Leveraged Breakdowns

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 … Four Key Ratios to Evaluate Downside Risk Read More » ...

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 … Negative Leverage in Real Estate Read More » ...

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 … Cap Rates and their role in Commercial Real Estate Read More » ...

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 … Interest Rate Hedging in Commercial Real Estate Read More » ...

Underwriting a Construction Loan – Summary & Wrap Up

This is the sixth and final  post in our ongoing real estate private equity case study on how a construction loan is underwritten by potential lenders.  This installment will provide a deal summary and a wrap up that includes a cautionary tale about construction lending.  To read the previous posts in the series, click on … Underwriting a Construction Loan – Summary & Wrap Up Read More » ...

Underwriting a Construction Loan – Collateral Analysis

This is the fifth post in our ongoing real estate private equity case study on how a construction loan is underwritten by potential lenders.  This installment will focus on collateral analysis.  To read the previous posts in the series, click on the links below:  Post #1:  Introduction & Setup Post #2:  Borrower Analysis Post #3:  … Underwriting a Construction Loan – Collateral Analysis Read More » ...

Underwriting a Construction Loan – Repayment Analysis

This is the fourth post in our ongoing real estate private equity case study on how a construction loan is underwritten by potential lenders.  This installment will focus on repayment analysis.  To read the previous posts in the series, click on the links below:   Post #1: Introduction & Setup  Post #2:  Borrower Analysis Post #3:  Guarantor … Underwriting a Construction Loan – Repayment Analysis Read More » ...

Underwriting a Construction Loan – Guarantor Analysis

This is the third post in our ongoing real estate private equity case study on how a construction loan is underwritten by potential lenders.  This installment will focus on guarantor analysis.  To read the previous posts in the series, click on the links below:   Post #1:  Introduction & Setup  Post #2:  Borrower Analysis The intent … Underwriting a Construction Loan – Guarantor Analysis Read More » ...

Underwriting a Construction Loan – Borrower Analysis

This is the second post in our ongoing REPE Case Study on how a real estate private equity construction loan is underwritten by potential lenders.  This installment will focus on borrower analysis.  If you haven’t had a chance to read the first post, you can do so by clicking here. The intent of this article … Underwriting a Construction Loan – Borrower Analysis Read More » ...

Sector Series: Self Storage

Executive Summary / “TLDR” The U.S. self storage industry got started in the 1960s in the state of Texas, where most homes lack basements (and thus extra storage space). Self storage units back then were simple boxes with garage-like doors that locked. The industry has evolved somewhat since then, with large, multilevel structures housing indoor … Sector Series: Self Storage Read More » ...
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