Alpha or Arbitrage profits from public / private real estate markets?

Posted in the REIT Forum

Since: Dec 09

Indian Wells, CA

#1 Dec 28, 2009
Hi all,

Basically after 10 years trading I was forced to close my residential development company in Dec '08. Eventually I would like to go back into business for myself but in case this is not possible I decided to try and improve my resume by hitting the books and study for a Masters in Real Estate Finance. All my previous real estate has been quite practical so I am finding the quantitative work pretty tough, especially regression analysis but I am enjoying the challenge and the more I learn the more I am getting my pride and confidence back.

At the moment I am trying to find the right topic for my final paper. I am interested in the relationship of the private and public real estate market and whether this could create a potential arbitrage profit situation.

Prior to looking more closely, I assumed that after REITs took quite a bashing in the crisis that they would be trading at a discount to their NAV but I see that is generally not the case. Are there any instances of REITs trading at a discount to NAV? Can anyone recommend a good place to view the NAV value of REITs?
Is there a particular time of the year when REITs value their assets? Do they use a discounted cash flow method? Does anyone think that there could ever be a case where the comparison data used to value their portfolio could be lagged and thus as the real estate market recovers the property perhaps be worth more than listed?

Sorry for the barrage of questions but there is so much I want to know thats not in my text books.
Many thanks for ANY information given!
Simon

Is "alpha" the correct term for an arbitrage profit?

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