Real Estate Financing and Assessment

Introduction

This course draws on global experience and is designed to provide you with a full background of the financial aspects of commercial and residential real estate investment and development. Important methodologies – including how to calculate returns, how they are financed, and how to successfully analyze development cash flows, leases, and risk all aimed at understanding how to invest and sell profitably will be explored within this course. You will gain a thorough understanding of the valuation process, as well as explore the principles behind financing a project. This will include a review of the different financial instruments, how they can be used, and their impact on the overall performance of the real estate project.

To maximize this learning opportunity, practical simulation exercises have been included throughout the course. Please be sure to bring your own laptop to ensure you can take part in these exercises to help link theory with practical systems and reinforce the understanding of the material presented

Objectives

By the end of this program you will be able to:

• Learn the key financial concepts, ratios, and models needed to analyze investment and development proposals for Gulf and Western real estate
• Explore the use of propTech and modern technology in real estate strategy for development and investment
• Appreciate how leases work and how they influence real estate valuation
• Analyze risks for real estate development and investment, and apply them to spreadsheets and other real estate software

Training Methodology

This is an interactive course. There will be open question and answer sessions, regular group exercises and activities, videos, case studies, and presentations on best practices. Participants will have the opportunity to share with the facilitator and other participants on what works well and not so well for them, as well as work on issues from their own organizations. The online course is conducted online using MS-Teams/ClickMeeting.

Who Should Attend?

This course is designed for:

• Real Estate Managers
• Real Estate Analysts and Investors
• Real Estate Planners and Developers
• Property Owners and Managers
• Government Officials and Regulators
• Lawyers
• Accountants
• Valuers
• Mortgage Brokers, Bankers, and Lenders
• Investment Bankers/Managers, Venture Capitalists, and Private Equity Specialists
• Finance Managers and Analysts

Course Outline

Evaluating Real Estate Cash flows

• Definitions and the range of real estate analysis
• Key risks of real estate investing and development
• Measuring real estate cash flow
• Analyzing real estate markets

Forecasting

• Methods of forecasting and their application
• Forecasting real estate values
• The dynamic behavior of the 4-Q model – stability vs. Oscillations

Residential Property: Assessing Capital Value

• Why buy residential real estate?
• Does rental income matter for residential property?
• What are the main problems?
• Measurement criteria for residential real estate – hedonic approaches
• Qualitative issues, competition, style, and marketing

Market Analysis Considerations

• Comparables and how to analyze them
• Regression models and how they work

Property Analytics

• Gross and net income
• Differences in calculating NOI
• Overall capitalization rate
• Capital expenditure issues
• Differences between property types
• Approaches to the cap rate
• Assessing Net Present Value (NPV) for properties
• Ratio analysis and its value

Mortgages and Bank Finance

• Concepts and applicability of the mortgage
• Global statistics
• Available types of mortgage
• Syndication and the mortgage market
• Lending practice and pitfalls
• Mezzanine finance and deal structuring
• Logic and use of Special Purpose Vehicles (SPVs)
• Relative returns for structured real estate finance
• Recent funding developments

Commercial Property: Assessing Income

• Appraisal of income property – Royal Institution of Chartered Surveyors (RICS) valuation practices and international comparisons
• Comparison with corporate finance valuation
• Reporting as per International Financial Reporting Standards (IFRS)

Financial Aspects of Development

• Analyzing the highest and best use studies and models
• Feasibility studies – dose and don’ts

Leasing Analysis

• Why developers and investors alike need to study leases
• Nature and creation of leases
• Differences between types of commercial property leases
• Commercial leases and statutory control
• Residential tenancies and statutory control
• Structure of leases, including the length of the lease period and options for tenant alterations or expansion
• Sinking funds
• Lease calculations (with worked examples and exercises)
• Rent reviews and lease renewal options
• Covenants to leases, such as repairing liability, occupancy conditions, sub-leases, termination, and service charge provision

Financial Management Principles

• Accounting theory and methods
• Asset and liability valuations
• Development vs. investment property in IFRS
• Reporting procedures in the management of different kinds of properties
• Preparing profit-and-loss statements
• Tax implications; tax records
• Cash flows; depreciation; investment tax credits; after-tax cash flow
• Presentation to clients and management of client’s accounts

Risks and Real Estate

• Applicable risks in real estate development and investment
• Modeling and evaluating comparative risks
• Risk management strategies
• Available risk management instruments
• Costs and benefits of risk management
• Modeling risk management

Measuring Property Performance

• Applicable concepts and methodologies
• Problems and issues with performance evaluation
• Sources of data
• Evolution of data measurement
• International comparisons of performance
• Current issues in performance measurement

Investment Portfolio Analysis

• Comparison of risk-return profiles of real estate and financial investment assets
• Measuring investment performance
• Principles of portfolio diversification
• The case for active portfolio management
• Application of property within a larger non-property investment market
• The nature of risk and return from property compared with bonds and equities

Securitization of Real Estate

• Securitization mechanics
• Sukuks and their relationship to securitization
• Securitizing mortgages
• The future of securitization

Quoted Real Estate Investment Trusts (REITs)

• What is a REIT?
• Size and structure of the global REIT market
• Benefits and risks of REIT investment
• Comparison with direct and private equity investment