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Randy’s Custom Workshop:  Selected Topics

  • Introduction:  Scope and learning objectives

  • Market pathologies: (1) Hubris before the GFC; (2) investing in Tokyo land during the 1980s; (3) crypto mania; (4) real estate limited partnerships before the 1986 TRA; (5) America’s edifice complex; (6) zero cash flow:  lessons from the DOT.COM bust; and (7) real estate as both a money laundry and morality bath. 

  • How to improve institutional investment management practices 

  • What is an asset class?  Investors should invest in risk factors and not is asset classes; how to use an attributes approach to investing  

  • New sources of capital for alternative investments; should 401(k)s invest in the alts?

  • Practitioners live in a stochastic (uncertain) world but, unfortunately, they use deterministic methods, thus leaving value on the table and assuming uncompensated risks.  

  • Tutorial:  Statistics and stochastic arithmetic, Monte Carlo, and multiple regression

  • Options approach to the capital stack; how does tail risk affect the blended cost of capital (WACC)?  

  • Lease clauses, including the right to escalate, using Monte Carlo; is the rental growth rate relevant to the valuation of the option to escalate?

  • Optimal benchmarks using shortfall analysis that incorporates the volatilities and correlation of the portfolio and the benchmark; managers (and investors) may suffer when they ignore volatility.

  • Optimal stochastic development using constrained optimization; shadow price of land and capital (WACC)

  • Does leverage increase portfolio diversification?  No, increased beta risk swamps the marginal value of diversification.  

  • Real estate quadrant linkages; forecasting property returns using traded REIT and BBB-rated CMBS performance

  • Modeling optimal fee structures using Monte Carlo; creating fee structures to motivate managers better

  • Bayes Rule:  Predicting the likelihood of false positives and negatives when recommending managers 

  • The risks of overbidding for deals:  Modeling the winer’s curse using Monte Carlo

  • Quality adjusting performance; does quality predict performance?

  • The true volatility of private real estate; smoothed (serially correlated) returns underestimate risk

  • Asset allocation with liabilities (surplus maximization) and shortfall constraints

  • Modeling cap rates, liquidity and total returns; the problems of omitted variables and risk factors

  • Volatility and liquidity at the national and MSA levels; does liquidity predict performance?

  • Monte Carlo applications: (1) Private listed REITs, and (2) a highly structured joint venture 

  • Modeling public pension fund underfunding and the tilt toward opportunistic funds and alts

  • Modeling the hedging characteristics of property; what makes a good hedge against inflation?

  • Properties as bond substitutes (e.g., net lease and self-storage) and the use of credit spreads to infer corrected expected returns 

  • Modeling office-to-apartment conversions; in which MSAs are conversions a compelling idea?

  • Modeling the Winner’s Curse:  The likelihood of overpaying in a bidding war; smart bidding strategies

  • Better performance reporting and asset management using risk metrics; a critique of current methods

  • Should pension funds allow their managers to leverage deals?  The pathology of manager-leveraged assets

  • How do real estate conferences and professional associations screen investment information, propagate myths, and create barriers to entry, all to the detriment of investors? 

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