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All Publications

All Publications

 

Investment Strategy

 

INVESTOR PRIMER: U.S. DATA CENTER MARKET

by Chris R. Miers and Michael McGowan, Real Estate Issues, August 2018

Institutional investors are increasingly considering investing in a dynamic new property sector - data centers. This article provides a detailed overview of the sector today and some thoughts on where it is headed.

the opportunity for increased institutional investment in public real estate

by Roy Schneiderman and Michael McGowan, Real Estate Issues, February 2018

Although investment in public real estate has surged over the past decade, institutional investors remain hesitant to fully embrace public real estate. This article examines how changes in public real estate alleviated some traditional areas of concern such as measures of volatility and correlation with the broader stock market. We conclude that institutional investors should undertake a fresh examination of REITs and their potential role in overall real estate portfolios.

Churn, Churn, Churn?: Or is “Buy and Hold” for the Byrds?

by Roy Schneiderman and Oliver Cowan, Institutional Real Estate Americas, July/August 2017

How much better does a new investment need to perform to justify the costs of selling one asset and purchasing another? We offer some analysis and examples.

A Big Shift: The Impact of GICS Changes on Institutional Investment in Real Estate

by Roy Schneiderman and Michael McGowan, Institutional Real Estate Asia Pacific, October 2016

Schneiderman and McGowan explain the implications of the new Global Industry Classification Standards for the real estate asset class, real estate capital flows, REITs, and institutional management of real estate investment portfolios.

Making Sense of Before- and After-Fee Rates of Return

by Dean Altshuler, PhD, CFA Institute Magazine, July 2016

If time-weighted rates of return tests are factored into an incentive fee calculation, then large overpayments are likely when using the industry-favored approach for accruing incentive fees. Altshuler explains how to properly account for manager fees when using a time-weighted rate of return and notes that if incentive fees are based upon time-weighted returns, manager overpayments are possible.
 

One Way Not to Align Interests

by Roy Schneiderman, Institutional Real Estate Americas, December 2015

Why are investments often evaluated on a time-weighted return basis when incentive-fee structures are based on IRRs? Schneiderman explains the ins and outs of why time-weighted returns are not a good metric for incentive-fee structures.

Time-Weights for No One: Investors' Focus Should be on Current Income, Not Unrealized Gains

by Roy Schneiderman, Institutional Real Estate Letter, July/August 2015

As life expectancy increases and job growth slows, pension funds require more cash flow. Increased focus on benchmarking and time-weighted returns has favored appreciation in real estate investments, but given real estate’s capacity for generating cash flow, cash flow should be an objective of all real estate allocations.
 

Risk-adjusted Returns: Like Potter Stewart Said, ‘You Know It When You See It’

by Roy Schneiderman, Institutional Real Estate Letter, December 2014

What does “risk-adjusted returns” mean in real estate and is it quantitative or qualitative? Schneiderman deconstructs what real estate professional mean when they use the term in both individual deals and discrete investment strategies.
 

It Used to be Simple: Investors' Economic Motivations have Gotten Complicated

by Roy Schneiderman, Institutional Real Estate Newsletter, September 2014

Real estate investors are more varied, complex, and multi-faceted than they used to be and investment managers must understand their objectives. Schneiderman offers a synopsis of real estate investors’ motivations in today’s market.
 

Assessing Manager Operational Risk: Up-front Analysis Pays Off on the Back End

by Faye Beverett and Roy Schneiderman, Institutional Real Estate Letter – North America, June 2012

Beverett and Schneiderman argue that institutional investors are overlooking key operational aspects in their manager due diligence and that in-depth operations reviews of asset decision-making procedures, investment vehicle back-office systems, and major internal decision processes pays off in the end.
 

Investment Manager Co-Investment: Does Co-Investment Really Help to Align the Interests of Investors and a Manager?

by Roy Schneiderman, Institutional Real Estate Letter – North America, April 2011

While requiring manager co-investment in institutional real estate ventures may sometimes serve to align manager and investor interests, this is not always the case. Here, Schneiderman explains when co-investments have negligible impact, when they create misalignment, and when they are beneficial.

 

Market Issues

The Human City: Urbanism for the Rest of Us, by Joel Kotkin

Book Review by Roy Schneiderman, Real Estate Issues Special Edition, 2016

Schneiderman reviews The Human City for its major themes—children, crowding, and choice—and discusses what Kotkin does and does not achieve.

What If? Just, What If?: Autonomous Vehicles and Real Estate

by Roy Schneiderman, Institutional Real Estate Americas, February 2017

The imminent autonomous vehicle, aka “self-driving car,” revolution will have real implications for real estate. Schneiderman uses a prudent skepticism to assess the potential impacts.

