CAPSTONE: DEVELOPMENT CASE STUDIES SPRING 2020
PLA 6335 3.0 CREDITS
Thursday, 9 am - 12:00 pm
Dr. Patrice Derrington
- Course Description
The capstone course synthesizes the learnt analytical, comparative and critical processes involved in real estate development projects, transactions and investments. It provides an opportunity for the student to demonstrate their understanding of the dynamics of real estate development, its capital requirements, and delivery procedures.
With the utilization of various real estate development and investment case studies and the input by external industry professionals, this course presents a variety of property types, urban and economic contexts, critical decision-making and business styles. With the intensity of in-class examination of each case, students are required to advance their analytical and decision-making skills to respond to the rapid resolution of real estate issues and challenges. With reference to actual development sites and real-time analysis, students will proceed through the assessment of the physical aspects, financial returns, and transaction processes of a deal and propose solutions or alternatives to a given outcome given the current day conditions.
In anticipation of the student’s imminent professional practice, the format for addressing the case studies has three stages – each representing a typical dynamic of the work environment - progressing from full class discussion, though team-based debate, to the individual proposal, presentation and defense:
- All-class discussion and debate of each of the selected case studies resulting in the identification of major development issues, capital structuring challenges, or decisions for which there might be alternatives given today’s context.
- Team-based, detailed investigation of one of the prior cases (every student focuses on one of the cases studies), resulting in a classroom negotiation between conflicting parties with the objective of proposing alternative outcomes, as evaluated by the non-participating class members.
- Individual exploration for a new or alternative resolution of the case study examined in Stage 2, taking into account the negotiation dynamics of that phase, and producing a comprehensive, detailed, and compelling proposal for a new or alternative outcome given current day conditions. Creative but credible efforts are encouraged, with the primary deliverable being a hard copy “Deal Book” for potential equity partners.
In addition, the final Capstone Project of each student will be presented in a 10 minute “pitch” to the class with guest instructors and external professionals. The 4-6 best pitches will be selected to participate in a subsequent “Shark Tower”, utilizing the known Shark Tank format with a committee of notable professionals and faculty.
- Course Requirements and Assignments
Students will be expected to attend all classes, which will comprise lectures, guest presentations, classroom discussions, team negotiations, and individual presentations. Participation in all class discussions, are required as these will factor into the final grade.
Four case studies will be addressed throughout the course and utilized as follows:
- Each of the cases will be examined in class. Students will prepare for the discussion and constructive participation will be noted towards the final course grade.
- In teams of 8-12 people, students will elect one of the case studies to examine in detail with a view to critically evaluating the investment, its returns and risks.
- Individually, as the Capstone Project, each student is to propose a new or alternative outcome for the case study taken under evaluation, and make the proposal in the form of a Deal Book.
This Capstone Project is the key deliverable for the student’s presentation of their comprehensive understanding of the material studied in the MSRED program, and provides a tangible demonstration of professional capability and excellence.
Case Study and Capstone Project Content:
Discussions of the specific cases and the proposed Capstone Project should include the following:
- Development concept. Design, and functional program
- Zoning and entitlement approvals, hurdles, and/or strategies
- Market Analysis and input data for financial analysis
- Financial analysis and capital structure
- Project delivery schedule and asset management strategy
- Marketing and/or exit strategy
Case Study/Studio Method:
- All-class Case Analysis: The case studies will be subjected to class discussion in successive weeks. The student is required to read the case, compose a succinct description of the status of the real estate project and the critical challenges or concerns, and be prepared to discuss the details in class. The instructor will call upon any student to commence the discussion or respond to any issue raised.
- Team Debates: Subsequent to the all-class discussions, each student will select one of the cases and join a team of 8-12 people. Teams will prepare to present their review of thee case in the classroom setting and then debate the other teams also working on that respective case. The use of visual aids in these team presentations is recommended.
Case Study Moderators and Judges:
The all-class analysis and team debates will be moderated by the instructor. Additional external reviewers may be included as relevant to certain aspects of the cases. All students not participating in the current debate will be expected to participate as judges in the debate.
