Leveraged Breakdowns

George De Rossi

Four Key Ratios to Evaluate Downside Risk

As global financial market volatility continues to rattle investor sentiment, and the possibility of a recession looms, commercial real estate markets have begun showing signs of a slowdown. This is a clear deviation from the commercial real estate industry’s trajectory over the last decade, which was characterized by cheap debt, steady rent growth, and increasing …

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Negative Leverage in Real Estate

Almost all real estate transactions are financed with debt, with debt levels dependent on the borrower’s investment strategy, risk tolerance, and capital markets availability. In doing so, investors are able to reduce their upfront capital outlay and increase their return on equity. By incorporating debt, investors can enhance their returns with leverage. But, this is …

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Cap Rates and their role in Commercial Real Estate

According to the latest report from the U.S. Bureau of Labor Statistics, the annual inflation rate in June 2022 was 9.1%, its highest level since 1981, as measured by the consumer price index. This persistently high inflation for several months has forced the Fed to rapidly increase benchmark interest rates. The Fed funds target rate …

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Interest Rate Hedging in Commercial Real Estate

Given that almost all real estate is financed with debt, interest rate risk can be a critical factor in the performance of a real estate deal. Like any other risk, the goal with interest rate risk is to mitigate the risk and limit its impact on the outcome of the deal. Performance of the deal …

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