Dancing Bird

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11.431/15.426J Real Estate Finance & Investments I: Fundamentals & Micro-Level Analysis Fall 2006 Introductory Lecture Slides (Selections from Chs.1, 2, 7 of text.) 1 Overview: 1. 2. 3. 4. 5. 6. Magnitude of Real Estate Investment Performance of R.E. Investment The “Real Estate System” (role of capital mkts) The space market The asset market & investment industry Example real world R.E. development investment 2 Magnitude Figure 1a: Net Asset Value of U.S. Structures ($ billions, 2003, source BEA) Total = $ 23,747 Govt. R.E., $5,751 Houses, $11,917 Commercial R.E., $6,079 3 Magnitude Figure 1b: Net Asset Value of U.S. Commercial Real Estate Structures ($ billions, 2003, source BEA) Total = $ 6,079…show more content…
Individuals: – THE 25-YR-OLD "YUPPY" ? . . . – THE 25-YR-OLD "DINC" COUPLE ? . . . – THE 35-YR-OLD "YOUNG FAMILY" ? . . . – THE 45-YR-OLD "MID-LIFE CRISIS" ? . . . – THE 65-YR-OLD "RETIREE" ? . . . DIFFERENT LIFE STYLES, LIFE CYCLES, PERSONAL GOALS, LEVELS OF WEALTH 14 Asset Mkt WHY DO PEOPLE INVEST?... Institutions: – LIFE INSURANCE COMPANIES – PENSION FUNDS – MUTUAL FUNDS – BANKS – FOUNDATIONS DIFFERENT CONSTITUENCIES, EXPERTISE, LIABILITIES, REGULATIONS, SIZES 15 Asset Mkt WHY DO PEOPLE INVEST?... ===> DIFFERENT TIME HORIZONS, RISK TOLERANCES, NEEDS FOR INCOME vs GROWTH Therefore, . . . (opportunities for new product development in the investment industry) 16 Asset Mkt TWO MAJOR INVESTMENT OBJECTIVES: 1) GROWTH (SAVINGS) RELATIVELY LONG-TERM HORIZON (NO IMMEDIATE NEED); INCOME (CURRENT CASH FLOW) -SHORT-TERM & ON-GOING NEED FOR CASH. 2) 17 Asset Mkt MAJOR CONSTRAINTS & CONCERNS: - RISK LIQUIDITY TIME HORIZON MANAGEMENT BURDEN, EXPERTISE AMOUNT OF FUNDS AVAILABLE FOR INVESTMENT (SIZE) CAPITAL CONSTRAINT Therefore (again), . . . What? 18 Example Montague Court Development Cost Budget: Hard Costs 1. Land 2. Base Shell & Sitework 3. Tenant Improvements Total Hard Costs: Soft Costs 4. Architect/Engineers 5. Permits/Fees 6. Legal/Title/Taxes 7. Marketing 8. Leasing Commissions 9. Developer Fee 10. Contingency 11. Construction
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