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<i>Preface</i> x <p><i>Acknowledgements</i> xv</p> <p><b>PART ONE REAL ESTATE AS AN INVESTMENT: AN INTRODUCTION 1</b></p> <p><b>Chapter 1 Real estate – the global asset 3</b></p> <p>1.1 The global property investment universe 3</p> <p>1.2 Market players 6</p> <p>1.3 Property – its character as an asset class 11</p> <p>1.4 Conclusions 28</p> <p><b>Chapter 2 Global property markets and real estate cycles 32</b></p> <p>2.1 Introduction 32</p> <p>2.2 The United States 34</p> <p>2.3 The UK property market – a performance history 67</p> <p>2.4 Continental Europe 80</p> <p>2.5 Asia 83</p> <p>2.6 Conclusions 91</p> <p><b>Chapter 3 Market fundamentals and rent 94</b></p> <p>3.1 Introduction: the global property cycle 94</p> <p>3.2 The economics of rent 95</p> <p>3.3 Forecasting rents 109</p> <p>3.4 Conclusions 116</p> <p><b>Chapter 4 Asset pricing, portfolio theory and real estate 117</b></p> <p>4.1 Risk, return and portfolio theory 117</p> <p>4.2 A property appraisal model 124</p> <p>4.3 The model components 132</p> <p>4.4 The required return for property assets 140</p> <p>4.5 Forecasting real estate returns 142</p> <p>4.6 Conclusions: a simple way to think about real estate returns 151</p> <p><b>PART TWO MAKING INVESTMENT DECISIONS AT THE PROPERTY LEVEL 155</b></p> <p><b>Chapter 5 Basic valuation and investment analysis 157</b></p> <p>5.1 Introduction 157</p> <p>5.2 Estimating future cash flows 161</p> <p>5.3 The discount rate 166</p> <p>5.4 Conclusions 170</p> <p><b>Chapter 6 Leasing 171</b></p> <p>6.1 Introduction 171</p> <p>6.2 Legal characteristics of leases 173</p> <p>6.3 The leasing process 174</p> <p>6.4 Important economic elements of a lease 174</p> <p>6.5 Lease economics and effective rent 192</p> <p>6.6 Conclusions 199</p> <p><b>Chapter 7 Valuing commercial real estate: the unleveraged case 203</b></p> <p>7.1 Introduction: the investment opportunity 203</p> <p>7.2 Developing a pro-forma income statement 206</p> <p>7.3 Valuation using the cap rate 210</p> <p>7.4 Valuation using cash flows 212</p> <p>7.5 Applying discounted cash flow to analyze investment feasibility 219</p> <p>7.6 Conclusions 221</p> <p><b>Chapter 8 Mortgages: an introduction 222</b></p> <p>8.1 Introduction 222</p> <p>8.2 What is a mortgage? 223</p> <p>8.3 The risks and returns of mortgage investment 225</p> <p>8.4 The fi nancial components of a mortgage 226</p> <p>8.5 The mortgage menu 229</p> <p>8.6 An introduction to mortgage mathematics 231</p> <p>8.7 Conclusions 247</p> <p><b>Chapter 9 Commercial mortgage underwriting and leveraged feasibility analysis 248</b></p> <p>9.1 Introduction 248</p> <p>9.2 The mortgage underwriting process 248</p> <p>9.3 Investment feasibility with leverage: before-tax analysis 256</p> <p>9.4 Investment feasibility with leverage: after-tax analysis 263</p> <p>9.5 Global variations in real estate debt 270</p> <p>9.6 Conclusions 272</p> <p><b>Chapter 10 Valuing the private real estate entity 274</b></p> <p>10.1 Introduction: the four quadrants and private equity 274</p> <p>10.2 Sponsor economics 276</p> <p>10.3 The life cycle of a private equity fund 277</p> <p>10.4 Fund economics 279</p> <p>10.5 Waterfall structures 282</p> <p>10.6 Private equity structures in the credit crisis 289</p> <p>10.7 Conclusions 291</p> <p><b>PART THREE REAL ESTATE INVESTMENT STRUCTURES 293</b></p> <p><b>Chapter 11 Unlisted real estate funds 295</b></p> <p>11.1 Introduction to unlisted real estate funds 295</p> <p>11.2 The growth of the unlisted real estate fund market 299</p> <p>11.3 Unlisted fund structures 303</p> <p>11.4 Characteristics of unlisted real estate funds 307</p> <p>11.5 Liquidity and valuation issues 310</p> <p>11.6 The case for and against unlisted real estate funds 312</p> <p>11.7 Conclusions 317</p> <p><b>Chapter 12 Public equity real estate 319</b></p> <p>12.1 Introduction 319</p> <p>12.2 REITs and REOCs 320</p> <p>12.3 Listed funds and mutual funds 321</p> <p>12.4 Exchange-traded funds (ETFs) 321</p> <p>12.5 The US REIT experience 322</p> <p>12.6 The global market 331</p> <p>12.7 REIT pricing 335</p> <p>12.8 Conclusions 339</p> <p><b>Chapter 13 Real estate debt markets 340</b></p> <p>13.1 Introduction 340</p> <p>13.2 A brief history lesson 342</p> <p>13.3 Wall Street Act I: the early residential mortgage-backed securities market 344</p> <p>13.4 Wall Street Act II: senior-subordinated securities, the advent of structured finance 350</p> <p>13.5 Wall Street Act III: the evolution of structured finance 356</p> <p>13.6 Collateralized debt obligations (CDOs) 361</p> <p>13.7 Summary 363</p> <p>13.8 Mezzanine debt 364</p> <p>13.9 Cash-out refinancing 367</p> <p>13.10 All good things must come to an end 369</p> <p>13.11 Conclusions 377</p> <p><b>Chapter 14 Real estate derivatives 378</b></p> <p>14.1 Introduction 378</p> <p>14.2 A short history of the real estate derivatives market 379</p> <p>14.3 Total return swaps 381</p> <p>14.4 Structured real estate index notes 386</p> <p>14.5 Traded property futures and options 387</p> <p>14.6 Pricing property derivatives 389</p> <p>14.7 Property derivatives: pros and cons 399</p> <p>14.8 Property derivatives: spin-offs 401</p> <p>14.9 Conclusions 405</p> <p><b>PART FOUR CREATING A GLOBAL REAL ESTATE STRATEGY 407</b></p> <p><b>Chapter 15 International real estate investment: issues 409</b></p> <p>15.1 Introduction: the growth of cross-border real estate capital 409</p> <p>15.2 The global real estate market 411</p> <p>15.3 The case for international real estate investment 415</p> <p>15.4 The problems: an introduction 419</p> <p>15.5 Technical issues 420</p> <p>15.6 Formal barriers 423</p> <p>15.7 Informal barriers 427</p> <p>15.8 Conclusions 433</p> <p><b>Chapter 16 Building the global portfolio 440</b></p> <p>16.1 The top-down portfolio construction process 440</p> <p>16.2 Strengths, weaknesses, constraints: portfolio analysis 447</p> <p>16.3 A pricing approach for international property 451</p> <p>16.4 Managing currency exposure and currency risk 463</p> <p>16.5 Portfolio construction 471</p> <p>16.6 Conclusions 474</p> <p><b>Chapter 17 Performance measurement and attribution 475</b></p> <p>17.1 Performance measurement: an introduction 475</p> <p>17.2 Return measures 476</p> <p>17.3 Attribution analysis: sources of return 487</p> <p>17.4 Attribution analysis: the property level 489</p> <p>17.5 Attribution analysis: the portfolio level 492</p> <p>17.6 Attribution and portfolio management: alpha and beta 502</p> <p>17.7 Performance measurement and return attribution for property funds 505</p> <p>17.8 Conclusions 518</p> <p><b>Chapter 18 Conclusions 520</b></p> <p>18.1 Why property? 520</p> <p>18.2 Liquid structures 521</p> <p>18.3 Unlisted funds 521</p> <p>18.4 International investment 523</p> <p>18.5 Best-practice real estate investment 523</p> <p>18.6 Pricing 524</p> <p>18.7 The future 525</p> <p><i>References</i> 526</p> <p><i>Glossary</i> 533</p> <p><i>Index</i> 548</p>

