WCM Educational Recap #15: Intro to Real Estate

Recapped by Morgan Tannis

Welcome back to the Western Capital Markets blog! This week, we dive into the fundamentals of real estate investing.

Real Estate Overview

Major Types of Real Estate

Property Class Drivers

Multifamily

Market Drivers: Demographic trends, Homeownership, Population growth, and Employment growth

Asset Level Drivers: Proximity to public transportation and Proximity to amenities

Industrial

Market Drivers: Global trade growth, Access to major highways, and E-commerce shopping trends

Asset Level Drivers: Ceiling heights, Number of docks, and Proximity to cities

Office

Market Drivers: Employment growth, Regional economic focus, and High parking ratios

Asset Level Drivers: Unobstructed views, Tenant lease contracts, Tenant credits, and Number of tenants

Retail

Market Drivers: Income growth, Employment growth, and Population density

Asset Level Drivers: Tenant mix, Tenant lease term, Parking ratio, and Tenant performance

Hotels

Market Drivers: Travel activity, Airport, and Proximity to potential group demand generators (e.g. office)

Asset Level Drivers: Guest type, Management company, Meeting space, and Room space

Current Market Trends

Industry Fundamentals

Real Estate Investment Trusts

A Tax-Efficient Business Structure

REIT Characteristics

Types of REITs

Why invest in a REIT?

Real Estate Securities

Increasing Popularity and Development of Real Estate Securities

Real Estate Valuation Overview

Introductions to Valuations in the Real Estate Industry

Key Considerations

NOI & Cap Rates

Net Operating Income (“NOI”)

Capitalization Rates

REIT Valuation

Operating and Valuation Metrics Meaningful for REITs

Operating and Valuation Metrics NOT Meaningful for REITs

Relative Valuation — Multiples

Intrinsic Valuation — Net Asset Value (NAV)

Intrinsic Valuation — Discounted Cash Flow (DCF)

Intrinsic Valuation — Dividend Discount Model (DDM)

The underlying concept: The value of an asset is the present value of its future cash flows

External Opportunities & Resources

Third-Year Opportunities

Resources

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