$1 Billion Real Confidence Challenge

$1 Billion Real Confidence Challenge

Over the course of last year, a team of our fellow Boothies took on a $1 billion challenge against several other universities to see which school could best invest the theoretical sum of money in commercial real estate. The Booth team’s unique strategy beat out the rest of the Real Confidence University Challenge participants and earned them the $30,000 grand prize (in real money). The Booth team returned 23.86% on their portfolio over the course of the year and cleared the runner up of 32 teams by 4.80%. Hear what a couple of the team members have to say about their winning two-point approach and how Booth set them up for success.

Craig Foreman, ’17
Pre-Booth Industry:
Real Estate Commercial Mortgage Lender
Post-Booth Industry: Commercial Mortgage Lending – Investment Associate, PGIM Real Estate Finance



Andrew Dialynas, ’17
Pre-Booth Industry:
Sales & Trading Vice President, Mortgage & Asset-Backed Securities
Post-Booth Industry: Fixed Income Investment Management 
Investment Analyst, Revenue Backed Municipal Debt


TBE: What Booth courses and resources helped prepare you for success in the competition?

CF: Real Estate Investments I & II were extremely helpful for the 2016 Real Confidence™ University Challenge. Professor Joseph Pagliari is extremely knowledgeable and his courses provided the right mix of industry fundamentals and current market trends that allowed us to develop a successful strategy.

AD: The best recipe for success as it relates to this competition is to have a genuine passion and interest in real estate and financial markets. This is something that cannot be taught or prepared for as it is a function of staying consistently tuned into the markets and having a view. Financial markets are something I had developed a strong interest for prior to coming to Chicago Booth. In addition, Booth’s finance classes in Real Estate Investments and other financial investments courses covered topics that were key considerations for our investment analysis and thesis. In terms of resources, the access to Bloomberg terminals and other data programs available helped us pull data on specific indices and conduct a quantitative analysis from a valuation aspect.

TBE: How has what you learned at Booth influenced the strategy you used for the competition?

CF: We took a quantitative approach, testing potential portfolio compositions against several key metrics to determine the appropriate allocation.

AD: Our thesis was based around current market levels and valuations, a macroeconomic analysis, understanding the skew and outcome of our investment in different market environments. We did touch base on drivers we learned in asset valuation related courses at Booth such as Real Estate Investments, Investments, and Corporate Finance to understand if we wanted to be positioned in debt or equity markets as well as public or private investments.

TBE: Describe how you worked with your team?

CF: Booth emphasizes collaboration, which was critical to our victory. Team members with diverse backgrounds and skill sets provided input that led to the winning portfolio.

AD: Each of the five members provided initial thoughts in our first meeting to give some sense of direction. We then decided to sharpen up our approach and divided research among the different investable sectors among our team members. In our second meeting, team members gave their feedback with respect to their research and we subsequently had a more serious conversation about the higher conviction ideas to determine our allocation. The final allocation was determined by a voting process with all team members involved.

TBE: What differentiated your approach from other teams?

CF: Our strategy focused on mortgages. Based on where the team felt we were in the cycle, a mortgage strategy was most likely to outperform as it is better insulated against asset value declines than an all equity strategy. We also felt the mortgage REITs were undervalued and had upside potential relative to alternatives.

AD: Our approach was differentiated in the sense that we made two points upfront that we sought to incorporate in our portfolio. First, we decided we needed to be concentrated in our positions so we agreed that the portfolio would consist of one or two positions. Second, we wanted to avoid “crowded trades” such that we wouldn’t have a very similar allocation as other teams—we actually observed several other teams in the top 5 have heavy overweight towards public/private equity in Industrials, which kept them nearly on top of each other throughout the competition. We executed on both of these points and feel strongly this contributed to our success. Overall, the concentration across two choices in sectors that lacked sponsorship by our competitors enabled us to win the competition by a significant margin.

TBE: Describe the support/expertise you received from Professor Pagliari.

CF: Professor Pagliari was a key member of the team. His knowledge of the real estate industry made him the perfect sounding board.

AD: Professor Pagliari’s depth of real estate from an academic and practitioner perspective helped guide our investment process in many ways. We were able to overlay macroeconomic, valuation, technical, real estate sector-specific, and other investment considerations with his vast knowledge of specific real estate investments and thoughts on larger constituents in investment indices for the competition. Additionally, Professor Pagliari is very well respected in the real estate community as he consistently sources access to top real estate competitions, brings in prominent speakers/alums, and coordinates a very impressive annual real estate conference. The team is incredibly thankful for his support and insight.

TBE: What is your most important takeaway from participating in the competition?

CF: The importance of combining a qualitative market hypothesis with quantitative analysis.

AD: In the investment process it’s extremely important to have a view with conviction. It can often be in times be the case that you need to defend your view and convince others to support your view, but you need to pursue what you truly believe in. A high conviction view comes from proper investment analysis of the investment that is being defended, as well as the greatest degree of understanding on other investment alternatives available.

Thank you to Craig Foreman, ’17, and Andrew Dialynas, ’17, for their guest contribution about their experience in the 2016 Real Confidence™ University Challenge, where over 200 students from 32 universities got hands-on learning experience in public and private commercial real estate investing. Mike Bellisario, ’16,  Sophie Kim, ’17,  and Michael Mazur, ’16, are also members of the winning Booth team, which will be recognized and receive the $30,000 grand prize award in October at the annual Real Estate Conference held by Booth’s Real Estate Alumni Group. The conference is open to the public and will feature keynote speakers Sam Zell and Nobel laureate Professor Eugene Fama.