Buyouts and Venture Capital Investments
Buyout and venture capital funds are the two critical private equity investments regarding the number of funds and invested amounts. Characteristics of Valuations of Venture Capital and Buyout Investments Firms financed through venture capital are typically less mature than buyout…
Control Mechanisms in Private Equity Transactions
In most private equity firms, the businesses, their ownership, and control are concentrated in the same hands. Private equity firms can also increase control if any venture capital investee firm does not meet specified targets. The following clauses can be…
Sources of Value Creation in Private Equity
Generally, private equity firms are believed to have the ability to add substantial value to their portfolio firms compared to publicly governed companies. Thanks to this aspect of private equity firms, they form a critical component of the financial system….
Advantages and Disadvantages of Investing in Publicly Traded Real Estate Securities
Advantages The most likely merits of investing in real estate through publicly traded real estate securities include: Higher Liquidity Publicly traded real estate securities offer investors much higher liquidity than physical real estate investments since they trade daily on…
Calculating the Value of a REIT Share
An example is better suited here to help candidates understand the concept. Example: Value of a REIT Share Tysons Limited, a real estate asset management company, is keen on diversifying its portfolio through an office lease REIT investment. The…
REIT Valuation Using Funds From Operations (FFO) and Adjusted Funds from Operations (AFFO)
Funds from Operation (FFO) FFO amends reported earnings and is a popular measure of the ongoing operating income of a REIT or REOC. It is calculated as follows: $$ {\begin{array}{l|r} \text{Accounting Net Earnings} & XX \\ \hline\text{Add: Depreciation expense}…
Net Value Per Share (NAVPS) in Publicly Traded Real Estate Securities Valuation
NAVPS refers to the (per-share) amount by which assets exceed liabilities. The amount is computed using current market values, as opposed to accounting book values, divided by the number of shares outstanding. NAVPS is generally considered the most appropriate…
Types of Publicly Traded Real Estate Securities
The primary type of REITs, the equity REITs, are keenly managed enterprises that seek to maximize returns from their property portfolios by applying management skills in operations and finance. Retail or Shopping Center REITs This class comprises shopping malls…
Basic Forms of Real Estate Investments
Real estate investments involve unique, heterogeneous assets in fragmented markets with infrequent transactions and high costs. Investments range from stable, income-producing properties (core real estate) to speculative, opportunistic investments (e.g., new developments, mezzanine debt, distressed situations). – Core: Stable…
Pricing and Valuing Equity Swap Contracts
Equity Swaps An equity swap is an OTC derivative contract in which two parties agree to exchange a series of cash flows. In this arrangement, one party pays a variable series determined by equity. The other party pays a variable…