Case Study Team Dynamics
Each case study team will elect a Project Manager (PM) on day one of each detailed team-based case analysis. That PM will be responsible for overall production and act as a facilitator for the group. The PM will lead self-elected Sub-teams:
- Development Concept and Delivery Process (1-2 people) - This group creates initial trial project programs and works to finalize the development concept through consensus with other Sub-teams, arbitrating design, finance analysis, and capital sources. This group will also be responsible for deriving cost numbers and a development schedule. The PM should be a part of this group.
- Site Layout, Design and Functional Program (1-2 people) - this Sub-team will develop the site plan and layout in response to planning constraints and produce the architectural and design images necessary to provide a clear idea of the project and sufficient details for financial analysis and project management.
- Market Analysis, Property Comparables, and Marketing Strategy (1-2 people) - This group will perform market research and help drive the program and concept to fit the market requirements. The market study should substantiate the functional program and design concept in addition to providing reliable inputs for the financial analysis. Also, this group is to propose a marketing strategy for the sale/lease-up of the project.
- Financial Analysis (1-2 people) - This group will prepare the feasibility analysis, the development budget, the construction funding, the DCF Proforma, and metrics and to support or modify the functional program and design concept to maximize the project returns.
- Capital Structure and Project Risks (1-2 people) – This group will examine the current capital markets and propose a credible capital structure for the project, focusing on an attractive opportunity for equity investors. Additionally, the potential risks to the feasibility of the project are to identified, financially evaluated in a sensitivity analysis, and mitigation strategies proposed.
Team Meetings will take place outside the classroom to prepare for the scheduled in-class presentation and debate with other teams.
IMPORTANT -- Team Dynamics + Flexibility + Circular Nature of Case Study Activities
Everything is based upon the vision and formulation of the development program and buildable square footage. This must be done immediately with input from the entire team. Vigorous and quick consensus building will be required by the team Project Manager. Without establishing a starting point for the overall vision and a breakdown of square footage by use, none of the other processes can reasonably go forward. Once the vision and site plan are established and the other processes are up and running the project proposal becomes an interactive discussion wherein the Financial Analysis + Market Support influences the Product Concept and Site Plan / Design Layout iteratively. This requires that all analyses be set up for quick changes/adjustments and to work efficiently for sensitivity analyses.
Capstone Project Details:
Individually, each student will be required to:
- Make a comprehensive, detailed, and compelling proposal for a real estate equity investment.
- The proposal is to be an alternative proposition for one of the case studies reviewed in the class. Each student is to create their own proposal and that proposal may be for an alternative in the property development, the investment structure, and/or the capital stack. Creative but credible solutions are encouraged.
- This proposal will be prepared in three steps and submitted as scheduled:
- Proposal Memo 1 (10% of course grade): Give a general description of the alternative proposal. Provide an evaluation of the detailed aspects of the given case study that are to be further resolved in the new proposal. Present all new data and assessments necessary to support the new proposal, such as market analysis, site reviews, functional evaluations, capital markets conditions, and investor sentiment.
- Proposal Memo 2 (15%): Provide the comprehensive financial analysis of the investment proposition. The full DCF Proforma for the holding period is to be provided in detail including the specifics of the development budget, construction funding, details of the capital stack, and returns to all investment participants. A summary in prose, with simple charts as necessary, is to provided that is specifically directed to the equity investor – this is the financial core of the “pitch”.
- FINAL SUBMISSION: DEAL BOOK: Complete presentation of the alternative Real Estate Investment Proposal comprising:
- Written submission (25%) that comprehensively makes the case for the investment, i.e. includes a summary which “sells” the proposal, and consolidated supporting material.
- Oral presentation (10% additional grading) in class for 8 minutes, that makes the “pitch” for investing in the project.
The three components: Proposal Memo 1, and 2, and the Final Submission DEAL BOOK, in addition to the 1-page summary and visual aids for presentations must be posted to Canvas on schedule.
Capstone Submission Components:
- Five hardcopies of a one-page summary due at time of presentation
- Electronic copies of all materials to be submitted to Canvas prior to presentation including:
- PDF of Deal Book
- Active Excel file of proforma (formatted in a way that is easy to read and understand)
- PowerPoint slides utilized in presentation
- Hard Copies of the Deal Book may be made at the election of the student.
