Exam 1

Name

Institute

Assignment
Exam 2

Question 1

The property valuation process determines the market value of a real estate purchase, which

is based on the prices that a seller is willing to receive for his or her own property. On the

other hand, it's said that both parties are aware of the information, and neither one is forced to

either to trade away or buy it. As much has been said already, but it is essential to draw

attention to the fact that the value of a property is not equal to its price. A specific instance of

this occurs when a property owner finds that his property is less valuable than what it is

worth but is forced to sell it even though the market value is above the distressed level.

Although property values can be assessed using three different methods, the three approaches

are as follows:

1 Income Approach

While income and property valuation methods are popular in commercial real estate and

rental properties, the expansion approach is less common in residential real estate. The

primary goal of the use of the property-based model is to arrive at the current yield of a

property by dividing the net profits by its capitalization rate of return.

2 Sales Approach

Market data is used to measure to estimate the price of a real estate transaction is a number of

things is used in this strategy. If other properties that have recently sold in the area have

gotten an increased or reduced in price are used as a reference, the current property's sale

price can be estimated. When you can't find any function to compare with your target, you're

searching for, you must look for comparable assets, also known as comps. Many things affect

the quality of a site, but some are clearly not all. These include floor space, quantity, quality,

and age of the building; but the most significant aspect is where the property is located.

Property values need to be compared to be adjusted since two properties do not conform to

one and usually vary by such a great degree. When assessing properties, real estate appraisers
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must understand the distinctions that allow for comparisons to be made more precisely, it is

critical that they know about their own standards of comparison.

3 Costs Approach

It is a technique used in real estate valuing to consider the value of the land as well as the

initial costs of development (as well as physical and functional depreciation) plus everything

that has been removed from the property value. This method is used in instances where

property is difficult to sell, such as schools, hospitals, government facilities, and property

which have a historical value like condominiums and townhouses.

For market value, recent transactions should be compared to nearby properties that are similar

in size and location should be used. The cost of a new foot is usually calculated by figuring

out the total number of square feet of the building you want to replace and multiplying that

number by the price per square foot.

REIT Valuation

In addition, these other types of financial firms use the valuations of their properties to guide

their decision making but have less accurate markets to which they must turn to find

appropriate valuation information. If you attempted to value Apple by using its balance sheet,

you would be grossly underestimating its true value because its balance sheet values (as

reported in history) do not reflect its real value.

Real estate investment trusts are distinct. On the one hand, the assets held in a REIT are much

more liquid than those held in fixed investments. On the other, the real estate market there are

many fixed assets actively being purchased and sold. This means that the property market

serves as a very good gauge for measuring the fair market value of an asset's portfolio for real

estate investment trusts.

Exam 4

Further, like many REITs, they must pay out their earnings as dividends and this further

diminishes the possibility of generating above-market return, the dividend discount model is

superior

REIT valuation is commonly performed by analysts using the following 4 approaches.

1. Net asset value (“NAV”)

2. Discounted cash flow (“DCF”)

3. Dividend discount model (“DDM”)

4. Multiples and cap rates

Net asset value The most widely-used valuation method for real estate investment
(“NAV”) trusts is the Net Asset Value (NAV) approach. As opposed to
predicting potential cash flows and discounting to represent them in
the present (as is done with conventional approaches), the NAV
methodology computes a REITs valuation by measuring real
estate's market value. As a consequence, the NAV is commonly
used in the valuation of REITs since it makes use of market values
in the real estate markets to arrive at their value.

Discounted The discounted cash flow approach is similar to traditional DCF

cash flow valuation for other industries.
(“DCF”)

Dividend One thing all real estate investment trusts have in common is that
discount model their tendency to pay out almost all of their earnings as dividends.
(“DDM”) That one helps drive down the price of their shares: the dividend
discount model. Anticipated dividends have been discounted by the
expense of the DDM to present value, leaving little to accumulate.

Multiples and The 3 most common metrics used to compare the relative valuations
cap rates of REITs are:
Cap rates (Net operating income / property value)
Equity value / FFO
Equity value / AFFO
Exam 5

Question 2

Private equity companies play an important role in the economy: They may aid small

businesses, which allows for capital to be raised and profit to be gained by investors.

particularly during difficult times such as during the COVID crisis, it is vital for businesses to

have additional sources of capital and business experience to assist in recovering more

quickly and more easily.

