This half session “B” course is focused primarily on the commercial real estate debt markets and is complimented by the half session “A” course, Real Estate Equity Markets. Students may wish to take both half courses sequentially for a complete understanding of the Real Estate Capital Markets or individually.

The purpose of this course is to provide the student with a comprehensive understanding of both theory and practice in the commercial real estate debt markets both from the perspective of capital providers as well as property investors. The approach will be to make sure students first have a thorough grasp of the relevant theories and models used to value these assets and then to apply that understanding to reality seeing the limitations of the theory. Students will learn how to underwrite, size, and analyze a variety of commercial real estate debt including balance sheet first mortgage loans, first mortgage loans for securitization and CMBS, and subordinate debt structures including mezzanine loans, B- notes and preferred equity.

The course will also teach the student how to analyze the $800 billion CMBS market, the largest commercial real estate debt market and the associated CRE CDO, CRE CLO and CMBX markets both from a theoretical and practical perspective. These markets finance about one quarter of all commercial real estate debt. They were also at the heart of the recent commercial real estate bubble, collapse and rebirth. Some time will also be devoted to agency “CMBS (multifamily)” markets including FNMA DUS MBS, FHLMC K certificates and Ginnie Mae Project and construction loan certificates. As a final project, students will be grouped into teams and given commercial real estate securities to analyze on a Bloomberg to make investment decisions.

All students who would like to understand these critical markets and their connection to the commercial property markets are welcome. The course would be particularly appropriate for students wishing to pursue careers in real estate finance and/or trading, creating, investing in, researching, selling or regulating commercial real estate securities. The course is also recommended for students wishing to pursue careers as developers or investors in commercial real estate properties themselves (“ the dirt”) but want to understand how to fund their ventures via these instruments and how volatility in the real estate debt capital markets for these instruments can create opportunities and risks in the property markets themselves.

By the end of the course students should understand: 

• The key drivers of real estate capital flows and capital pricing.
• The interaction between real estate debt markets and commercial real estate property markets.
• All of the major public and private source of debt capital for commercial real estate.
• The key structural elements and credit considerations for each form of financing.
• How to structure from the borrower’s perspective the capitalization for a given project type.
• How to analyze and make an investment in a given commercial real estate debt structure.

Brian Lancaster

Senior Lecturer in the Discipline of Finance and Economics in the Faculty of Business

Brian P. Lancaster is a Senior Lecturer in the Discipline of Finance at the Columbia University Business School.  Professor Lancaster teaches the following courses: Real Estate Finance, Real Estate Debt Markets, Residential Real Estate Finance, Capital Markets, Real Estate Entrepreneurship, and  Debt Markets in the MBA and EMBA programs. He is also a faculty sponsor of Chazen Global Study Tours, most recently...

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