The Private Equity Real Estate Model is designed to eliminate the appraisal bias associated with traditional industry benchmarks and appraisal-based valuation methodologies. Combining property-specific and property market data, the model not only produces risk estimates for real estate using methods that are consistent with those used for traded securities, but also traces and quantifies the sources of risk at both the property and portfolio levels. Because the model is linked to Northfield’s Everything Everywhere Model and Open Optimizer, risk metrics and portfolio construction tools normally associated with stocks and bonds are now available to global property owners.
- Relates each property’s risk to property-specific characteristics such as financing, lease turnover, tenant credit, as well as economic factors
- Consistent factor structure allows for easy comparison across properties and portfolios
- Permits users to answer questions such as:
• Changing financing structures
• Hedging interest rate risk
• Impact of adding or subtracting a property
• Risk comparisons across markets and land uses