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