Posts Tagged ‘net operating income’
Does Size Matter When Bidding on CRE?
February 17th, 2010 | 
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As I’m sure most of you heard, yesterday Simon Property Group made an unsolicited offer to acquire General Growth Properties for about $10 billion, which translates to $6 per share in cash and $3 per share interest in Simon’s assets. For those who didn’t realize, the largest mall owner in America just bid for the assets of the second largest mall owner in America. While traditional fears of the issues a corporate monopoly could pose in terms of thwarting fair market competition do not really apply in real estate, there is an interesting parallel. If a corporate company has a dominant market share in a given industry, it can lower the prices of its goods or services to undermine its competitors. While it may lose money in the short term by setting prices below the supply/demand equilibrium, it will gain in the long term by driving its competitors out of business. While mall owners do not really offer any good or service to the public, the same effect could occur if Simon is successful. After all, we’ve seen signs of it happening int he commercial real estate marketplace already… Read the rest of this entry »
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Questionable Brokers: Real Estate Metrics
Editor’s Note: Several of us at Llenrock Group have been teaching a course on the capital markets for commercial real estate broker’s continuing education requirements for the states of Pennsylvania and Delaware. As part of a three week blog series, Questionable Brokers will posit questions we have received in such classes from various brokers from the Tri-State area regarding the capital markets. We felt it would be useful for other brokers to see the kinds of questions their peers are asking, and a useful tool to our other readers who may have some of the same basic questions on the capital markets. We will divulge names and companies for a fee. Just Kidding. On second thought…it depends on how much you offer. The first part of the series will examine questions regarding Real Estate Metrics. Next week, we will feature questions regarding Types of Capital, and the following week, we will examine questions regarding Deal Structure. Enjoy!
Q: Does the IRR metric still carry the same weight as a measurement for property valuation given the state the market today?
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