<p>“This comprehensive guide to international real estate investment provides detailed information on the unique challenges of remote investment in the global marketplace and presents practical advice for successful outcomes.” (<i>Book News</i>, 1 April 2012)</p> <p> </p>

<b>Andrew Baum</b> was appointed Professor of Land Management at the University of Reading, UK in 1989. He is now Professor of Real Estate Investment at the University of Cambridge and a Fellow of St John's College, Cambridge. He is former Head of Research, Prudential; CIO Property and Head, International Property, Henderson Global Investors, and has chaired the investment committee for the CBRE Global Investors Multi-Manager business since 2008. <p><b>David Hartzell</b> is Steven D. Bell and Leonard W. Wood Distinguished Professor in Real Estate and Professor of Finance at the Kenan-Flagler Business School, University of North Carolina, USA. He is a former vice president at Salomon Brothers Inc. in New York and is now a board member with Highwoods Properties, a REIT.</p>

Developments in the sophistication of global real estate markets mean that global real estate investment is now being executed professionally. Thanks to academic enquiry, professional analysis and entrepreneurial activity, backed by the globalisation of all investment activity, there is now an available body of material which forms the basis of this scholarly but practical summary of the new state of this art. <p> The measurement, benchmarking, forecasting and quantitative management techniques applied to property investments are now compatible with those used in other asset classes, and advances in property research have at last put the ongoing debate about the role of real estate onto a footing of solid evidence.</p> <p> The truly global scope and authorship of this book is unique, and both authors here are singularly well qualified to summarise the impact and likely future of global innovations in property research and fund management. Between them, they have experienced three real estate crashes, and have observed at first hand the creation of the real estate debt and equity instruments that led to the global crisis of 2008-9.</p> <p> <i>Global Property Investment: strategies, structures, decisions</i> offers a unique perspective of the international real estate investment industry with:</p> <ul> <li>a close focus on solutions to real life investment problems </li> <li>no excessive theoretical padding </li> <li>a target of both students and professionals </li> <li>highly qualified dual-nationality authorship </li> </ul> <p> With many cases, problems and solutions presented throughout the book, and a companion website used for deeper analysis and slides presentations (see below), this is a key text for higher-level real estate students on BSc, MSc, MPhil and MBA courses worldwide as well as for practising property professionals worldwide in fund management, investment and asset management, banking and real estate advisory firms.</p> <p> Website:</p> <p> The companion website for this book at <a href="http://www.wiley.com/go/baumglobalpropertyinvestment">www.wiley.com/go/baumglobalpropertyinvestment</a> offers freely downloadable resources:</p> <ul> <li>spreadsheets for deeper and fuller analysis (and sensitivity testing) of the cases and problems presented in the book </li> <li>PowerPoint slides for lecturers to accompany chapters </li> <li>related articles by the authors and others </li> <li>useful weblinks </li> </ul>

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