Alternative Investments

Common Features
 Low liquidity
 Good diversification potential
 High due diligence cost
 Difficult to value
 Limited access to information
Due diligence check points
 Assess the market opportunities offered
 Assess the investment process
 Assess the organization of the manager & Its
operations
 Assess the term & structure of the investment
 Assess the service providers
 Review of documents
Real Estate
Forms of Real Estate
 Equity VS Debt
 Private VS public
Private Real Estate
Investments
Characteristics
 Heterogeneity and fixed locations
 High unit value
 Management intensive
 High transaction costs
 Depreciation
 Need for debt capital
 Illiquidity
 Price determination
Types
 Residential: single family; multi-family
 Non-residential: Commercial property other than
multi-family properties, farmland etc.
Commercial real estate properties
are categorized by end use
 Office
 Industrial and warehouse
 Retail
 Hospitality
 Multi-family
 Farmland
Private Market Real Estate Equity
Investments Motivations

 Current Income
 Price appreciation
 Inflation hedge
 Diversification
 Tax benefits
Risk Factors
 Business conditions
 Long lead time for new developments
 Cost and availability of capital
 Unexpected inflation
 Demographics
 Lack of liquidity
Risk Factors (Cont.)
 Environmental
 Availability of information
 Management (asset management and property
management)
 Leverage (loan-to-value ratio)
 Other risk factors
Net Operating Income
Example
Answer