REIT Valuation: Crash Course

[@gatsbyliu1084]

No bull shit, no advertisements, no fake courses, and only legit content. This channel is so under rated !

[@financialmodeling]

Thanks for watching! (Note: We do offer courses. But we try hard to make them "not fake.")

[@eagerbeever22]

This is by far the Best Video I've found on REIT Valuation on any channel ! Great Job !

[@financialmodeling]

Thanks for watching!

[@pilarrojas965]

Amazing! saving for the courses!

[@financialmodeling]

Thanks for watching!

[@nicolassuarezblog]

GREAT work, thanks for sharing, really good, king regards

[@financialmodeling]

Thanks for watching!

[@yoelherman1951]

Thanks a lot. Two question about this topic: (1)What’s the purpose of the “minimum cash balance” in the model, and why is it calculated as a percentage of operating expenses? (2)By assuming a declining Change in WC % of revenue, you're actually assuming that’s the company credit relation with is customers and suppliers in getting better over time, right?

[@financialmodeling]

All companies need a certain amount of cash to operate, pay employees, pay for expenses that come up, etc. The Change in WC here is so small that it's almost irrelevant, but yes, if it decreases, the company's position relative to suppliers and customers improves over time.

[@safeershahid9150]

Sir your channel is just superb. Really attractive and competent content and material. but i can't find the practice sheets for practice. please provide the Practice files as well. that will be so nice of you!

[@financialmodeling]

You can click "More" or "Show More" under the video or go to the first pinned comment on newer ones to get the resources.

[@xstriker831]

Thank you so much, this was helpful

[@financialmodeling]

Thanks for watching!

[@FConradez77]

Amazing video, very informative

[@financialmodeling]

Thanks for watching!

[@franco521]

Beautiful video, thank you!

[@financialmodeling]

Thanks for watching!

[@alfredlee4629]

Thanks for this informative video !

[@financialmodeling]

Thanks for watching!

[@Luke-nh5tu]

what book would you recommend ro study source to go into more depth of REIT valuation?

[@financialmodeling]

I have not really seen in-depth books on the topic. Green Street has some good materials. We also offer a comprehensive course on real estate (properties and REITs): breakingintowallstreet.com/real-estate-modeling/

[@quietlike]

Did you create the soreadsheets or are they available from each reit? Thanks so much for the in depth tutorial

[@financialmodeling]

We created these from scratch. REITs do disclose some financial information in Excel format, but not in a way that's ready to use in a financial model.

[@vapa5761]

Great Video, glad I found your channel. So I just checked out your website and am keen in purchasing your BIWS platinum package. So if I happen to buy this, would I be provided with the template for your reit modelling ?

[@financialmodeling]

Thanks. Yes, you will have access to all the REIT modeling and valuation templates in the course if you purchase the Platinum package.

[@wheresmyhandle]

Hi thanks for the vid! Is the simple projection model spreadsheet available? I don’t see any links... thanks!

[@financialmodeling]

Click "Show More". Scroll to Resources. Click the links.

[@davidluo1234]

Do REITs purchase properties unlevered or do they take out a mortgage on each property? Is the debt on a REIT's balance sheet representative of the mortgages they have taken or is it further back leverage?

[@financialmodeling]

Virtually all REIT deals use leverage because REITs do not have much cash on-hand to use for acquisitions. The Debt on a REIT's Balance Sheet is mostly property-level Debt used to fund acquisitions and developments.

[@davidluo1234]

So that means a REIT cannot take the money it has raised from debt and equity to just purchase the equity portion of a property, kind of like what a PE fund does with its portcos? Instead, the debt is used as a mortgage by the REIT directly instead of using bank loans?

[@financialmodeling]

@@davidluo1234 It varies by the deal. REITs tend to have both property-level and corporate-level debt.

[@Gmanation765]

When valuating a REIT, are you using the trust's financials, or the financials for the L.P.? I've found most REITs are set up this way, and am wondering best practice for truly capturing performance of the reit. Cheers!

