18-05-2015

Sustainability and real estate debt -- the elephant is back

There are many ways to invest in real estate, but a typical university textbook would show a variation of the picture below.

The top row shows equity investments: buy shares in a listed property company (REIT), or take a stake in a private equity real estate company or fund. (You could of course also buy an asset directly.) The bottom row shows the debt market, which represents the other side of the real estate capital stack. Debt comes in the form of corporate bonds (general obligation financing) or mortgages (where the property collateralizes the financing). As it goes, textbooks never fully reflect reality, and in the absence of banks providing capital post-crisis, alternative lenders such as real estate debt funds have stepped in to fill the financing gap. Just add those to the right-side of the bottom row.

Continue reading here.

Author: Nils Kok

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