Real Estate in Frontier Markets
Course Number 1405
Professor of Management Practice Arthur Segel
Winter; Q3; 1.5 credits
This course is intended for any student serious about a career in managing, developing, or investing in real estate. This course is distinctly not for those thinking about real estate as a hobby or for those considering real estate for limited personal investing.
- How to analyze a real estate project;
- How to assess the risks in projects and portfolios;
- How to be a better deal maker;
- How to manage a project;
- How to exit a project; and
- How to be a leader in the industry.
Real estate in frontier markets is best learned through a rigorous and thorough understanding of the context, the role and the perspective of actors from both the private sector and the public sector.
Two themes recur throughout the course. The first is that market inefficiencies and the dearth of usable information can elevate perceived risk. A better understanding of the true risk (and how to mitigate that risk) can create substantial margins of profitability. Traditional real estate practices can exacerbate or undermine development opportunities in frontier markets. Failing to recognize the disproportionate role of government in these environments can derail the best thought through venture. In such scenarios the ability to mitigate risks is even more critically needed than in a traditional investment environment.
The second theme is that the poor have purchasing power and represent a viable market as illustrated through affordable housing initiatives in the US and in profitable commercial and residential projects in the developing world. Market gaps (absence of products and services) and density of population can lead to opportunities. Although financial distress and the lack of infrastructure (both hard and soft) impede development, they can be overcome by innovation and creative partnerships.
The course investigates how entrepreneurs and investors analyze real estate development options. Cases illuminate how developers and lenders analyze markets and development opportunities, with emphasis on the pricing and management of risk.
Through cases, the course analyzes the legal and financial infrastructure for real estate finance in frontier markets. We will examine changing institutions, new private sector actors and evolving public policies. The course will address the connections (or lack thereof) to global capital markets. Cases include pure private sector responses, not-for-profit initiatives and public-private sector partnerships and demonstrate how capital markets and investor interest are turning to foreign emerging markets.
Course sessions will revolve around cases from a diverse variety of perspectives and environments. Most of the cases will be drawn from international experiences. Supplementary materials will be distributed for further background on individual cases. Grades will be based on class participation (50%) and a final exam (50%).