[@financialmodeling]

It depends on how you've set up the model, but you should capture all the REIT's outstanding shares, including OP and DownREIT units, in the analysis. So you should use whichever filing gives the information on all the shares and dilutive securities associated with the REIT.

[@alexdu9009]

hi, a question about REIT's risk exposure to their counter party please. Who determine the fair market value of the mortgage assets? Can the counter parties/lenders take ownership of the pledged assets if the counter party solely determine the assets value is below the loan lend to the REIT? in other words, is the REIT in control on timing of sales of assets during crisis time?much appreciate your response.

[@financialmodeling]

Mortgages on a REIT's Balance Sheet are recorded at historical cost. They are marked to market only in a valuation, like the NAV model, or in a liquidation/restructuring/bankruptcy scenario. Lenders cannot seize the assets just because their market value has fallen - the REIT itself would also have to be in serious trouble.

[@mickxdz]

Awesome work, do you mind sharing the european reit spreadsheet?

[@financialmodeling]

It's inside our Real Estate course. We may do something separately on that example here in a future video.

[@Perfectvlogss26]

Can you please let us know we can get this excel sheet

[@financialmodeling]

Click "Show More" and scroll to the links.

[@methioswar2916]

Still to complicated for me. Any tips as to where to start?

[@financialmodeling]

We might eventually publish a simplified or short version of this. Unfortunately, it is a relatively complicated/specialized topic, so I don't think there's an easy approach to learning everything.

[@veryclearwater]

Great work. Can you also do a commercial real estate REITs as well?

[@financialmodeling]

??? I don't understand your question. We have case studies on individual properties if that is what you are asking about.

[@user-pi9tz7ij4f]

Hotel would be commercial real estate! on this video!

[@danieldesantiago9902]

Where do you find all this info for a company??? its not as easy as looking in the financial statements like for stocks

[@financialmodeling]

If the REIT is publicly traded, Google [REIT Name] "investor relations" and you can find the information there. You can look up Cap Rates based on market data from the big real estate brokerage firms, such as CBRE, JLL, etc.

[@Progameroms]

you are top notch

[@financialmodeling]

Thanks for watching!

[@Gid-J]

Can you do a Reit valuation for Canada pls?

[@financialmodeling]

We have IFRS-based examples and one Canadian deal example in our Real Estate Modeling course (for Pure Industrial REIT). Not focused on real estate in this channel currently, but may revisit it in the future.

[@LifeStyleGoalsS]

can you share the excel?

[@financialmodeling]

Click "Show More" and follow the links.

[@TheRasins]

Why do you say that an advantage of DCF is that you don't have to forecast debt,interest?

[@financialmodeling]

Because in an Unlevered DCF, you don't need those items since you are only calculating Free Cash Flow to Firm AKA Unlevered Free Cash Flow. It better represents all investors in the company and requires less work/time spent forecasting.

[@jackkulinski8132]

Can anyone give me an idea about the REIT ticker symbol "TWO"? It's trading around $4 right now. P/B ratio is 0.30. It seems like a steal right now but I don't know

[@caseyle4447]

I wouldn't invest in it. I just looked at their balance sheet and they have so much in liabilities. Also, they had a net loss in 2018.

[@jackkulinski8132]

@@caseyle4447 Appreciate it. Thanks

[@beyondthenorm1257]

what software are you using'''looks great

[@financialmodeling]

Excel, PowerPoint, Camtasia

[@TheUnknownNexus]

Can we do an LBO on a REIT?

[@financialmodeling]

Yes, but they're not that common because IRRs tend to be lower, REITs are very capital intensive, and it's difficult to add much additional leverage to most REITs.

[@galoreweezing5224]

This walk through is damn fast

[@financialmodeling]

Yes, that's why it's a "Crash Course" rather than a book or 1-hour-long video. We do have written versions of these tutorials within our courses, and the material is typically broken up differently (focusing on one concept in 10-20 minutes rather than presenting everything at once).

[@galoreweezing5224]

I nearly crashed myself pepelaugh