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27 Cards in this Set
- Front
- Back
capitalization rates
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net of value appreciation or depriciation
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market-extraction method
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when cap rate is derived from market
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band-of-investment method
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individual rates of interest applicable to properties that use both debt and equity financing are weighted to arrive at market rate of capitalization
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cash-on-cash return to equity investor
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is knownas the equity dividend rate
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Build up method:
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-pure interest- interest that can be secured by government bonds
-rate of nonliquidity- rate necessary to compensate for negative inability to cash in the investment -recapture premium- retun on investment or an adjustment for appriciation -rate of risk |
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gross icnome multiplier (GIM)
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relates total annual income to market value
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steps in GIM
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1) assertain gross annual market income
2) derive GIM from market 3) apply GIM to subject property |
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mezanine finance
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financing generally provided in the form of subbordinated debt and equity kicker frequently in the context of LBO transaction
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buyout
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is a form of private equity transaction in which the nuyer acquires from the seller a controlling stake in the equity capital of a target company
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exit routes
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-IPO
-secondary market -management buyout MBO -liquidation |
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ratchet
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mechanism that determines the allocation of equity between shareholders and the management team of the private equity controlled company
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clawback provision
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requires the GP to return capital to LPs in excess of the agreed profit split between the GP and LP
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distribution waterfall
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mechanism providing an order of distributions to LPs first before the GP receives carried interest
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NAV
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Value of fund's assts less liabilities corresponding to the accrued fund expenses
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contango
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if the future price of comodity is above the spot price
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backvardation
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if the future price of commodity is below the spot price
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3 types of yeilds from commodities
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1)collateral yeild
2) roll or convinies yeild 3) spot price return |
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collateral yeild
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the return on cash used as margin to take long derivatives exposure
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roll yeild
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return from rolling forward the maturity of the derivatives position
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geometric return of the average commodity
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is close to zero but the geometric return of the commodity index is strong
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core commodity investment approcaches
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1) index fund
2) index-plus strategy 3) active long only strategy |
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one approximate method of estimating the expected return of a fixed income arbitrage fund is
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to multiply the amount of credit spread by the amount of leverage
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band of investment method
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is the only method of capitalization rate determination that considers the financing mix used in real estate transaction
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the market extraction method requires only two inputs
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comparable property's sales price and "net operating income"
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venture capital characteristics:
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-primarily equity funded. use of leverage is rare or very limited
-returns of investment portfolios are generally characterized by very high returns from a limited number of highly successful investments and a significant number of write-offs -venture capital firms monitor achievemtns of milestones defined in business paln and growth management -expanding capital requirement if in the growth phase -assessment of risk is difficult due to lack of history and new technology |
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buyouts characteristics
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-extensive use of leverage
-returns on investments portfolios are generally characterized by lower variance across returns from underlying investments. bankruptcies are rare -buyout firms monitor CF mgmt and startegic and business planing -low WC requirements -risk is measurable (long operating history) |
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ratchet
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firm enabling management of private equity controlled company to be rewarded with increased equity ownership as a result of meeting performance targets
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