CRE Professor

Welcome to my teaching page. I have created these resources to help people better understand commercial real estate. As I was starting out in the industry in 2002, a seasoned veteran told me that real estate is 20% jargon and 80% common sense. The challenge is that the jargon gets in the way of understanding how to apply the common sense. This site will help you understand the jargon and learn from my experience.

Good luck in your journey!

Professor Matthew Bateman

The Commercial Real Estate Industry

If you are new to the industry, this is where to start. I break down the basics of the industry relative to property types and groups involved. Read more

Return on Costs & Cap Rates

This is probably the first and most fundamental concept to understand. "Return on Costs" refers to the investors annual return (example 5% per year) on their investment. It changes, and hopefully grows, over time. This concept is applicable to many industries beyond real estate.

"Cap Rate" is a commercial real estate term. It is short for "capitalization rate". Mathematically, it is the "net operating income" (NOI) divided by "price". It is important to understand that NOI changes over time and even price can mean different things. Read more

Acquisition Process

The acquisition process includes a series of steps to acquire real estate. This includes a non-binding letter of intent, a binding purchase and sale agreement, due diligence, deposits, escrow, and closing documents.

Due diligence is one of the most important components of the acquisition process. It is a deep dive into all aspects of the property to minimize the risk of negative surprises once the property is owned. Read more

Debt

Debt, also known as a loan, is how much of commercial real estate is funded. Most investors borrow around 50-65% of the total cost of the property from a lender to complete the purchase of a property.

As with other aspects of commercial real estate, there is a significant amount of jargon associated with debt and loans. Read more

Equity & Joint Ventures

Equity is the second component of how commercial real estate is funded. There are many ways to raise equity: from individual investors, from private equity funds, by selling stock, and directly from institutional investors (pension funds, endowments, and unions). An important component in raising equity is the joint venture agreement that outlines the terms under which all parties will operate while the real estate is owned.

As with other aspects of commercial real estate, there is a significant amount of jargon associated with equity and joint ventures. Read more

Leasing

Leasing is critical to commercial real estate. For industrial, retail, and office properties it is actively negotiated with the assistance of brokers. This allows for opportunities to drive revenue but comes at the expense of paying brokers commission and performing tenant improvements (TIs) to customize the space to the tenants.

Multifamily is different as it is governed by fair housing laws. Brokers are not involved and the rent is not negotiated, although the rent is often determined using revenue management software. Read more

Disclaimer: This information is provided to help you better understand commercial real estate. It is based on my experience over 20+ years. There is no guarantee that this information will allow you to be successful. No guarantee is provided as to the accuracy of the information. It is provided for educational purposes only.