Emerald Group Publishing Limited
Copyright © 2004, Emerald Group Publishing Limited
There are a number of good texts in the market on real estate finance and investment, such as Fundamentals of Real Estate Investment by Jaffe and Sirmans, Real Estate Finance and Investments by Brueggemen and Fisher, Real Estate Investment – A Capital Market Approach by Brown and Matysiak, and Commercial Real Estate Analysis and Investments by Geltner and Miller. Recently, I chanced upon a new title devoted to the exploration of the key concepts of real estate finance and investment strategy. The book, Real Estate Finance and Investments: Risks and Opportunities, is written by Peter Linneman, who is the Albert Sussman Professor of Real Estate and Public Policy at the Wharton School of Business, the University of Pennsylvania. Besides having an impressive list of scholarly publication, the author has a wealth of experience in the industry, serving as a consultant to numerous leading real estate companies and investors around the world.
Written with the explicit aim of helping readers to evaluate risks and opportunities of real estate assets and investments, the 218‐page hardcover book is divided into 20 chapters – each addressing a specific topic in real estate finance and investment. Most of the major topics on real estate finance and investment, such as pro forma and feasibility analysis, leverage and financing decisions, are covered in this book. Given the author's impressive track record as an academic and as a practitioner, the book provides a good balance of theory and practice. Financial models and quantitative techniques for decision‐making are succinctly presented. In addition, relevant illustrations are provided and common mistakes are highlighted. Unlike some texts which focused on the framework for evaluating investment proposals, the author's consistent message in this book is that there is no singular or simplistic answer to any real estate finance problem. As pointed out by the author in page 5, “Never think that the numbers can make investment decisions for you. A mastery of the ‘the numbers’ is important, but merely the starting point for investment analysis. So, learn how to do ‘the numbers’, but understand that is just (barely) the beginning.” It is equally important for analysts to appreciate the significance of the numbers and assumptions driving their feasibility analysis.
The book also covers several interesting topics that are not commonly found in traditional texts on real estate finance and investments. Chapter 6 provides a useful framework on how to carry out a real estate due diligence analysis prior to acquiring an asset. This process involves analyzing both facts about the property and robustness of the assumptions in the following areas:
title, survey, environmental;
loan documents; and
neighborhood and market.
Overall, I have enjoyed reading this book. It is well written, the presentations are concise and interesting stories abound. It really makes real estate finance and investment exciting. More than just being a compilation of knowledge, the book contains many words of wisdom from a seasoned practitioner and accomplished scholar. Personally, I like the closing thoughts at the end of each chapter, which is more than a synopsis of the material covered in the chapter; these essentially contain invaluable lessons and advice from the author. This book will provide practitioners and academics with fresh inspirations on how to blend the science and art of real estate decision‐making. I have no hesitation recommending this book as required reading for my students in real estate finance and investments. The hardcover book, which can be purchased directly from Linneman Associates, is priced at US$135.