Thesis (S.M. in Real Estate Development)--Massachusetts Institute of Technology, Dept. of Architecture, Center for Real Estate, 2008. / This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections. / Includes bibliographical references (leaves 66-68). / Market forces continually change the landscape of the real estate private equity ("REPE") industry. In the current market, robust capital raising and the emergence of new funds in REPE suggest increasing competition to place capital while the credit crisis has marked the end of an era for cheap debt that was previously used by opportunity funds to enhance returns. Under these changing market conditions, opportunity funds seek to continually deliver above market returns through various investment strategies and composition allocations which have major implications on the risk levels of the funds. This thesis seeks to understand if and how recent market changes have influenced the REPE industry. It identifies the kinds of investment strategies currently being used by opportunistic funds, and in particular, whether the investment compositions of the opportunity fund portfolios are changing in terms of geographic allocation or asset type allocation. The study finds that opportunity funds have been notably impacted by forces of the credit crisis, but not necessarily by increasing competition. While it is not readily apparent whether investment compositions of opportunity funds have changed due to the credit crisis, several global funds are increasing geographic allocations to emerging markets, such as Asia, to enhance returns. The interviewees generally believe that they will continue to deliver the proposed returns without necessarily increasing portfolio risks due to their flexible investment mandate, which allows them to invest in opportunities that are inline with their expertise and experience. / (cont.) In the short term, most funds expect opportunities to arise from distressed sellers. This thesis attempts to shed light on some issues involving REPE investing and represents a first attempt to scratch the surface of opportunistic investment portfolio compositions and strategies. Hopefully, readers will gain insight into the workings of this growing and highly proprietary asset class. / by Alex Lin. / S.M.in Real Estate Development

Thesis (S.M. in Real Estate Development)--Massachusetts Institute of Technology, Dept. of Architecture, Center for Real Estate, 2008. / This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections. / Vita. / Includes bibliographical references (leaves 116-119). / The private capital business for public REITs was started by Kimco Realty, Developer Diversified, AMB and ProLogis during the years 1998-2000, at the time when the public equity was not easily available. Over the past decade, public REITs have used their private capital funds to take out REITs' existing portfolios and newly completed projects, to finance land purchases and development pipelines, and to diversify their rental income into a fee income business. Given the limited disclosure of public REITs in their private capital funds and a lack of standardized industry terms and practice applicable to this field, this research can be described a fact-finding study. By studying each of the private capital funds managed by 7 leading REIT managers, I categorize these funds in terms of fund type, inception year, fund life, fund style strategy, investment target, geographical focus, fund terms, target leverage, key investors, parent REIT's ownership, gross fund assets, distribution frequent and incentive design. In addition, I argue that the private capital business of public REITs would not have grown successfully without fuel of the merchant development activities under the public REIT's framework. This is particularly true with respect to the industrial REIT sector. I carefully examine the case of ProLogis' business model, comprised of three indispensable pillars - merchant building, fund management and core portfolio, to substantiate this claim. By creating a new structure diagram of "public REIT-sponsored private capital fund", I demonstrate the "co-opetition" phenomenon among pension funds, real estate investment managers ("REIMs") and public REIT private capital funds in the value chain of the institutional real estate investment. / (cont.) The concept can be described by the fact that two primary investors (pension funds and REIMs) of this field could themselves replicate what public REIT private capital funds are doing. I also relate this observation to the real estate M&A deals that occurred in 2007, where REIMs were observed to "arbitrage" between public REIT and private real estate markets by taking the public REITs private. Moving forward, public REIT-sponsored private capital fund is well positioned to grow as it complements a niche market for pension funds and REIMs to add private real estate exposure in a predictable and sizeable format. However, concerns on above 75% FFO coming from merchant development and private capital for leading REITs (such as ProLogis) may trigger regulatory scrutiny from Internal Revenue Service, as this represents a huge deviation from original purpose of being a REIT - to act as passive investor for core portfolio holding and pay out as dividends most of its net income. In an extreme scenario, REITs like ProLogis may voluntarily or involuntarily spin off their private capital business. Under current capital market conditions, this might actually unlock public REITs' shareholder value. Referencing from mid-cap asset managers' comparable (such as Eaton Vance and Janus Capital), REITs' private capital business can be valued from the 4x price-earnings multiple to a likely 20-30x range. / by Cervantes Lee. / S.M.in Real Estate Development

