London Business School | Groups

What is Real Estate?
Real estate can be defined as land – the quarter of the earth’s surface on which we humans move and live on. It can also be defined as the build environment surrounding us – the structures that provide us shelter, that are created to live, work and play in, the structures that form the faces of our cities. Or it can be defined as over one third of the world’s capital assets.
Depending on who you ask – architects, engineers, designers, environmental scientists, or lawyers – the definitions and interpretations of Real Estate will be manifold. The multidisciplinary of Real Estate is responsible for the high complexity of the topic and probably reason for Real Estate being of interest to the most different people.

Within the Real Estate Club at LBS we mostly focus on two aspects – Real Estate Development and Real Estate Private Equity.
 
Private Equity Real Estate
From a financial point of view, Real Estate is potential future cash flows. As this, it is subject to the capital markets, in which it is valued and traded. Many private equity firms have either specialised on Real Estate entirely or invest in it as a separate asset class within their portfolio. They operate under a collective investment scheme with most capital coming from private equity funds. What distinguishes Real Estate from other asset classes are the the active investment strategies with which most Private Equity Real Estate firms approach their investments. These strategies can range from moderate reposition or re-leasing of properties to development or extensive redevelopment. The different strategies are normally served by different types of funds. In general one can distinguish between core, core plus, value added and opportunistic funds, which each invest in different types of properties, expecting a different level of return.
 
Real Estate Development
While Real Estate Development can be part of a Private Equity Real Estate investment strategy, it is oftentimes a standalone business segment of Real Estate with firms specializing purely on developing and managing properties. Development does not only entail the creation of buildings from scratch, but also includes redeveloping and refurbishing of existing properties. The whole process usually includes buying land, developing a building programme and design, financing the project, obtaining approvals, constructing the building, renting and managing it and eventually selling it.