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Introduction to Capital Markets
October 5, 2023
What is Real Estate Capital Markets and What Value does it Provide?
Real Estate Capital Markets can be defined as the financing and exchange of real estate investments. The exchange of real estate as a “good” is directly beneficial to producing economic growth in our communities, which in turn affects people’s livelihood in positive and fruitful ways. When thinking of different footprints and paths to produce income within your respective communities, real estate capital markets provide a proper marketplace to exchange goods, directly provide value to communities/residents within them, and impact/elevate lifestyles in a healthy and productive manner.
The Journey
To start off our capital markets journey, it would be a good idea to cover some basic understandings of who all is involved in this process, who benefits from the transactions of real estate, and where the future of capital markets is heading as we dance closely with the macroeconomic headwinds that the current global affairs landscape is proposing.
THE WHO (The Players)?
| Investors: | Investors: Developers, Investors/Owners, Owner-users, Etc. |
| Capital: | Debt: Bank, CMBS, Debt Fund, LifeCo, Agency (Freddie/Fannie,HUD) /// Equity: Institutional, Private, EB-5, etc. |
| Brokers: | Investment Sales (Buyer-Rep/Seller-Rep), Debt & Equity |
THE WHAT?
| Asset Classes: | Single-Family Residential, Multifamily, Retail, Industrial, Office, Hospitality, Land, and Specialty Mixed-Use Lifestyle Projects |
| Activity: | Buy, Sell, Develop, Invest, Lend, and Borrow |
| Related Topics: | Capital Stack, Pricing/Cap Rates, and Interest Rates |
THE NOT:
| Real Estate Capital Markets are everything that impacts Investment Returns in some way: | The following are related, but they are generally considered to be distinct from the Capital Market world: Design, Architecture, Engineering, Marketing, Leasing, Legal, Construction |
Data Driven Decision Making
Now more than ever, data is at the forefront of every decision being made within the capital marketplace. Decisions are constantly being made from buyers trying to achieve forecasted investment horizons based on today’s predictions and current market environments, to sellers being tasked with perfectly timing the right moment to harvest their crops. We all strive to make the most intrinsically influential decision based on the most relevant data that positively impacts all stakeholders alike.
The Future
As many professionals in the space strive not to dwell in the past, it would be rather foolish to ignore the paradigm shift in which the market has taken since the global pandemic occurred just 2 years ago. Recent recessionary warnings have lingered in the form of interest rate hikes, employment personnel issues, and many other headwinds. Moving forward, let’s work hard to study the data available, mistakes that have been made, and derive actionable solutions in order to adapt, regroup, and capitalize on innovative strategies for the real estate capital markets in this new and excitingly opportunistic environment. As we wrap up the final quarter of a daunting 2023, and as many of us like to say … On To The Next One (2024)!
We will welcome in the new year with another newsletter diving deeper into more concepts to help support and assist the industry with updates, relevant topics, and new market makers that enter into the space.
Have a great 4th quarter ULI constituents, and rest assured that real estate is on its way back to becoming great again.
Yours Truly,
ULI Houston Capital Markets Committee