Science Fiction and Institutional Real Estate: Change is Coming Soon to the Industry

by Roy Schneiderman, Institutional Real Estate Americas, April 2016

Schneiderman explores the potential impacts of automation on commercial real estate over the next twenty years.

Fact or Fiction?: Is the Long-term Impact of Millennials on Office Space Overhyped?

by Roy Schneiderman, Institutional Real Estate Letter, April 2015

While there is considerable focus on Millennial preferences transforming conventional office spaces to include open floor plans, more amenities, and less private spaces, advances in technology likely have an equal or greater impact on future real estate priorities and design.
 

The End of the Suburbs: Where the American Dream is Moving, by Leigh Gallagher

Book review by Roy Schneiderman, Real Estate Issues, 2014

Schneiderman reviews The End of the Suburbs and its anecdotal discussion of factors impacting the American residential real estate sector.

 

Due Diligence

Chapter 5: Choosing the Advisor

by Faye Beverett and Roy Schneiderman, The Advisor's Guide to Commercial Real Estate, April 2014

Real estate investors are more varied, complex, and multi-faceted than they used to be and investment managers must understand their objectives. Schneiderman offers a synopsis of real estate investors’ motivations in today’s market.
 

Assessing Manager Operational Risk: Up-front Analysis Pays Off on the Back End

by Faye Beverett and Roy Schneiderman, Institutional Real Estate Letter – North America, June 2012

Beverett and Schneiderman argue that institutional investors are overlooking key operational aspects in their manager due diligence and that in-depth operations reviews of asset decision-making procedures, investment vehicle back-office systems, and major internal decision processes pays off in the end.
 

Chapter 11: Key Considerations in Joint Venture Projects

by Roy Schneiderman and Dean Altshuler, PhD, PERE’s Real Estate Mathematics, October 2011

Joint-venture structures are typically, but not exclusively, used for development or redevelopment projects and this chapter covers both the simple and complex mathematical issues related to allocations, waterfalls, and incentive fees of joint-venture structures.

 

Fees & Quantitative Analysis

Making Sense of Before- and After-Fee Rates of Return

by Dean Altshuler, PhD, CFA Institute Magazine, July 2016

If time-weighted rates of return tests are factored into an incentive fee calculation, then large overpayments are likely when using the industry-favored approach for accruing incentive fees. Altshuler explains how to properly account for manager fees when using a time-weighted rate of return and notes that if incentive fees are based upon time-weighted returns, manager overpayments are possible.
 

One Way Not to Align Interests

by Roy Schneiderman, Institutional Real Estate Americas, December 2015

Why are investments often evaluated on a time-weighted return basis when incentive-fee structures are based on IRRs? Schneiderman explains the ins and outs of why time-weighted returns are not a good metric for incentive-fee structures.

Time-Weights for No One: Investors' Focus Should be on Current Income, Not Unrealized Gains

by Roy Schneiderman, Institutional Real Estate Letter, July/August 2015

As life expectancy increases and job growth slows, pension funds require more cash flow. Increased focus on benchmarking and time-weighted returns has favored appreciation in real estate investments, but given real estate’s capacity for generating cash flow, cash flow should be an objective of all real estate allocations.
 

Introducing Aggregate Return on Investment as a Solution to the Contradiction Between Some PME Metrics and IRR

by Dean Altshuler, PhD, and Carlo Alberto Magni, PhD, The Journal of Performance Measurement, Fall 2015

Explaining why the Index Comparison Method is illegitimate, Altshuler and Magni present the benefits of Aggregate Return on Investment, a metric which uses one consistent time series of Net Asset Values, preserves additivity, and does not incur the problem of multiple solutions.
 

The Importance of Testing Term Sheet Math

PrivcapRE Report / Performance & Portfolio interviews Roy Schneiderman, 2015.

Schneiderman points out that problems between general and limited partners often occur at the point where term sheets are converted to legal documents. He recommends paying close attention to language and testing by third-party analysts when converting term sheets into legal documents.
 

It's a Fee for All: Rethinking Incentives and Alignment of Interest

by Faye Beverett and Roy Schneiderman, The Advisor's Guide to Commercial Real Estate, April 2014

Since the market has not produced fee structures that align investor and investment manager interests as closely as they should be, Schneiderman explains the benefits and drawbacks of asset management and incentive fees as currently used and ponders some new ideas to better align investor and investment manager goals. 
 

