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Forecasting Performance on Opportunistic Real Estate Investments
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management.
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management.
2013 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

This thesis investigates the difficulty in making accurate forecasts on opportunistic commercial real estate investments. The purpose is to quantify the differences between unlevered cash flows from underwriting estimates and actual outcomes, analyse them and arrive at conclusions about the difficulty in producing forecasts on opportunistic investments.

The data used in this thesis comes from two opportunistic real estate portfolios previously owned by the private equity firm Niam. Both portfolios comprised Swedish office properties.

The results from analysing Niam’s investments shows that operating cash flows on individual properties are most difficult to forecast since the strategy for the assets constantly needs to be updated in order to adjust for current events like for example change in demand of office properties. This can have great impact on the profit allocation between property cash flows and exit cash flows in comparison to underwriting.

Furthermore the results show of an increased need of diversification for opportunistic investments, since individual investments have high volatility. Also, analysing investments on unlevered level has limitations. On an unlevered level an investment can have actual outcomes worse than in the underwriting, but when adding effects from financial leverage and currency movements the same asset can outperform the underwriting.

Place, publisher, year, edition, pages
2013.
Keyword [en]
commercial real estate, opportunistic investments, real estate funds, underwriting, cash flows, outcomes
National Category
Engineering and Technology
Identifiers
URN: urn:nbn:se:kth:diva-124112OAI: oai:DiVA.org:kth-124112DiVA: diva2:632847
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Examiners
Available from: 2013-06-25 Created: 2013-06-25 Last updated: 2013-06-25Bibliographically approved

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Jakob Paljak and Per Edenström(1020 kB)394 downloads
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CiteExportLink to record
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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
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