Thesis (S.M. in Real Estate Development)--Massachusetts Institute of Technology, Dept. of Architecture, Center for Real Estate, 2008. / This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections. / Includes bibliographical references (leaves 64-65). / The practice of applying options theory to real estate investments has only recently begun. In particular, options in real estate are called "real options." Real options add value to real estate development projects by allowing developers to take advantage of positive aspects of the market and avoid negative conditions. There has not been much effort to rigorously quantify the value of applying flexibility to real-world development projects. In this paper, I will attempt to examine the impact of applying real options theory to a mixed-use development project, the "Parcl project," which consists of two office towers, a hotel, and a retail mall to gain better understanding of flexibility. This project is being constructed all at once based on predetermined assumptions about factors like rental rolls, sales price, and constructions costs. However, the deterministic model could result in a loss in case market conditions do not meet the assumptions set at the beginning. In this sense, applying real options such as phasing, deferring, and abandoning would be one of the ways to absorb the uncertainties in the market. This paper will try to figure out how much value real options can add to the project in terms of dealing with market conditions. For the analysis, the quantitative methods such as an engineering model and Monte Carlo simulation will be used. / by Kyungwon Kim. / S.M.in Real Estate Development

Thesis (S.M. in Real Estate Development)--Massachusetts Institute of Technology, Dept. of Architecture, Center for Real Estate, 2008. / This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections. / Includes bibliographical references (leaves 185-186). / What paths have real estate entrepreneurs taken to establish their own firm? Also, what characteristics did they develop and utilize in the process? This thesis gives the unique opportunity to better understand the life of the real estate entrepreneur. Also, this thesis shall add clarity to these questions by providing case studies and analyses through reviewing such topics by obtaining information from face-to-face interviews of leaders and legends in the real estate industry. Included is a study on the general characteristics that are utilized by entrepreneurs and their importance. Also, studies on the application of these characteristics and their statistical significance are discussed. These characteristics have been reviewed to create a better understanding of the composition of the entrepreneur and how the application of these factors will help in entrepreneurial achievement. This framework will also help create a better understanding of the case studies and the paths the real estate entrepreneurs took to establish their firms. For the development of the case studies, 12 entrepreneurial leaders in the real estate industry were interviewed based on a framework of questions. From this information, a case study is created to obtain an understanding of their family background, education, experience, path and characteristics. Each case study will be accompanied by an analysis section discussing the important steps and characteristics that led to the development of the entrepreneur's career. These individuals represent a variety of fields in the real estate industry including development, construction, service, and finance. In review of the case studies and analyses, 5 distinct paths are found which have led to the preparation of being able to establish a real estate firm. / (cont.) Also, it is shown that no set group of characteristics is utilized by each real estate entrepreneur. Yet, each entrepreneur provides premier examples of these characteristics and gives insight to their application in the real estate industry. / by Michael Kazmierski. / S.M.in Real Estate Development

Thesis (S.M. in Real Estate Development)--Massachusetts Institute of Technology, Dept. of Architecture, Center for Real Estate, 2008. / This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections. / Includes bibliographical references (leaves 78-80). / In an attempt to determine what business and regulatory factors are required for the successful establishment of a Real Estate Investment Trust (REIT) structure in the Philippines, we analyzed the macro and microeconomic factors affecting the Philippines property market. The proposed law governing the REITs in the Philippines was also analyzed and compared with other REIT regulation in Asia. In the Asian REIT industry, supply and demand issues are inherently important. However, regulations, governing their activities, are also a factor in their growth and success. On the Philippine REIT supply side, the office, retail and hotel sectors offer acquisition potentials for REITs. Key demand drivers for real estate in the Philippines have been the increasing remittances from Overseas Filipino Workers, which have increased consumer spending in residential real estate and consumer goods, prompting rent growth in the retail sector. Another factor is the phenomenal growth of the Business Process Outsourcing industry which is driving both demand for office and residential supply On the REIT demand side, there is a strong incentive for real estate developers/owners/sponsors to divest their properties into REITs in order to access an alternative and cheaper source of capital caused by the increasing globalization and securitization of real estate. Opportunities to create fee-based businesses through external management contracts with REITs also exist. For potential REIT shareholders, there is clear investor demand for a tax efficient, yield driven investment vehicle such as REITS, which provide, not only higher transparency, professional management, greater liquidity and more stable return, but also diversification for their local and global portfolios. / (cont.) A tax savings analysis was simulated using the current proposed REIT legislation and found that, although REITS provide significant tax benefits to residents and nonresidents, greater tax advantages are created for nonresident investors. The proposed Philippine REIT legislation is largely in line with international REIT standards. As is the case with other Asian REITs, it appears that Philippine REIT regulation shall be a case of walking-before-running. And as international REIT regulation is continuously evolving and changing, both the Philippine REIT public and private sectors should ensure that local market regulation adapts to the global markets. / by Delfin C. Wenceslao. / S.M.in Real Estate Development