Even in the most optimistic forecasts, the odds of success do not always favour any public-

equity company. A main success factor is predicted to be found in companies that overdeliver

on the expectations of their stakeholders – staff, portfolio companies, and LPs. This paper

looks at projected AUM growth and shows how the firms in the hypothesis supports that

companies should meet the various stakeholders' expectations, as shown by an examination

of their investment portfolios

While many businesses are listed on the stock market, not all of them can be considered

publicly held because most have private equity (equity and debt securities) mixed in with

them. For most investors, private equity investing means a private equity firms, venture

capital, or investment by a fund of an individual with a company whose primary focus is

equity. An investor has a targeted objective and a purpose to accomplish, regardless of his

mission, each of these kinds pursues the same strategy: To expand, advance, or grow a

company, the equity is necessary. In order to do this, they help provide working capital for

business growth, advancement, creation, or restructuring. Additionally, every investor should

be aware of these private equity investment strategies and their strengths, as described in the

following.

 Taking advantage of existing stock or debt (or using capital for debt) is known as an

LBO. LBO is a way for a company to increase its stock and/debt capital base when it

purchases another company. Businesses participating in leveraged buyouts generally

Exam 6

have been profitable for a long time and cash flows are abundant. he selling side of a

business believes it will make an overall profit and seeks an offer that will result in a

rise in valuation so that they can pay back the amount of debt without having to

resorting to repaying the investment.

 (money lenders) agreeing to provide a loan in advance in order to buy an additional

interest, and not being responsible for repaying it This is done by the financial

sponsor issuing debt which looks at the cash flows of the target to evaluate how much

interest and principal the target will have to pay out, and how much the target owes in

relation to these funds.

 Many buy-money-to-borrow partnerships have a balance sheet with a debt component

of 60% to 90% of the purchase price.

 The traditional form of growth capital consists of a venture fund that is seeking

financing to fund larger scale up operations, finance a takeover, or to penetrate new

markets, or buy into an established company.

 Growth-Cap Corporation normally yields both a stream of sales and operating

income, but is too cash-short to make significant investment in other ventures, like

buying out another company or undertaking an acquisition. In certain ways, this lack

of size has a stifling effect on these companies' ability to raise capital, which, along

with the increase in expansion, hinders their ability to keep it going.

 The owner's main objective is to realise monetary gain, and pass the benefit onto

partners in the form of extra capital. When selling to private equity, this frees up his

or her personal capital for an increase in personal net worth.

 When private equity investors lower the amount of financing needed for a leveraged

buyout or major expansion, it expansion of the current assets is used as a primary

source of financing. This definition, which includes debt and stock or bond offerings
Exam 7

that are lower in seniority than the majority of the overall stock or bond structure,

includes common stock (or preferred equity).

 As used by smaller firms can't get a high interest rate of return in the capital market, it

is best to use Mezzanine as a bridge to the gap. This presents these firms with the

ability to have access to greater credit than banks and credit card issuers are willing to

grant.

 To reflect the increased risk, debt holders demand a higher return, their return on

investment is typically outperforms more senior lenders.

 As with any partner investment in a trade with Mezzanine Resources, Mezzanine

stakeholders will reap certain advantages, such as having to put in a minimal equity in

order to obtain capital.

 Venture capital traditionally goes to older businesses, businesses in the first stages of

growth, newer ventures, and start-up firms. In several cases, new business models,

marketing ideas, technologies, or products have not yet had proven themselves as

successful, and even ventures which use money in order to expand their initial track

record.

 When these businessmen and women lack money, the goods and innovations

produced by them are not possible for the masses to realise their full potential. In

particular, entrepreneurs will often turn to Venture Capitalists for additional funds.

high-return investments (to balance this one's own personal loss of capital risk) must

be provided to VCs if they are concerned about possible losses (or gains) because of

large sums are at stake (or one is reluctant to invest).

 Funding is best for companies that need significant investments that can't be made by

any other than by other means, including those that are made by credit.

 The Distressed and Special Situations

Exam 8

 This is a general kind of investment that can be made in the struggling firms'

vulnerable assets, such as stock or bonds. If a company should go through a

distressed-to-to-to-control or a loan-to-to-own, the lender gets new debt instruments

and buys shares in anticipation of being able to take control of the company's

ownership.

 When an investor lends money to a lot of debt or takes control of a company in order

to facilitate a turnaround, this. In exceptional cases, such as a merger and acquisition,

restructuring, bankruptcy, and extraordinary events may be applicable.

 The effectiveness of this investment strategy should also merits mention that, among

private equity funds, hedge funds use this method.