Chapter 16: Trends in Real Estate Compensation 

by Roy Schneiderman & Amy Wells, Private Equity International’s Private Equity Compensation and Incentives, April 2012

In this chapter, Schneiderman and Wells review current manager and general partner compensation trends for various investment strategies and vehicles in the real estate equity arena with regard to private equity deal structures in general, and manager compensation in particular.
 

Why IRR is NOT the Rate of Return for Your Investment: Introducing AIRR to the Real Estate Community

by Dean Altshuler, PhD, and Carlo Alberto Magni, PhD, Journal of Real Estate Portfolio Management, 2012

After explaining why IRRs often do not produce an accurate rate of return, Altshuler and Magni introduce a new metric called Average IRR (AIRR) that produces a correct money-weighted rate of return. AIRR has none of the problems that the IRR has, and it appropriately accounts for the amounts actually invested over the course of the investment.
 

Chapter 5: A New Approach to Interim Incentive Fee Payments

by Roy Schneiderman and Dean Altshuler, PhD, Real Estate Compensation and Incentives: How Executives, Investors and Investment Managers Negotiate and Secure the Best Terms, 2012

One of the most important and heavily negotiated elements of manager compensation has been, and will continue to be, the incentive fee or “promote.” In this chapter, Schneiderman and Altshuler explore whether a general partner or manager should receive incentive fee payments prior to the full realization of an investment program, and if so, how such interim incentive payment(s) should be structured.
 

Overpayment of Manager Incentive Fees: When Preferred Returns and IRR Hurdles Differ

by Roy Schneiderman and Dean Altshuler PhD, Journal of Real Estate Portfolio Management, May/August 2011

While many investors do not see a significant difference in fees associated with the change from Preferred Return formulations to IRR Hurdle formulations, Schneiderman and Altshuler shed light on situations where these two formulations yield significantly different results for investors and managers.

 

Miscellaneous

buildings emerge as drivers of health and profits

by Scott Muldavin, Chris R. Miers, and Ken McMackin,Corporate Real Estate Journal, 2017

This paper describes and documents a methodology for assessing the financial performance of health-and-wellness investments that can be used to analyze property and portfolio decisions.

The Human City: Urbanism for the Rest of Us, by Joel Kotkin

Book Review by Roy Schneiderman, Real Estate Issues Special Edition, 2016

Schneiderman reviews The Human City for its major themes—children, crowding, and choice—and discusses what Kotkin does and does not achieve.

It Used to be Simple: Investors' Economic Motivations have Gotten Complicated

by Roy Schneiderman, Institutional Real Estate Newsletter, September 2014

Real estate investors are more varied, complex, and multi-faceted than they used to be and investment managers must understand their objectives. Schneiderman offers a synopsis of real estate investors’ motivations in today’s market.

The End of the Suburbs: Where the American Dream is Moving, by Leigh Gallagher

Book review by Roy Schneiderman, Real Estate Issues, 2014

Schneiderman reviews The End of the Suburbs and its anecdotal discussion of factors impacting the American residential real estate sector.

Chapter 16: Trends in Real Estate Compensation 

by Roy Schneiderman & Amy Wells, Private Equity International’s Private Equity Compensation and Incentives, April 2012

In this chapter, Schneiderman and Wells review current manager and general partner compensation trends for various investment strategies and vehicles in the real estate equity arena with regard to private equity deal structures in general, and manager compensation in particular.
 

Super Senior Advice

by Robin Marriott, Profile on Bard Consulting, PERE, June 2011

PERE profiles a selection of professionals from the US and Europe who investors see as in-demand super-senior consultants, including Roy Schneiderman of Bard Consulting, who is recognized as a leading independent fiduciary for public and private investors.
 

Investment Manager Co-Investment: Does Co-Investment Really Help to Align the Interests of Investors and a Manager?

by Roy Schneiderman, Institutional Real Estate Letter – North America, April 2011

While requiring manager co-investment in institutional real estate ventures may sometimes serve to align manager and investor interests, this is not always the case. Here, Schneiderman explains when co-investments have negligible impact, when they create misalignment, and when they are beneficial.
 

Call in the Bench: In Times of Trouble, Special Project Consultants Offer a Second Opinion

by Roy Schneiderman and Faye Beverett, The Institutional Real Estate Letter – North America, January 2009

Project consultants (Independent Fiduciaries) can be a useful tool for institutional real estate investors when there is a need for specialized investment expertise, the primary real estate consultant has a conflict, timing issues necessitate using a new firm, or when an investor simply wants a fresh perspective or a second opinion. Schneiderman and Beverett explain the benefits of specialized consultants in the post-crisis real estate market.