Tuesday, September 08, 2009

Some ideas on analysing Real Estate Developers

Real estate developers have been a significant part of value creation for investors. And they will continue to be. However, as times get difficult, it is important to pick the right developers to invest in. While these are logical, they are often ignored in my experience. I present an idea-Book looking into some key ideas while selecting successful real estate developers. Key points include:

  • I believe first thing a developer must be sensitive to is business cycle. Irrational optimism leads to a fatal failure in preparing for eventual slowdown.
  • Similarly, land bank quantity, quality and cost determine the future earning potential and growth of the developer.
  • Developers’ also need an ability to manage through-cycle earnings for the company. In search of quick profits, developers often condemn the company to future revenue de-growth and lower or negative profitability.
  • Cash flow management and debt structuring is other critical part of real estate business that can make or break the company.
  • Lastly, I mention some ways in which real estate developers prevent value realisations for the listed entity.
  • I hope these learning’s will be helpful. These do not comprise the complete list and must be used in conjunction with standard investment and valuation procedures and practices.

Please find the ebook enclosed below.


IdeaBook on Investing in Real Estate Developers