The Handbook of Commercial Real Estate Investing

Citation

Ooi, J.T.L. (2007), "The Handbook of Commercial Real Estate Investing", Journal of Property Investment & Finance, Vol. 25 No. 2, pp. 212-213. https://doi.org/10.1108/14635780710733870

The Handbook of Commercial Real Estate Investing is a prized contribution to the world of real estate investment. Supplementing the many existing texts which focus on the academic side of investment and portfolio theories, the handbook provides a “real world” perspective on how the commercial real estate investment process actually operates. This is not a book on how to construct discounted cash flows models. Instead, it is a comprehensive handbook of “best practices”, which will appeal not only to graduate students and teachers, but also of great relevance to mid‐ and senior‐level managers involved in the real estate investment process. The overall viewpoint of the book is that of the professional investment manager, who may be a manager of a public real estate investment trust (REIT), an investment advisor to pension funds, a general partner in an investment partnership, or an advisor to foreign investors through any one of a number of investment vehicles. The 393‐page book is divided into four parts as follows:

1. 1.

   Part I – real estate investment process. This covers a few introductory topics on how value is created in real estate; market demand drivers; property type characteristics; major players; and understanding investor objectives.

2. 2.

   Part II – transaction management. This is directed at managers involved in investment transactions such as acquisitions and dispositions. It covers operational issues such as sourcing, screening, and preliminary underwriting; preliminary approvals and negotiation; due diligence; and final underwriting and closing.

3. 3.

   Part III – asset management. This deals with the evolving role of the asset manager corresponding to the transformation of real estate from individual to institutional ownership. It covers several functional topics on asset manager and his critical involvement in investment transactions, tenant relations, building operations and financial reporting.

4. 4.

   Part IV – enterprise management. This covers more strategic topics of concern to senior managers and board members such as leadership; strategic planning; market positioning; risk management; and governance.

In addition, there are two appendices to the handbook: Appendix A describes the problems and opportunities of applying technology to the real estate investment process, particularly due diligence on prospective investment assets. Appendix B contain samples of various types of legal documents associated with real estate investment, namely Letter of Intent, Purchase Agreement, Tenant Estoppel Certificate, Lease Abstract, Closing Statement, Listing Agreement, Confidentiality Agreement. At the end, there is a 12‐page glossary to provide a definition of terms commonly used in the real estate industry.

The materials covered in the handbook, on their own, are not sufficient to be adopted as a primary textbook for a graduate course on real estate investment. Nevertheless, it serves as a useful supplementary text to provide students with a real perspective of commercial real estate investments. The individual chapters are written such that they can be read independently. Overall, the handbook is a valuable resource for comprehensive charts, forms and check lists commonly used during the real estate investment process. For example, there is a four‐page due diligence checklist that covers comprehensively important aspects of the due diligence process. In addition, potential pitfalls are highlighted clearly in boxed‐out Litigation Alerts and Early Warnings. Another valuable aspect of the handbook is the final section, which covers more strategic issues, such as leadership, planning and governance of real estate business enterprises. Reasons as to why the real estate industry traditionally has had so much difficulty in adopting many of the management concepts and tools that have been successful in other industries are discussed along with several other interesting topics such as establishing a nurturing work environment, establishing sustainable competitive advantage and managing real estate enterprise risks.

The author, John McMahan, has been at the forefront of real estate practice and education for over 45 years as an entrepreneur, professional manager, board member, consultant and educator. He has served as chairman of two REITs and numerous governing boards such as the National Association of Real Estate Investment Managers and the Urban Land Institute, among many others. He also taught “Managing the Real Estate Enterprise” at the Stanford Graduate School of Business for 17 years and more recently, “Institutional Real Estate Investment” at the University of California at Berkeley for five years. John is also to the author of Property Development published in 1976 (and 1989) and Cases in Commercial Real Estate Investing published in July 2005.