Risk Reward: The Relationship Between Bond Yields and Real Estate IRRs
Fall/Winter 1992, Vol 17, No 2 Abstract: Given the strong similarities between bonds and real estate and the increase in real estate transactions, it is appropriate to compare anticipated risks and rewards for each with actual results. Who has fared better the bond buyer or the real estate investor? Do current returns justify continued investment in… Read more
Linkages Among Capitalization Rates, Discount Rates and Real Estate Cycles
Fall/Winter 1992, Vol 17, No 2 Abstract: Many income-producing properties have been overvalued by appraisers and analysts in the current real estate recession by failing to account for asymmetric effects of the real estate cycle on risk-adjusted discount and capitalization rates. Because changes in rents are driven by unpredictable, exogenous factors when a market is overbuilt,… Read more
Investor Surveys and the Discount Rate
Fall/Winter 1992, Vol 17, No 2 Abstract:The use of an investor survey as a benchmark for deriving the discount rate for real estate analysis is a generally accepted technique, based on the assumption that information gathered in the survey is reliable and consistent. This article focuses on the reliability of the investor survey, the importance… Read more
Real Rates of Return: Does Real Estate Make Sense?
Fall/Winter 1992, Vol 17, No 2 Abstract: In a stagnant economy, there is limited comparable information to support assumptions and draw meaningful conclusions. Therefore, analysts must go beyond transactional data and examine Real Rates of Return for real estate as measured against other investments. Real estate value for investment grade properties represents a reasonable estimate of… Read more
Developer’s Disease Can be Hazardous to Your Health
Spring/Summer 1992, Vol 17, No 1 Abstract: A real estate developer who suppresses negative information about a proposed development project to protect himself from losing the project has what is called developer’s disease. This term is a form of defensive reasoning and it is the underlying cause of failure for many real estate development projects.
Commercial Real Estate Loan Evaluation in the Insurance Industry
Spring/Summer 1992, Vol 17, No 1 Abstract: Recent increases in the rate of default for commercial real estate mortgages held by life insurance companies have raised concerns about the health of the U.S. life insurance industry. Read More