Credit markets have made a strong comeback since the global financial crisis. Fears of a global financial system meltdown have now been replaced by concerns about asset valuation bubbles, too much capital chasing too few high quality investment opportunities, the desperate search for investment returns, and the volatility resulting from reduced government stimulus. To be successful in today's uncertain market, commercial real estate industry participants need an understanding of the most commonly used real estate financial analysis techniques, approaches to financial modeling, newly available real estate data sources and indices, and quantitative tools available to manage portfolio risk.
This course provides insights into analyzing the financial risks and opportunities in today's marketplace by utilizing quantitative analytics taught in popular graduate courses at MIT. Current real estate finance market dynamics and trends, the rapid return of securitization, example transactions and identification of the most active capital sources will also be discussed.
Laptops or tablets are required as course materials will be distributed electronically.
Earn a Professional Certificate in Real Estate Finance and Development
This course is part of the Real Estate Finance and Development certificate program, offered jointly by MIT Professional Education and the MIT Center for Real Estate.
Learn more about how you can earn a Professional Certificate when you take this and other real estate courses.
This course has been approved for 16 CPD credits toward renewal of the CoreNet Global MCR designation.
It is highly recommended that you apply for a course at least 6-8 weeks before the start date to guarantee there will be space available. After that date you may be placed on a waitlist. Courses with low enrollment may be cancelled up to 4 weeks before start date if sufficient enrollments are not met. If you are able to access the online application form, then registration for that particular course is still open.
Participants will learn to:
- Understand fundamental financial economic concepts and tools as applied to real estate investment.
- Become conversant with the cutting-edge of real estate investment, relevant for institutional investment management.
- Understand the basics of real estate risk management techniques and products.
Who Should Attend:
This course is applicable to a wide range of professionals across the real estate, banking, finance/investment, and insurance industries. Specifically, the course may be of interest to analysts and investment professionals, fund managers, investment portfolio managers, financial advisors, investment bankers, fixed-income analysts, financial risk managers, global financial market specialists, and professionals working in macroeconomic policy. More generally, this class can be valuable to anyone dealing with global financial markets and real estate investments.
8:00 AM - 9:00 AM: Registration, breakfast
9:00 AM - 10:30 AM: Introduction / Current Trends in the U.S. Debt Market
The opening session will provide an overview of the current dynamics and trends of the commercial real estate debt market. Market challenges including high asset valuations, intense competition for high quality commercial mortgage transactions and the desperate search for yield will be discussed. The current lending activities of life insurance companies, banks, CMBS conduits and Fannie/Freddie will be examined.
10:30 AM - 10:45 AM: Break
10: 45 AM - 12:15 PM: Financing and Shadow Banking
The real estate asset market is part of the larger capital market, which includes, for example, equity and bond markets. The capital market is an important source of the financing of real estate assets. In this session, we will provide an overview of the capital market, in particular, the debt and equity markets. Special emphasis will be placed on innovation in financing as a response to market imperfections and costs facing particular firms. We will also introduce shadow banking, the provision of capital outside the scope of the regular banking system, and discuss its importance as a source of financing real estate and its attendant risks.
12:15 PM - 1:15 PM: Lunch
1:15 PM - 2:45 PM: Innovation in Debt Capital Markets
The innovation within real estate capital markets, particularly debt markets, has changed the landscape of capital providers to the real estate business. These increasingly complex business models carry new opportunities and risks for both borrowers and lenders. In this session we will focus in more detail on several of these lending platforms and their underlying economic models – how their motivations differ from traditional platforms, how they assess and manage risk, how they make and lose money, and how these impact borrowers and bondholders.
2:45 PM - 3:00 PM: Break
3:00 pm - 5:00 PM: Current Trends in the US Equity Market, Debt Market Group Case Study
This segment will analyze the current trends in institutional equity real estate investment, including: investor outlook, where we are in the market cycle, foreign investment activity, key factors that institutional investors watch closely before investing and current market dynamics.
The second half of this session will be dedicated to an interactive group case study that highlights the challenges lenders face at the top of market. The class will be divided into groups to work on the case, which uses a loan opportunity to highlight typical issues faced by lenders and borrowers when negotiating a financing.
9:00 AM - 10: AM: Group Preparation for Graybar Syndications Case Study
10:00 AM - 10:15 AM: Break
10:15 AM - Noon: Correctly Measuring and Analyzing Pricing Risk
This lecture will provide an introduction and overview of real estate price and investment performance indexing. We will also consider how the capital asset market prices risk as it relates to real estate’s role in the asset markets and the investment portfolio. (Ref: Selected portions of Geltner-Miller (3e) text Chapters 21, 22, & 25).
Noon - 1:00 PM: Lunch
1:00 PM - 2:15 PM: When the Money Meets the Developer: A more scientific look at joint venture terms between institutional money partners and managing partners in real estate development
This lecture will apply some of the preceding knowledge to a particular and ubiquitous question in institutional real estate investment: the joint venture agreement terms between the money partner and the developer or manager partner. We will show how empirical evidence about real estate price dynamics can be used to quantify the risk/return trade-off between the two partners. (Ref: Geltner-Miller (3e) text Section 15.3 of Chapter 15).
2:15 PM - 2:30 PM: Break
2:30 PM - 5:00 PM: Graybar Syndications Case Study and Class wrap-up
This case asks you to evaluate a proposed offering to invest in a major office building in downtown Manhattan. Your group of attendees will present their analyses of the offering and render a final investment decision.
