The UK Private Rented Sector (PRS) perspectives and Build to Rent (B2R) opportunities

By Victor Alarsa

The PRS is the fastest-growing sector in the UK properties market. It is England’s second-largest housing tenure after owner occupied, 62% against 20%, as shown below:

Image 1

Source: Alex Bate, Building the new private rented sector: issues and prospects (England), 2017

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The benefits of SUMPRODUCT?

By Victor Alarsa

If you are one of those who loves to model using lots of “IF”, “AND” and “OR” functions, then this article is for you.

Let’s discuss the SUMPRODUCT, which literally means summing up the multiplication (product) of two or more different arrays.

For example, if you want to calculate total rental value of a property with different floor sizes and rents per square foot, then you simply need to multiply each floor size by its corresponding rent and sum up everything in the end.

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London: Density vs. Price, Challenges & Opportunities

By Victor Alarsa (valarsa@cambridgerefinance.com)
& Maria Wiedner (mwiedner@cambridgerefinance.com)

We are living in the age of the City. Larger and denser cities are likelier to be more innovative and generate more wealth. For instance, as the population of a city increases by 100%, its residents get 115% more innovative, productive and hence 15% wealthier1. This attracts more people, which, in turn, makes the city larger, denser, more innovative, wealthier. This cycle continues up until a point when pollution, house unaffordability, traffic and crime outweigh the benefits of agglomeration, i.e. when a city becomes too large for its own sake.

Density in general is massively beneficial, for example in 2015, London represented 14% of the UK population but was responsible for 23% of its GDP. However, the virtuous cycle of agglomeration needs to be accompanied by a housing expansion, which many cities struggle with. In London, finding housing accommodation is a challenge; land is scarce and restrictions in planning permission deter new constructions. Demand, on the other hand, is further growing as people want to move to London where jobs are available and the clustering of people has made public goods such as entertainment, health and transport more accessible.

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What is covenant strength and why does it matter?

By Cleo Folkes

As House of Fraser announced the closure of 31 stores earlier this month and Debenhams issued their third profit warnings in the year today, we hear that landlords worry about covenant strength. What is it exactly that they worry about?

In property you often hear the word covenant strength when people talk about a tenant or the quality of an investment property or real estate loan. When you Google the definition for covenant it will tell you it is “an agreement” or something you “agree by lease, deed, or other legal contract”. Thus, when people talk about covenant strength, they are talking about how secure the income is coming from a lease with a tenant. Continue reading What is covenant strength and why does it matter?

What is the relationship between yields, risk, rents and price/value in property?

Yields have many different meanings in finance – yield to maturity, running yield, dividend yield, interest yield – and in property finance, the case is very similar. We can talk about initial yield, equivalent yield, reversionary yield etc. It is, therefore, really easy to get lost in a “yield” conversation, unless you stop the other person and ask: “which yield?!”

If you are emotionally intelligent enough (and I bet you are if you are reading this!), you won’t do this so blatantly. So, let’s break down this “yield” conversation first to ascertain the relationship between yields, risk etc. Continue reading What is the relationship between yields, risk, rents and price/value in property?

RICS and Cambridge Finance collaborate to bridge the skills gap between real estate and finance

The Royal Institution of Chartered Surveyors (RICS) is delighted to announce a collaboration with Cambridge Finance to develop a comprehensive training course that will help bridging the gap between real estate and finance education.

The growing sophistication of the property and financial markets has meant that investment surveyors have not only been requested to advise on property location, covenants and physical structure of buildings, but also on debt, Continue reading RICS and Cambridge Finance collaborate to bridge the skills gap between real estate and finance

Demystifying real estate financial models

Real Estate financial models are mainly spreadsheets used extensively as an aid in decision support in the areas of property investment and lending. These spreadsheets will ascertain the present value of a stream of cash flows and generate risk / return ratios.

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How to convince your boss to pay for your financial modelling training

More often than not employees find themselves trapped in a situation where they know they could do a better job, but just don’t have the right skills to implement more efficient routines. Training seems to be the key to solve their problem. However, there is always that question: “Should I pay for my training or should I ask the company to pay for it?”

In our experience, companies are more willing to pay for their staff’s training as long as they can see the short-term results of their investment, mainly improved process or product development.
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Are REITs real estate?

Cambridge Finance Property Training Courses

Firstly, REITs, or Real Estate Investment Trusts, are companies that own and manage real estate. Therefore, owning shares in REITs is a way for investors to access the risks and rewards of holding property assets without having to buy and manage property directly. REITs typically pay out all of their taxable income (90% in the UK) as dividends to shareholders and in turn, shareholders pay income tax on those dividends. Continue reading Are REITs real estate?

What is the value a REIT?

What’s the value of a listed real estate asset? Our belief is that as markets trade on disagreements about the value of assets, the valuation process should be a crucial point in any investment course.

However, before we start, we want to highlight that a valuation exercise is an exercise of consistency and coherence. We call these the two pillars of the valuation exercise. On the course, you will understand better what this means but we want to draw your attention to this now. Thus, if the variables used on the different

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