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Factors Affecting Capitalization Rate of US Real Estate

Factors Affecting Capitalization Rate of US Real Estate

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Published by vharish88

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Published by: vharish88 on May 21, 2011
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04/25/2013

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1.1INDUSTRY PROFILE:US Real Estate Industry:
 Real estate in United States is one of the largest markets in the world. In fact, it is so significant to worldeconomic activity that the availability of easy money and the subsequent Housing Bubble triggered the Sub-Prime Crisis and eventually the global Financial Crisis of 2008 - 2009 that brought the world's economy to itsknees. The US real estate market is divided into 2 sectors: commercial real estate and residential real estate.Most discussion tends to focus on residential real estate (i.e. houses), but commercial real estate is also acritical sector of the economy, and is made up of offices, shopping malls, factories, warehouses and other commercial buildings.In order to be successful in real estate investment, an investor needs to understand house price trends, assessthe condition and value of the investment property, and secure a suitable mortgage or other form of realestate finance. The US real estate industry has been experiencing wonderful growth due to the relativelysteady good economy. In 2006, some markets had major gains in occupied space, others saw record salestransactions. The market has begun to tighten, developers remained cautious possibly eye toward the future, particularly predictions of escalating rental rates.
Major Participants in the Real Estate IndustryDevelopers
Development is an idea that comes to fruition when consumers – tenants or owner- occupants acquireand use the space put in place by the development team. Land, labor, capital management andentrepreneurship are needed to transform an idea into reality. Developers balance the needs of diverse providers and consumers of the real estate product. The developers have to demonstrate the project'sfeasibility to the capital markets and pay interest or assign Equity positions in return for funding.
Appraisers
Appraisers can be a part of every stage of the property development process. Appraisers are primarilyresponsible for valuation of the project. They estimate the market value of the property and typically preparea formal document called appraisal. Appraisal may be necessary when a developer transfers ownership, seeksfinancing and credit, resolves tax matters, and establishes just compensation in condemnation proceedings.Appraisers can also evaluate a project as input to market studies and feasibility studies. Some of the familiar 
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names in the US Real Estate markets include CB Richard Ellis, Cushman and Wakefield and Grubb andEllis.
Property managers 
Property managers focus on the day operation of the asset. Property managers carry responsibility for all respects of the physical space in accordance with the asset manager's plan. The responsibilities of a property manager include:
Marketing and leasing
Maintenance and repair 
Tenant relations including rent collection
Insurance
Accounting
Human resource management
Providing timely information to the asset manager about events affecting the property.Some of the major property managers include Trammel Crow Company and Grubb and Ellis Company.
Brokers/ Leasing Agents
Real Estate brokers and leasing agents are hired to act in the name of the developer or asset manager in leasing and selling space to prospective tenants or buyers. Their function, particularly in leasing largeindustrial and commercial spaces is to carry out one of the most complex financial negotiations in thedevelopment process. Leasing agents must balance all the various uses' individual needs against thedeveloper's financial model.
LendersA) Construction Lenders
are usually commercial banks, which are responsible for financial during project construction and for seeing that the developer completes the project within the budget and accordingto the specifications. 
B) Permanent lenders
seek to originate safe loans generating the maximum possible return. Themarket value of the completed project is very critical in that it serves as the primary collateral for the loan.
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1.2 COMPANY PROFILE:
 Zenta Knowledge Services Pvt. Ltd 
.,
 
About Zenta:
Zenta which is founded in 2001 is a world-class knowledge process outsourcing (KPO) and business processoutsourcing (BPO) and Company, offering a full range of back-office, voice and on-site support solutionssuch as Credit Card Servicing, Consumer Lending Servicing, Accounts Receivable Management, MortgageServicing and Real Estate Capital Market Analytics. The Company serves in the area of Consumer Creditservices, Insurance and Financial Services, and Commercial and Residential Real Estate services. With4,500+ employees worldwide, Zenta has operations in six locations across three continents. Zenta is a preferred employer in India. Zenta pioneered the concept of developing and delivering higher level offshoresolutions for the real estate industry. The unique onshore/offshore approach combines US domain expertise,a proven process migration methodology and a large team of highly trained offshore finance professional.Zenta allows the clients to focus on their core business by utilizing its cost effective resources and scalable platform to execute non- core activities.
Vision & Mission
The May 2007 realignment of the Company’s services under the Zenta brand reflects the new corporatevision of building a world-class Knowledge and Business Process Outsourcing Company focused on the realestate and financial services industries. As a fully integrated global enterprise, Zenta now offers real estateand financial services customers a broad array of services from its centers of excellence around the globe.
Zenta Solutions
From origination and throughout the customer lifecycle, Zenta delivers deep, end-to-end servicing solutions.Zenta's specialized focus on the financial services industry and our management expertise and experience,are the reasons we have been chosen to provide high-end business processing for some of the world's most prestigious banks and financial institutions. Instead of coordinating multiple vendors, Zenta's completesolution set makes it possible for clients to work with one company only - providing a single source for alltheir business processing needs. Zenta's end-to-end solutions include Credit card servicing and Commercial
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