This course meets 9:00 am – 5:00 pm both days.
Laptops or tablets are required as course materials will be distributed electronically.
JASON BATTISTA, ANALYST, MERCY HOUSING, INC.
“This course was short but very well done. I go to a lot of trainings that don’t go too deep and are geared towards beginners. This course was full of substance and more complex, which was appreciate! I felt like this course was a great value with best in class professors. This course did a great job of bridging the gap between the theoretical and practical. I highly recommend this course and look forward to staying in touch with the Center for Real Estate.”
CHRIS REBER, AEW CAPITAL MANAGEMENT
“Yet again, great course! Excellent material and superb professors!”
JOHN STEBBINS, XSS HOTELS
“David and Walter were excellent! Very informative and also obviously extremely knowledgeable."
SCOTT BACKMAN, SENIOR ASSET MANAGEMENT OFFICER, MASSACHUSETTS HOUSING INVESTMENT CORP.
“[This] course offered a great dissection of the risk and reward components of Commercial Real Estate Finance. The teaching forum was highly collaborative. Professor Geltner and Dr. Torous were all exceptional in sharing their expertise on the subject matter.”
ANDREW GAL, GE CAPITAL REAL ESTATE
“RE Finance Advanced confirmed that focusing and understanding the details and data available in RE is necessary.”
Dr. Walter Torous is a senior lecturer holding a joint appointment in the Center for Real Estate’s MSRED Program, as well as in the Sloan School of Management. As one of the nation’s leading scholars and researchers in real estate finance, Torous teaches a graduate course in Securitization.
Torous is the founding director of the Ziman Center for Real Estate and Professor Emeritus at UCLA Anderson School of Management. He taught managerial finance, real estate finance, and empirical methods in finance. His research interests include the pricing of financial instruments (options, future, risky debt, mortgages), the reorganization of financially distressed firms, and statistical issues in finance. He previously taught at the University of Michigan and the London Business School. He received his BMath from the University of Waterloo in 1976 and his PhD from the University of Pennsylvania in 1981, both in economics.
Professor David Geltner has been at MIT since 2002, where he has held the George Macomber Chair and currently is Professor of Real Estate Finance in the Department of Urban Studies & Planning with a joint appointment in Engineering Systems in MIT’s School of Engineering.
Geltner served as Academic Director of the MIT Center for Real Estate during 2003-2014, currently serves as the Center's Associate Director of Research, and is the faculty chair of MIT’s Master of Science in Real Estate Development (MSRED). He is the lead author of the most widely-cited real estate investments textbook, Commercial Real Estate Analysis & Investments, now in its third edition.
Recipient of the U.S. Pension Real Estate Association’s prestigious Graaskamp Award in 2011 for excellence and influence in real estate investment research, Geltner has served as Academic Advisor to the National Council of Real Estate Investment Fiduciaries (NCREIF), and as Director of MIT’s Commercial Real Estate Data Laboratory which has developed pioneering commercial property price and investment performance indices based on transactions prices (including the Moody’s/RCA CPPI, the NCREIF-based TBI, and the FTSE-NAREIT PureProperty® Indices). Geltner served from 1999-2012 as the External Academic Member of the Real Estate Investment Committee of the State Teachers Retirement System of Ohio (a pension plan sponsor with over $5 billion of directly managed real estate holdings).
Sam Davis served as the senior vice president and senior managing director of the Private and Alternative Investments Group of Allstate Investments, an investment management subsidiary of the Allstate Corporation. The Private and Alternative Investment Group manages approximately $20 billion of assets, including commercial real estate equity, commercial mortgages, private placement bonds, private equity, project finance, infrastructure, energy, and timber.
Prior to taking on expanded responsibilities for all private assets at Allstate, Davis led the commercial real estate and structured products investment activities. Allstate’s real estate and structured products portfolio was made up of commercial mortgages, commercial mortgage backed securities, residential mortgage backed securities, asset backed securities, affordable housing, and equity real estate fund investments. He joined Allstate in 2005 following a 16-year career at John Hancock Financial Services. During his career at John Hancock, Davis was vice president and head of the Real Estate Investment Group responsible for all aspects of commercial mortgage, commercial mortgage backed securities, real estate debt fund and affordable housing investment. He also was responsible for launching a successful commercial mortgage securitization business. Prior to joining John Hancock, Davis worked at Coldwell Banker in the commercial real estate brokerage business.
For nearly 10 years, Davis has been a guest lecturer in MIT Center for Real Estate’s MSRED program. He graduated from Babson College and is a member of the Mortgage Banker’s Association Commercial Board of Governors and the Real Estate Roundtable. Davis is a member of the Board of Directors of The Greater Boston Food Bank.
This course takes place on the MIT campus in Cambridge, Massachusetts. We can also offer this course for groups of employees at your location. Please complete the Custom Programs request form for further details.
|Fundamentals: Core concepts, understandings, and tools (30%)||30|
|Latest Developments: Recent advances and future trends (50%)||50|
|Industry Applications: Linking theory and real-world (20%)||20|
|Lecture: Delivery of material in a lecture format (90%)||90|
|Labs: Demonstrations, experiments, simulations (10%)||10|
|Introductory: Appropriate for a general audience (20%)||20|
|Specialized: Assumes experience in practice area or field (70%)||70|
|Advanced: In-depth explorations at the graduate level (10%)||10|