Chapter 47. Real Estate Investment

SUSAN HUDSON-WILSON, CFA

Member, Boards of Hawkeye Partners, LLC, Property & Portfolio Research, Inc. and University of Vermont Endowment

Abstract: Real estate is a multidimensional investment asset class. Trading markets, geography, property types, leverage, and investment structures all define the dimensions. Each of the four quadrants of public debt, private debt, public equity, and private equity are characterized by different attributes and contribute to an investor's portfolio in differing and sometimes complimentary ways. Real estate has two special characteristics. One is that assets tend to hold some of their value even through egregious market cycles and, second, each property evidences both debtlike and equity-like investment behaviors. Despite certain difficulties with valuation and a lack of transparency international investment is an expanding field and derivatives are being explored. The relationship across the quadrants of the real estate investment universe have proven to provide ample room for creating diversified portfolios.

Keywords: apartment, appraisers, cash flow, closed-end funds, collateral, commercial mortgage-backed securities (CMBSs), conduit lenders, core, credit tenant, debt-equity hybrid, derivatives, diversification, endowments and foundations, funds of funds, family trusts, geography, hotels, indexes, industrial, inflation hedging, institutional real estate investment universe, leverage, National Counsel of Real Estate ...

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