
426(1)
16.6.4 Liquidity Risk
427(1)
16.6.5 Geographical Barriers
427(1)
16.6.6 Political Risk
428(1)
16.6.7 Cultural Barriers
428(1)
16.6.8 Information Asymmetry
429(1)
16.7 A Pricing Approach for International Property
429(12)
16.7.1 Example
429(2)
16.7.2 Theories of Interest Rates and Exchange Rates
431(1)
The Law of One Price
431(1)
Absolute Purchasing Power Parity
431(1)
Relative Purchasing Power Parity
432(1)
The Monetary Model of Exchange Rates
432(1)
The Fisher Equation
432(1)
Interest Rate Parity
432(1)
Putting Relative Purchasing Power Parity and Interest Rate Parity Together with the Fisher Equation
432(1)
16.7.3 Putting Theory into Practice
433(5)
16.7.4 Using Local Excess Returns
438(3)
16.8 Managing Currency Exposure and Currency Risk
441(6)
16.8.1 Diversifying
442(1)
16.8.2 Using a `Currency Overlay'
442(1)
16.8.3 Using Local Debt
443(1)
16.8.4 Hedging Equity
444(2)
16.8.5 Leverage, Tax, and Fees
446(1)
16.9 Building a Portfolio
447(3)
16.10 Conclusion
450(1)
Chapter 17 Performance Measurement and Attribution
451(40)
17.1 Performance Measurement: An Introduction
451(1)
17.2 Return Measures
452(10)
17.2.1 Introduction
452(1)
Income Return
453(1)
Capital Return
453(1)
Total Return
453(1)
Time-Weighted Return
454(1)
Internal Rate of Return
454(1)
17.2.2 Example: IRR, TWRR, or Total Return?
454(2)
IRR or TWRR1
456(1)
IRR or Total Return?
456(1)
17.2.3 Required and Delivered Returns
456(1)
The Required Return
456(2)
The Delivered Return
458(1)
17.2.4 Capital Expenditure
459(1)
Timing of Expenditure
460(1)
17.2.5 Risk-Adjusted Measures of Performance
460(2)
17.3 Attribution Analysis: Sources of Return
462(3)
17.3.1 Changes in Initial Yields
462(2)
17.3.2 The Combined Impact
464(1)
17.4 Attribution Analysis: The Property Level
465(2)
17.5 Attribution Analysis: The Portfolio Level
467(7)
17.5.1 Introduction
467(1)
17.5.2 The Choice of Segmentation
468(1)
17.5.3 Style
469(1)
17.5.4 Themes
470(1)
17.5.5 City or Metropolitan Statistical Area Selection
471(1)
17.5.6 Two or Three Terms?
471(1)
17.5.7 The Formulae
472(1)
17.5.8 Results from Different Attribution Methods
473(1)
Case 1
474(1)
Case 2
474(1)
17.6 Attribution and Portfolio Management: Alpha and Beta
474(3)
17.6.1 Alpha and Beta Attribution: An Introduction
474(2)
17.6.2 Sources of Alpha and Beta
476(1)
17.7 Performance Measurement and Return Attribution for Property Funds
477(12)
17.7.1 Introduction
477(1)
17.7.2 The Asymmetry of Performance Fees
478(2)
17.7.3 An Attribution System for Funds
480(2)
17.7.4 Alpha and Beta in Property Funds: A Case Study
482(3)
17.7.5 Unlisted Fund Performance: Empirical Evidence
485(1)
The Data
485(1)
Relative Returns
486(1)
Alpha and Beta
486(2)
Timing: IRR and TWRR
488(1)
IRRs and Vintage Year
488(1)
17.8 Conclusion
489(2)
Chapter 18 Conclusions
491(18)
18.1 Why Property?
491(2)
18.2 Lessons Learned
493(3)
18.2.1 Liquid Structures
493(1)
18.2.2 Unlisted Funds
494(1)
18.2.3 International Investing
495(1)
18.2.4 Best-Practice Real Estate Investing
495(1)
18.2.5 Pricing
496(1)
18.3 The Future
496(8)
18.3.1 The PropTech Explosion
496(3)
18.3.2 Smart Buildings and ESG
499(1)
18.3.3 Occupier Markets: Space as a Service
499(1)
18.3.4 Fractionalization and Liquidity
500(1)
Liquidity and Faster Transactions
500(2)
Tokenization and Fractionalization
502(1)
18.3.5 Derivatives
502(2)
18.4 Conclusion
504(5)
References 509(6)
Glossary 515(12)
Index 527
DAVID HARTZELL is Steven D. Bell and Leonard W. Wood Distinguished Professor of Finance and Real Estate and Director, Wood Center for Real Estate Studies, University of North Carolina. He is a Fellow of the Private Equity Research Consortium, Kenan Institute and serves on the Board of Directors of Highwoods Properties, a publicly traded Real Estate Investment Trust (REIT), and has served on the Investment Advisory Committee of the $100 billion North Carolina Retirement System.

ANDREW BAUM is Professor of Practice, Saļd Business School, University of Oxford and Professor Emeritus, University of Reading. He is Director of the Oxford Future of Real Estate Initiative, Chairman of Newcore Capital Management, and has held senior executive and non-executive positions with Grosvenor, The Crown Estate, CBRE Global Investors and others.