Leveraged Breakdowns

Public REIT Valuation, Part One: Start with the Filings

Introduction

This post is the first in a series oriented as a real estate private equity guide book through my process of underwriting the value of a publicly traded company. This skill is helpful for anyone interested in pursuing an acquisitions career at a real estate private equity fund. This analysis is the type of work you would do if your fund wanted to buy an entire company, purchase a large stake in its public equity, or otherwise planned to expose itself in some way to the company’s performance, be it through a debt investment or a derivative structure. Point being, if you are making a bet on a company, whether big (buying all of it) or small (buying a few shares of it), you would perform this type of M&A valuation analysis. So without further ado, let’s begin.

Top-Down vs. Bottom-Up

Our flagship course, Breaking Down REPE, offers a deep-dive real estate private equity case study on how a fund would consider a single-property investment. Here, we’ll maintain the theme of apartment investing by looking at a well-known apartment REIT: AIMCO (NYSE: AIV). But where we’ll differ from Breaking Down REPE is in our approach: where our flagship single-property course begins bottom-up, spreading T12s and rent rolls into a property model, this analysis will instead begin top-down. Top-down analysis means we’ll consider the corporate entity first, working with high-level assumptions for individual property valuations. With REPE M&A transactions, you generally wish to begin with a rough sketch of the target under consideration then flesh out from there.

First, Get Smart AIV’s Public Filings

The first place we should look to learn about AIMCO is through its most recent public filings. The public filings tell you everything you need to know, providing a 10,000 foot snapshot of the entire company. You’re not going to get crazy detail from the public filings, but you’ll have information to sketch out the company. The first thing you should do with public filings is to just read them and take notes on what looks most important. Then, after you’ve read them, build a shell of a model using your notes and the public filings. So where do we find these public filings?

Where to Access AIV’s Public Filings

The first place I start is on the company’s own investors page. You can find a lot of extra goodies there that aren’t in SEC filings. And in this particular case, we’ll find everything we need on AIV’s website. So if you go to AIMCO’s investors page, you’ll see links for a few things, below I’ve listed what appears most relevant to an investor.

Take a read through these documents yourself. What looks important to you? If you want to get serious with this series, actually start taking notes and try to work in tandem with us. We’ll follow-up in the next installment with some commentary and analysis of our own. Until then, perhaps check out our real estate private equity guide for technical interviews or other real estate private equity case studies to get smart on modeling skills that will certainly come in handy later in this series.

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