Many real estate professionals regularly engage in conversation about real estate capitalization rates ("cap rates"). But how well do they understand where they come from, what they signify, and how they can be applied to understand real estate valuation across markets, over time and through the development process? Part of the difficulty is that the cap rate reflects so many different components of a real estate project’s valuation. It is, in effect, an "all in" index incorporating conditions in capital markets, investor perceptions of regional and sector differences, expectations on the stability or potential growth of cash flows, and projections about future market conditions. There is a lot of information in one number.
This webinar explores the multiple inputs that determine a cap rate and explains how a developer, investor, lender, or broker can apply that understanding to making better, more informed decisions in the real estate market. It also illustrates how to use the projected cap rate of a development project as a "hurdle" for determining the project's economic viability for attracting capital investment.
Charles A. Long
Junction Properties, LLC
Charles A. Long is a developer specializing in mixed-use infill projects, including acquisition, entitlement and public private partnerships.
He served for eight years as city manager in Fairfield, California. Since 1996, he has worked as a consultant to public and private clients on development and management. He has held interim positions for several cities in finance, redevelopment and management, including Interim Town Manager of Mammoth Lakes and Interim City Manager of Pinole and Hercules, California. His assignments have been diverse including negotiating development agreements, writing redevelopment plans, pro-forma analyses, strategic planning, economic development, organizational development, capital and financial planning, budget reform, base reuse and alternative energy development. He has overseen over $600 million of public financing in his career.
He is currently developing two multi-family projects in Oakland, CA, one at 78 units, the other at 97 units. Construction on these is expected to begin in the third quarter of 2017.
Mr. Long is a full member of the Urban Land Institute and a member of the Public Private Partnership Council. He is a faculty member of the ULI Real Estate School, teaching both in the US and internationally. He has served on eighteen ULI Advisory Panels, chairing panels in Salem, OR, Boise, ID, Dallas, TX, Buffalo, NY Pasco County, FL and San Bernardino, CA. He received the 2012 Robert M. O’Donnell Award for distinguished service in the advisory program. He is the former co-chair of the Sustainability Committee for the San Francisco District Council and, in that capacity, initiated several reports including recommendations for streamlining California’s environmental review process, a directory of financing sources for building efficiency and a survey of resiliency best practices in the Bay Area. He is the author of the book, Finance for Real Estate Development, published by ULI in April 2011 and winner of the 2012 National Association of Real Estate Editors Silver Award.
Mr. Long has a BA in economics from Brown University and a Masters of Public Policy from U. C. Berkeley. He served in the U.S. Army as an infantry platoon sergeant.
- A comprehensive understanding of how existing and anticipated capital and real estate market conditions, property characteristics and regional and sector differences determine a particular real estate capitalization rate.
- How real cap rates determine property value in investment decisions over a time horizon.
- How to evaluate the viability of a real estate development project by comparing its "development cap" to the current market cap rate.
- How to analyze and portray investment and development opportunities based on existing and projections of future cap rates.