RE Finance II: Case Studies - Finance for Development Projects (Section 1)*
*Class is taken in conjunction with RE Finance II: Case Studies – Introduction to Equity Finance (Section 2) with Professor Bloom
SEMESTER YEAR: Fall A 2019
COURSE NUMBER: PLANA4312
CALL NUMBER: 41414
NUMBER CREDITS 3 Credits
DAY, TIME, ROOM Thursdays, 4PM-6PM, 113 Avery
Instructor: Mr. Christopher W. Munsell, email@example.com
Class assistant: Gin Jin, firstname.lastname@example.org
Textbooks: Professional Real Estate Development 3rd Edition, Richard B. Peiser & David Hamilton, 2012 Urban Land Institute.
Real Estate Finance and Investments, 14th Edition, William B. Brueggeman, Ph.D and Jeffrey D. Fisher, Ph.D. (students should have already purchased this book for Real Estate Finance I).
I. COURSE DESCRIPTION
Given the fundamental financial analysis of an income-producing property learnt in Real Estate Finance I, in this subsequent course students learn about the financing of the real estate development process that delivers the income-producing property, and also, learn about the possible structures for organizing equity investors in real estate and the related distribution of profits and return of capital to those investors, both for income producing properties and for development projects that are sold upon completion.
In Section 1 of this course, students will study the financial aspects of real estate development and construction activities and the learn the analytical methods used by real estate developers, lenders and investors in assessing these projects. The goal is for students to further their understanding of the financial analysis of real estate, with respect to both the debt and the equity, with specific attention to the process of initiating a development project, assessing its feasibility, determining the full costs and arranging the funding for that project. The range of development covered includes ground-up, major rehab, and value-add projects. Students are encouraged to apply these analytical capabilities in making critical comparisons of various real estate development proposals and in proposing alternative structures for funding a selected project. Students will be expected to be able to build a development funding proforma upon completion of this section.
II. COURSE REQUIREMENTS AND ASSIGNMENTS
Students are expected to attend every class and complete and submit each assignment (if due) prior to the start of class. Students are also required to read all assigned readings for each class, together with any supplemental presentations, case studies and homework assignments. Readings from the required textbook (or e-book) and recommended readings are provided in Section IV below. Students are expected to complete all work individually.
Financial Analysis Tutorial: Additionally, all students are to attend the Financial Analysis Tutorials that relate to the Section lectures. This meets alternating weeks with Professor Johnny Din on Thursdays from 9-10:30 am in 113 Avery.
III. COURSE GRADING CRITERIA
Below is a breakdown of the course grade (which is combined with Section 2):
- Attendance and class participation in the discussion of technical material, quizzes, and case studies: 10%.
- Excel Skills Workshop Projects: 10% and critical for course completion
- Homework Quizzes: 20%
- SECTION 1 EXAM: 30%
- SECTION 2 EXAM: 30%
Only exceptional performers will receive a High Pass.
IV. COURSE OUTLINE (classes are subject to change)
Class 1: September 5th – Course Overview & Introduction to Real Estate Development Finance
Reading: Peiser: Chapter 1 Brueggeman: Chapters 10 & 16
Assignment due: None
Class 2: September 12th – The Development Pro Forma & Development Funding Overview
Reading: Peiser: Chapters 1, 3 & 4 Brueggeman: Chapter 16
Assignment due: HW1
Class 3: September 26th – Building the Development Pro Forma & Construction Loan Sizing
Suggested Reading: Peiser: Chapter 2 (pg 66-71) & 4 Brueggeman: Chapter 14 & 17
Assignment due: HW2
Class 4: October 3rd – Development Loans
Suggested Reading: Peiser: Chapter 5 Brueggeman: None
Assignment due: HW3
Class 5: October 10th – Complete Development DCF Pro Forma
Suggested Reading: None
Assignment due: HW4
Class 6: October 17th – SECTION 1 EXAM
Suggested Reading: None
Assignment due: FINAL EXAM PREPARATION
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