Columbia University’s online Canvas system will be used for posting the course syllabus, selected class materials/handouts, hyperlinks to locations from where case studies and additional reading materials to be used in the course could be found and/or purchased by students. Canvas will also be utilized for the posting by students of all Case Study and Capstone submissions. Canvas will also be utilized as a tool for the instructor and Teaching Assistants to post announcements, and also for the instructor and students to connect outside of the classroom more consistently and conveniently.
III. COURSE GRADING CRITERIA
Course grading criteria are as follows:
- Attendance and in-class case study participation: 20%
- Detailed case study review as a team 20%
- Capstone Project (in three submissions): 50%
- Presentation or “pitch” of the Deal 10%
Only exceptional performers in all of the grading criteria will receive a High Pass.
Students will be expected to do the assigned READINGS and PREPARE THE CASE STUDIES in advance of class.
The case studies for class discussion will be posted one week in advance on Canvas.
The Textbook referenced for the class is: Professional Real Estate Development, Richard Peiser & David Hamilton. ULI publications.
Additional references for the course will be provided on Canvas.
DO NOT CONTACT THE CASE STUDY SPONSORS UNDER ANY CIRCUMSTANCES, UNLESS THEY SPECIFICALLY REQUEST IT AND THE INSTRUCTOR IS INVOLVED.
- COURSE OUTLINE (subject to change)
Jan 17: Case Study 1 posted. Students to prepare for Classroom discussion on Jan 23.
Class 01: Course Introduction, the Capstone Project, , Case Study Methodology: Course outline with grading details. Details of the Capstone Project. Analytical Framework for case study activities.
Case Study 1: 38 Carlton Avenue, Brooklyn Navy Yard
Classroom discussion by all students.
Presentation by Ian Tong.
Reading: Peiser & Hamilton Ch1
Note: Case Study posted: to be prepared for Class 2.
Jan 27 1.30-3.30 pm PRESENTATION SKILLS WORKSHOP
Patricia Hayling Price AVERY 113 REQUIRED!!!
Class 02: 9-10am: Case Study 2: Brick Cove Marina, Southold NY.
Classroom discussion by all students.
Discussion with Andrew Salomon
Reading: Peiser & Hamilton Ch 7 (pgs 326-356).
11- noon: RCA tutorial.
Note: TWO Case Studies posted: to be prepared for Class 3.
Class 03: Case Study 3: 800 Rockaway Ave, Brownsville
Classroom discussion by all students.
Presentation by: David Kruth
Case Study Overview: Baltimore Inner Urban Development Project
Presentation by: Brian Loughlin
Note: Case Study posted: to be prepared for Class 4.
Class 04:Case Study 4: Pacific Park Brooklyn
Presentation by: Eric Anderson from Brodsky Org.
Reading: Peiser & Hamilton Ch 4
Case Study 5: 666 Fifth Avenue
Classroom discussion by all students.
Reading: Peiser & Hamilton Ch 5
Class 05: Team Debates: Case Studies: Pacific Park, Brownsville, Carlton Ave Alternatives
Classroom discussion by all students
Class 06: Team Debates: Case Studies: Marina, 666 Fifth Ave Alternatives & Run-offs.
Classroom discussion by all students
Attendance by students from Schulich Business School
Class 07: Lecture: Review of Market Analysis, Patrice Derrington
Lecture: Review of Spatial Layout and Design, Prof Raquel Ramati.
Submission: Capstone Project Proposal Memo 1: March 4 11.59pm.
Class 08: Lecture: Review of Neighborhood, Planning & Macro-context
March 19: Spring Break. No class.
Class 09: Lecture: Review of Market Analysis, Demand Resolution and Project Program
Elisa Ours, Corcoran Sunshine
Review of Financial Analysis Professor Derrington
Class 10: Lecture: Review of Capstone Project Proposal Memo 1 submissions
Submission: Capstone Project Proposal Memo 2: April 1 11.59pm.
Class 11: Lecture: Marc Holliday
and Lecture: Changing Environmental Imperatives by Prof Stuart Brodsky
Class 12: Review of Memo 2 submissions.
April 22: MIDNIGHT: Submission: E-copy of Deal Books & LIVE Excel model
April 23,24, 27
Class 13: Presentations of Capstone Projects
Submission: E-copy of Deal Books and1-page summary.
Electronic submission of powerpoint deck for presentation.
Class 14: Presentations of Capstone Projects (continued)
Shark Tower: 3 – 7pm.
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