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Hi. If you don’t know me, I run a real estate private equity blog and work full-time at a manhattan mega fund. Okay, so I went to a random letter generator and got D as my result. Now, I’m going to pick a real estate stock that starts with a D and build you what we call a “capital stack.” Then I’m going to explain what the heck it all means. The purpose of this exercise is to show you how I learn, and also teach you about capital stacks.
We randomly chose to explore Digital Realty Trust But first, let’s pick a D stock. I go to Yahoo Finance’s Free Stock Screener to look for U.S. domiciled REIT stocks, click go, and the first one I find starting with D is Digital Realty Trust (NYSE: DLR). That’s our stock. And here is some quick context per their Yahoo Finance profile: Digital Realty supports the data center, colocation and interconnection strategies of customers across the Americas, EMEA and APAC, ranging from cloud and information technology services, communications and social networking to financial services, manufacturing, energy, healthcare and consumer products.= What is a capital stack? Let’s put a pin in exploring their business for now. This moment, our goal is to understand their capital stack. A capital stack is really just a company’s enterprise value, shown layer-by-layer. If you don’t know what enterprise value is, Google it. REPE investment memos will always show a capital stack. This is a staple that you learn to build rapidly. We’re going to build this together in real-time because I want to show you my process. Where do we begin? We’ll get started in their filings. I’m writing this post on May 4, 2020, which means DLR’s latest filing is their 2019 10-K. Before we dive in, below is a list of the crucial we’ll search for:
In the next article, we will get our hands dirty.
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