How we helped a Real Estate Private Equity firm in diversifying their portfolio

May 25, 2022

The Context

The client, a Real Estate Private Equity Firm based out of the U.S., wanted the TresVista Team to prepare a comprehensive study on 50 major cities in the U.S, based on the weighted average score of 18 fundamentals, which would help them in evaluating these cities to further diversify their portfolio. The client asked the team to derive takeaways on how the specific cities were performing based on the latest macro fundamentals and rank the cities based on their performance.

The Objective

To prepare a comprehensive study on fifty major cities in the U.S., derive takeaways on how the specific cities were performing, and provide rankings to each city based on the macro fundamentals.

The Approach

The TresVista Team followed the following process:

  • Researched and shortlisted the fundamentals based on their impact on the real estate market
  • Collated data for fundamentals such as population, age distribution, GDP, land area, etc.
  • Screened cities/MSAs (Metropolitan Statistical Areas) based on a certain minimum criteria
  • Assigned weightage to each fundamental and calculated the weighted average score of each city/MSA
  • Ranked each city based on the weighted average score calculated

The Challenges We Overcame

The major hurdle faced by the TresVista Team was the unavailability of credible government sources for city-wise data, except for the population and discrepancies in the data provided by other private sources.

The team overcame the hurdle by broadening its scope to MSAs for the respective cities. MSAs serve to group cities into specific geographic areas for population censuses and the compilation of related statistical data.

Final Product (Sanitized)

The Value Add – Catalyzing the Client’s Impact

The TresVista Team proposed a ranking system based on a weighted average score, emphasizing the importance of each parameter. Additionally, two layers of screening were provided:

  • Screen 1: Filtered out cities based on minimum criteria
  • Screen 2: Calculated the weighted average score and assigned ranks to the cities

The team also added the flexibility to provide a score based on quartile, quintile, or decile.

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