Hi, welcome back now to our next lecture in our FinTech module called real estate Tech or real Tech in some in some parlance. Real estate is an incredibly interesting area in part because of the size of the space by almost any measure. Real estate which is sometimes classified as a so-called alternative investment is vast, as an asset class, as an area of interest, and certainly as an area of identified interest with respect to FinTech digital methods and technologies. Also interest by those who overlap in both areas. It's called alternative although, depending upon your phenomenology or your metaphysics you might presume that real estate proceeded humanity. There in other words was probably real estate before humans. Real estate around the globe is a large area. Getting a handle on exactly how large either with respect to market cap or valuation or returns as a challenge in part because of its vast nature. How we define it, how we track it, and so on. But what's clear is that it's very large. To give you a sense around the globe sales of commercial properties as of a most recent mark-to-market here fiscal year 2017 was almost a trillion dollars US dollars. Within the United States just the commercial section of what we call real estate asset classes in fiscal year 2017 was about $376 billion. In the US markets are large that's about 57 percent of the total around the globe. Another area which will define a bit in a second the residential sector for real estate so 5.3 million homes what are called existing homes and almost 670 thousand new homes being sold in 2018. That's a measure of size by volume of trades or transactions. There were about 86,000 real estate brokerage firms in the United States. Again, from the most recent economic census data we have available to us and 2 million active real estate license, that is to say those who are qualified as brokers to sell real estate in the United States. It's big by many different measures from many different perspectives. In addition, many professional asset allocators and investors are expected real estate to expand although there are some immediate concerns about what some would call bubbles in certain areas. Increasing allocation to real assets as part of investment plans has been democratized, you might have heard of the famous endowment model followed by university endowments and foundations that allocate to tangible asset classes of which real estate is at the heart or even individuals who might purchase real estate in some sense. Although, there are some trends against some demographics especially in the US especially those we might call millennials as we've discussed who have different preferences over owning some areas of real estate. Appreciation or rate of return or ROR has been ongoing in positive in the US and around the world over recent historical periods. On the graph you see in front of you is what we call the net drift data. Moving across multiple what we call sectors in real estate. Apartment, buildings, office buildings or office spaces, industrial properties, retail properties, and then hotels roughly speaking although variances can occur generally thought to be from lower risk on the left to higher is less Prosecco on the left and more Prosecco on the right. In other words, more attuned or connected to the macro economy. Then within those sub-sectors suburban office space versus central business district or CBD, malls versus retail centers or apartments and hotels treated separately. What you see is over longer-term data available historical time periods. Real estate overall has produced returns that are of the same order of magnitude say of US or global equities. You can see apartments have including all returns that is coming from cash flow plus price appreciation has been around 10 percent. In the last five years, is little bit less around 8.6 percent and over the most recent year available 2017 to 2018 about 6.3 percent. There is variation across classes, industrial properties have appreciated on average more and we might say that suburban offerings office space in the aggregate as appreciated less. But one thing is clear, it's been positive. It has been positive across diverse kinds of real estate and it's been an area of organic growth. It's not to say though that's resulted in forward-looking valuations that are at historical peaks. In fact one way one statistic useful for measuring by either expected real estate returns or current what are called yields on real estates are to look at cap rates. Cap rate stands for capitalization rate, and it's essentially the rate of cash flows coming from a property scaled by the value of the price of the property, it's often compared to a dividend yield in stocks or yield on bonds. Here you can see a rate spread compared to the 10 year government bond yield as of the third quarter of 2018 and the end of 2017. It's a comparable spread in part because real estate is often held over longer holding periods than say a typical stop can or might be held. Although certainly people hold stocks for a long time, and it serves as a benchmark spread real estate has and is expected to earn based on current cap rates more than US government bonds. But those spreads have actually decreased in very recent times. Still, in part because of risk, in part because afford living expectations, they tended to have yields or cash flow percentages above US treasuries. As you can see there's diversity both across type of property and geographic location in the yield spreads for example. Although, they're of the same order of magnitude office space in Asia and or Asia Pacific in the aggregate has earned or is expected to earn on the basis of capitalization rates, greater yield than office space in Europe. So again across office retail and other spaces and Asia US in Europe we do see some historical and current differences in yields.