Real Estate Investment & Finance

Course Background This course will increase participants’ understanding of today’s complex process of real estate investment, development and finance. It has been created by a Course Director with extensive practical understanding of global real estate markets. It puts participants on a steep learning curve. The fundamentals of each subject will be initially outlined and reinforced before moving onto more complex areas. To gain maximum benefit from the course, participants should be familiar with the principles and application of discounted cash flow (DCF) techniques. Course Overview A new 4-day workshop-based course using spreadsheet models and interactive case studies to explain, examine and illustrate the essentials of real estate investment, asset management and development including structuring the finance for both income producing properties and commercial construction projects. The course starts with the fundamentals, and progresses quickly to include hands-on case studies and spreadsheet models of real estate appraisal techniques, investment sourcing, due diligence, risk analysis, asset management, structuring of acquisition finance, market analysis, development and private equity style JVs. It covers commercial real estate as well as hotels and residential assets. Over this 4-day training you will: Understanding of today's complex process of real estate investment and finance Examine and illustrate the essentials of real estate asset management and development Project Cash flow: How to structure for maximum return and avoiding common mistakes Opportunities and threats in property cycles: What to look for in different stages in the cycle Know what should financiers and investors ask for? What should they look for? Who should attend The programme will be of value to: Investors Analysts Financiers Developers Advisors Whilst its focus is primarily on global markets, the techniques and trends presented will also be of use to delegates active in local property markets. This workshop is aimed at professionals with several years' real estate finance/investment real estate or development background. Computer-based exercises All delegates should bring a laptop loaded with Microsoft Excel© 2010 or equivalent to facilitate in-class studies and exercises. Take-away In addition to exclusive documentation, participants will receive copies of Excel© models and templates to support analysis in investment, development and financial topics. FTS Eligible This programme is approved for listing on the Financial Training Scheme (FTS) Programme Directory and is eligible for FTS claims subject to all eligibility criteria being met. Please note that in no way does this represent an endorsement of the quality of the training provider and programme. Participants are advised to assess the suitability of the programme and its relevance to participants’ business activities or job roles. The FTS is available to eligible entities, at a 50% funding level of programme fees subject to all eligibility criteria being met. FTS claims may only be made for programmes listed on the FTS Programme Directory with the specified validity period. Please refer to www.ibf.org.sg for more information.
Day 1 Appraisal & Valuation Fundamentals What should financiers and investors ask for? What should they look for? Terminology & Techniques Investment Appraisal methods Different methods for different assets & markets Types of income How do lease terms affect value? Importance of income vs. capital appreciation Understanding yields and cap rates Types of yield Components of the yield: How do you interpret yields? What are the key drivers of value? Property Cycles Opportunities and threats What to look for in different stages in the cycle Spreadsheet analysis: Investment Acquisition Setting up, analysing and comparing different appraisal approaches including: Income Capitalisation & Depreciated Replacement Cost Applying and adjusting Cap rates and Income Using different types of Cap rates Structuring the Project Cash flow How to structure, avoiding common mistakes. Investor approach vs. Financier’s concerns. The Real Estate Business Plan: Investment objectives A Cash Flow primer: typical patterns of future cash flows Discounted Cash Flow (DCF) structure: Key inputs, variables and outputs Projecting rents, operating expenditure and cap rates Lease roll-overs: what are the underlying assumptions? Net Operating Income: A line by line assessment from gross to net income Impact of Sustainability, Depreciation & Obsolescence Capital Expenditure: How & When to use it The Exit: When, Why, How? IRR & NPV: Ratio Analysis and Diagnostics Spreadsheet analysis: Investment Cash flow model Setting out a flexible Cash Flow. Shaping up the basic Investment deal before finance. Assess uncertainty & the merits of the investment IRR, Income & Exit ratios. NPV: What is an appropriate discount rate? What else will show whether it is a good deal? "What if" testing & adding sensitivity analysis Day 2 Sourcing Product & Asset Management From sourcing to closing Due Diligence: Identifying potential "Red Flags" Asset Management techniques Adding and enhancing value Leasing strategies Incorporating Finance into a DCF appraisal Gearing up an investment acquisition (use of leverage). Key financial covenants, sizing the debt, understanding risks, pricing and risk mitigation. The Quadrants of Finance The Capital stack Different structures, including Amortisation Sizing the senior debt Junior debt & Mezzanine finance Pref equity Structuring for protection Equity IRRs Worked examples Case study: Hotel Investment Acquisition and Finance Analysing the Operating Cash Flow and considering financing alternatives. Participants will discuss terms for financing a 4/5 star hotel acquisition. Examples of Term Sheets will be used to focus the discussion on suitable terms. On completion, a spreadsheet model will be used to illustrate the cash flow implications and key structuring issues. Spreadsheet analysis: Adding the Finance Analysing the impact of different levels of debt and equity in a cash flow context Adding the senior debt tranche: Analyse and adjust a geared cash flow model Mezzanine Finance: Working through the Capital Stack including Lookback and Side by Side participation in a risk return context, by adjusting key inputs to the model Day 3 Development Market Analysis Data Analysis Trends & Forecasts Development Appraisals & Viability Methods & Approaches Analysing the affordable land cost or developer's profit Construction loan mechanics Main Underwriting Criteria Project Monitoring issues The Bottom line: What indicates a financially viable project? Spreadsheet analysis: Development Analysis & Finance Spreadsheet models will be used to demonstrate the set-up of development proposal Ratio analysis & risk analysis techniques will be used to show the implications of changing market conditions. Cash Flow Appraisal techniques: Moving from Residuals to Cash Flow Capital Budgeting Techniques (NPV) DCF, Accumulated cash flow and Loan draw-downs Structuring the Cash Flows including phases schemes Analysing the Outputs: IRR & NPV issues Development Risk: Towards a Risk Management Strategy Risk Identification & Management Analysis & Presentation Sensitivity Analysis & Data Tables Scenarios & Probabilities Simulation: What is practical? Real Options in Development Risk Management Day 4 Case study: Residential Development Finance Participants will work in small groups to analyse a case study that considers the risk return profile of a residential development to decide on appropriate methods of finance. Spreadsheet analysis: Development Finance Spreadsheet models will be used to demonstrate the impact of finance on Pre-let and Speculative schemes. Debt and Equity issues will be considered and analysed. Joint Ventures & Private Equity structures Landowner & Developer JVs Traditional JVs & Capital Partners Priority of Distributions Allocating Risk & Return Prefs, Promotes & Waterfalls Showing the Exit & Risk Spreadsheet analysis: JVs & Private Equity Spreadsheet models will be used to demonstrate the set-up of Joint Ventures, ground leases & private equity models. Delegates will test possible outcomes on the templates provided. Review of Module, Further Reading & References