Reading 79: Real Estate and Infrastructure

Book 4: Alternative Investments

Types of real estate

single-family residential

commercial

Types of commercial real estate

office buildings

shopping

industrial/warehouse/distribution

rental residential

What type of real estate investment involves direct investment—public or private?

private

Direct Real Estate Investment

purchasing and financing a real estate investment

Indirect Real Estate Investment

limited partnerships, joint ventures, REITs, publicly traded securities

Equity REIT

invests in real estate directly or through a limited partnership

Mortgage REIT

lend money for real estate or invest in MBS

Hybrid REIT

invests in both real estate and mortgages

Core Real Estate Strategies

REITs that invest in high quality commercial and residential properties that deliver stable returns

What kind of structure is typical for Core Strategies?

open-end

Core-Plus Real Estate Strategies

accepts a bit more risk than core strategies by undertaking development projects

Value-Add Real Estate Strategies

undertake development on a somewhat larger scale than core-plus

Opportunistic Real Estate Strategies

pursues large-scale redevelopment and repurposing of assets, invest in distressed properties, and speculate on real estate markets

Which has a higher correlation to equity investments—direct real estate investment or REITs?

REITs

Take-Or-Pay Arrangements

requires the buyer to pay a minimum purchase price for an agreed-upon volume

Types of cash flow from infrastructure investments?

availability payments

usage-based payments

take-or-pay

Greenfield Investments

Build-Operate-Transfer

the life cycle of greenfield investments

build- ==> cash outflow

operate ==> cash inflow

transfer ==> transfer ownership to government or another entity

Brownfield Investments

investments to expand or privatize existing infrastructure investments

Secondary-Stage Investments

investments in fully operational facilities that do not need any further development

Who is most suitable for infrastructure investments?

large, long-term institutional investors

pension funds, SWF