Conclusion

The alternative investment class (venture capital) consists of non-listed capital. either with

their sole objective being to invest in private companies or takeover of public ones, the

private equity firms set up independent and/investors focus on buying out and selling

corporations, resulting in the public company being shut down As both institutional and retail

investors finance private equity, they supply the money, which is used for technology and

new business and the world-sector and sector-sector development, as well as industry growth

and to start or continue a firm's balance sheet.

Exam 9

Question 3

Part a

A)

Management Fees = (Initial Capital * Return on Investment) * Management Fees %

= $(100 * 1.4) * 2%

= $140 * 2%

= $2.8 million

B)

Incentive Fees = [(Initial Capital * Return on Investment) - Initial Capital - Hurdle Rate fees -

Management Fees] * Incentive Rate

= [100*1.4 - 100 - 5%*100 - 2.8] * 25%

= [140 - 100 - 5 - 2.8] * 25%

= 32.2 * 25%

= $8.05 million

C)

Investor’s Effective Return = [(Initial Capital * Return on Investment) - Initial Capital -

Management Fees - Incentive Fees] / Initial Capital

= [100*1.4 - 100 - 2.8 - 8.05] / $100

= [140 - 100 - 2.8 - 8.05] / $100

= 29.15%

Part b

The phrase "alternative investment" could recall an investment that is only accessible to large

institutional investors or an investment typically too difficult to understand by the average

investor. This is a common misunderstanding and may have been a bit accurate until recently.

However, with the recent changes in the regulation, the access of a much wider audience to
Exam 10

this type of investment and the advantages are significantly better than you would imagine.

Precious metals, oil and gas, risk resources, hedge funds, real property – all belong to the

investment class alternatives or alts.

1. Unrelated with the stock market in general

It is probable that every investor on the stock market has endured big winnings, and

significant losses for a long time. Anybody who is on the verge of retirement or is now retired

has seen the heartburn fall, often dramatically. Diversification is one of the principal reasons

why investors are looking for alternative investment. Latest surveys of top U.S. investment

advisers by iCapital Network have shown diversification and good returns as two of the main

reasons to invest in alternatives.

Unrelated to the stock market, this investment would not adjust compared to the market ups

and downs. Many investors believe that REITS or other publicly traded alternatives are

diversified to find that they are as unpredictable as they are and don't add any value to the

investment portfolio.

2. Volatility deficiency

The share price fluctuates in conventional public investments based on many factors, several

times not directly connected with a company's success. Because private investment shares are

not traded publicly, public investment uncertainty is avoided. Furthermore, your investment

is usually supported by a real asset.

3. Ownership direct direct

What you buy is a paper commodity in most public investments – the discounted value of the

projected future earnings. You really have little to own. You are removed from keeping your

name in the real estate deed even though you invest in a REIT.

You own certain bottles of wine or that oil painting directly if you purchase fine wine or art.

You own the property directly if you have purchased a rental property. You have a lien on the
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property if you purchase a mortgage bill. Or, if you invest in a private fund, you usually own

any assets you buy directly.

4. Direct tax advantages

Significant tax gain may also come from alternative investments. You will retain your benefit

more because of the arrangement of many alternative investments. You become a partner to

the Fund or syndication of many private alternative investments and as a result, the tax gain is

transferred directly to you.

The two main tax advantages include passive depreciation and long-term treatment of capital

gains. Many real estate or trade unions have to be deducted from the net profits reduction in

gross income depreciation costs (non-cash expenses). The depreciation/depreciation tax

treatment of oil and gases assets is very positive.

5. High revenue

Not all private alternatives are cash-flowing investments – i.e. they return you on a monthly

or quarterly basis – but many do, mostly in the form of cash-flowing real estate strategies.

Some can generate high revenues in the 8-10% annual range. Many funds will be organised

such that the investors will be paid in cash first.

Anyone who has attempted to raise revenue from public investment, including CDs, shares,

or payment dividends, knows how hard it can be. We chat regularly and in general in a small

digit with investors who strive to produce cash flow in their portfolios. The public markets, as

has already been discussed, can be extremely unpredictable and only lead to a small yield.

6. Low investment liabilities

The majority of busy investors value their time and manage an asset or portfolio actively

takes a great deal of effort. Take Immobilien as an example, as most investors are thinking

about starting to invest actively. After you are excited about how much work is involved and

how big a learning curve is, when you buy a one-family home as rental or maybe a small
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multifamily apartment. Educators are still supplying themselves with their "5-stage plan for

success," but it is hard to find co-investors, get funding, organise the offer, find and assess

assets. Basically, it's hard to find. Many investors are giving up at this stage and assume that

no other choices exist.