Thesis (S.M. in Real Estate Development)--Massachusetts Institute of Technology, Dept. of Architecture, Center for Real Estate, 2008. / This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections. / Includes bibliographical references (leaves 56-57). / The intent of this thesis is to identify the demand drivers for ten retail sub-categories in the US and develop an understanding of how to best use this information to make better retail real estate investment decisions. This cross sectional study analyzes sales per population, establishment per population, and sales per establishment based on six independent variables and the 2002 data set of 54 metropolitan statistical areas. The independent variables are population, employment per population, income per population, precipitation, temperature, and population growth. The first portion of this thesis is to analyze the demand drivers for each retail category and the degree of effectiveness of each variable on retail sales performance. The regression results of this study have clearly demonstrated a measurable demand for each retail category given the nature of each product type. The last aspect of this thesis is the development of an investment strategy that examines the predicted results versus the actual sales figures to see if a certain city is over saturated or under-supplied with retail establishments by category. By understanding what is the exact demand driver for each category, real estate investors are able to use this information efficiently to make informed investment decisions based on demand drivers as well as retail store supplies. This methodology provides a reasonable and well thought-out strategy to avoid unsuccessful investment outcomes. / by Ai Kong. / S.M.in Real Estate Development

“What determines bond ratings?” has been asked since 1860 when Henry V. Poor, of now Standard & Poors, released his first financial and operational analysis of the railroad industry and is still asked today. The determinants of bond rating studies date back to Fisher (1959) and single out various industries (railroad, manufacturing, industrial, and utility) but do not focus on REITs. REITs are different from other industries in various ways. Literature suggest differences between REITs and non-REIT industries including: the regulatory IRS restrictions regarding REITs, the uncertainty regarding the value of REITs, the number of uninformed investors is greater in the REIT market due to valuation uncertainty, REITs securities behave more like mutual fund securities than like industrial firm securities (Wang et al. (1992), (1995)), and the uncertainty about the value of real estate stocks is greater than that for stocks of industrial firms with operating assets, causing REIT advisors to complain that the stock market underestimates their real value more often than the real value of industrial firms (Hite, Owens, and Rodgers (1987)). This study analyzes the determinants of REIT debt ratings. The determinants are analyzed using ordered probit and multinomial logit regression models. The results of the ordered probit regression model reveal that REIT debt ratings are determined by similar financial characteristics used to analyze determinants for non-REIT industries. Similar to the findings in Horrigan (1966), the data also reveals that liquidity is not as significant to REIT debt ratings as S&P analyst claim. The multinomial logit resuts show that leverage, cash, size, interest coverage, and shareholders right plan are significant to downgrades. Overall, the findings presented here are consistent with non-REIT ratings literature.

The study deals with real estate transaction for one-family houses and aims to compare and analyse the transaction processes and costs in six countries: Sweden, Finland, Norway, Poland, England and USA. The study identifies the main features of the normal transaction in each country and tries to measure the costs of the process. A basic description of the role of the real estate agent/broker is presented, referring among others to legal role of the agent/broker and the requirements for being allowed to work as real estate agent/broker. The conclusions of the study are that transaction processes differ considerably between the countries and that transaction costs vary. Only in Sweden and Norway, can and may a real estate broker carry out the whole transaction while in Poland, England and USA either a notary, an attorney or an otherwise authorized person is also required in the process. In Finland a purchase witness is required to confirm the purchase. It is difficult to arrange the countries in a clear way according to their rules, because even if a group of countries resemble each other in some aspects, they differ in others. There is no clear connection between how large part a real estate broker plays in the process and the broker’s education level. The total transaction costs excluding taxes vary from approx. 3-3.5 % of selling price in Norway and Sweden and up to approx. 8-8.5 % of selling price in USA and Poland. The transaction cost is, for example, lower if the recording system is well arranged, if a real estate broker has a bigger part in the process and the conveyancer, the professional who assists in the legal transfer of property, is impartial. The cost can also, but not always, be lower if only one real estate broker works with one commission and if the real estate broker is impartial, i.e. is enjoined to assist both parts in the process. In the countries where a real estate broker has a higher level of education and plays bigger part in the process, the estate agents remuneration is not higher compared to other studied countries / QC 20101118

<p> This paper discusses real estate activity in Hamilton, for the period 1973 - 80, in an attempt to identify predictors. Particularly of interest is activity in the older central city neighborhoods which have been declining for a number of years. After reviewing the literature on the inner city, and the process operating in it, the Hamilton situation is explored. Seventeen census tracts emerge from the analysis as experiencing reinvestment activity during the above time period. The characteristics which are predictive, and most distinct, deal with the housing in, and location of, the census tracts. Socio-economic characteristics are neither predictive nor significant, for the most part. </p> / Thesis / Bachelor of Arts (BA)

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