Comprehensive course analysis
Who should attend
- Lending and Finance Bankers
About the course
Understand the complex process of real estate investment, finance and development
A practical modular programme with case studies and integrated cash flow modelling for analysts, investors, financiers, developers and advisors. This course is made up of two individually bookable modules, which delegates are also able to book on
Real Estate Finance and Investment (3 days) Real Estate Development Finance (2 days) The 5 day school features
3-Day Investment Module
- Interactive case studies based on actual projects with spreadsheet analysis
- Real estate markets: Macro View
- Evidence of cycles in property markets
- Appraisal & valuation fundamentals
- Sourcing product & asset management
- Developing cash flow models: Avoiding common mistakes
- Implications of gearing and debt finance
- Mezzanine & Participating Loans
- Modelling the impact of debt, quasi equity and sponsor equity
2-Day Development Module
- Interactive case studies based on actual projects with spreadsheet analysis
- Development analysis and appraisal
- Setting up and modelling a development project
- Cash flow appraisal techniques in development
- Structuring the development finance
- Structuring mezzanine, JV and private equity deals
- Modelling sample waterfall structures
The modules are principally aimed at delegates with previous experience in investment/finance or development strategy, but as the course puts delegates on an interactive learning curve to cover fundamentals of each topic, before moving on to more advanced techniques and applications, it allows delegates from both a junior and more senior experience level to participate together. Articles. papers and further references and reading in the Course
Handbooks provide further information, expand and show potential applications for many of the topics included to give a more rounded understanding.
Real Estate continues to attract the attention of funds, banks, corporates and investors looking for diversification and liability matching. However, cross border investment and financing brings risks as well as opportunities. This programme is designed as an integrated set of modules which will increase participants’ understanding of the complex and changing process of real estate investment, development and finance. In addition to expert course tuition, delegates will benefit from a collegial atmosphere, with networking and information-sharing a valuable part of the course.
The programme’s key objective is to give a clear understanding of the most typical financing and investing structures, as well as the latest thinking in analytical techniques, in a shifting capital markets context.
The recognition and analysis of risk will be a component part of the programme. It covers several techniques and tools that can be applied to dealing with and resolving practical, everyday problems.
Module 1 - Days 1 - 3 Real Estate Investment & Finance
Day 1: Real Estate Appraisal and Analysis
Valuation and Investment Worth approaches and techniques. Structuring and developing flexible cash flow models for analysing real estate investments. At the end of this module participants should understand the component parts of a real estate cash flow model, the input variables will have been examined in concept spreadsheet models.
- Structure of the Module
- Discussion of delegates’ objectives
Appraisal & Valuation Fundamentals
A. Formal Valuations
- Terminology & Techniques
- Appraisal methods: clarity and transparency
- Market “comps”. What are they? How are they used? Disclosure?
- A framework for Market Value
B. Investor Appraisals
- Target IRRs / Discount rates
- Types of income: Opportunities or Threats?
- Lease terms & impact on value. Pressures for change
- Understanding yields and cap rates
Spreadsheet Analysis: Valuation Techniques
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 Cash flow
How to structure, holding period strategies. Worked examples and practical issues
- Business Plans: Linking objectives to hold period policy, expected returns & risk
- A Cash Flow primer: typical patterns of cash flows
- Discounted Cash Flow construction: Key inputs, variables, and outputs
- Projecting rents, operating expenditure, and cap rates
- Lease roll-overs & expiries: what assumptions to use?
- Net Operating Income: A line by line assessment from gross to net income
- Use of Capital Expenditure: Purpose & effects
- Links to Asset & Property Management
- The Exit: When, Why, How?
- IRR & NPV: Ratio Analysis and Diagnostics including Equity Multiples
- Solving the maximum price to pay / target sale price
Day 2: Real Estate Acquisition, Management and Finance
Procedures for sourcing, closing, management and adding value. Using the capital stack to finance the acquisition.
Spreadsheet concept models and interactive case studies will be used to illustrate various approaches, techniques, and potential solutions.
Spreadsheet Analysis: Investment Cash flow model before debt finance
- Shaping up the basic Investment deal before finance.
- Solving for transaction prices
- Holding period strategies
- Buy, hold, do nothing; Buy & Improve; Testing the exit
- Line by line build-up of Cash Flows, including Capex and Opex
- IRR, NPV, Income and Exit ratios. Assess uncertainty & the merits of the investment
- Setting the target rate of return. What is an appropriate discount rate?
- What else will show whether it is a good deal?
- “What if” testing and adding sensitivity analysis
Sourcing Product & Property Management
- From Sourcing to Closing
- Due Diligence: Identifying potential “Red Flags”
- Asset Management techniques
Case Study 1: Bid Strategy & Due Diligence Participants will work in small groups to analyse a potential purchase that considers the acquisition of an investment and the appropriate Due Diligence processes. How does risk affect the bid strategy?
Case Study 2: Leasing Strategies Participants will work in small groups to consider the challenges for leasing policies & negotiating strategies. How to attract potential tenants when faced with competing buildings which are being aggressively marketed. What role for leasing agents & property managers? Questions posed include selecting tenants, importance of covenant strength & pricing lease incentives including lease buy outs & re-gearing.
Although the focus here is offices, discussion could be widened to consider other sectors.
Discussion from Case Studies
- Regearing, tenant covenant, lease length, impact to building value
- Adding and enhancing value
- Leasing strategies
Day 3: Real Estate Finance
Gearing up an investment acquisition (use of leverage). Key financial covenants, sizing the debt, understanding risks, pricing, and risk mitigation.
Structuring the Finance
- Returns on NOI and Returns on EquityTypical financial covenants and points for negotiation
- Different structures, including Amortisation
- Sizing the debt
- Applying financial covenants to the cash flow
- After debt cash flow & metrics
- Impact of varying LTV ratios: Risk & return implications
- Identifying and quantifying the risks in the finance
Case Study: Hotel Investment Acquisition and Finance
Financing the investment acquisition of an existing hotel. Participants will discuss terms for a loan for an investment opportunity. 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
Asset Management Decisions and Financial implications
- Lease management (e.g. tenant improvement) will affect their project financing
- Balance between capex and sustainable cash flow
- Future proofing your building & prevention of building obsolescence
- Understanding the property cycle & financing through the cycle
- Capex linked it to the property cycle
- Financing using mezzanine / participating structures
- Lookback IRRs, warrants and convertibles
- Worked examples
Spreadsheet Analysis: The impact of different levels of debt and equity
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 Scenario Analysis: Impact of changing market conditions on Returns & Risk exposure How does leverage change the risk profile: Income & Exit ratios revisited After debt Equity Multiples
Development and Finance Module
Development appraisal techniques, risk analysis, tests of profitability and viability, sources and types of finance for development
Day 4: Real Estate Development Appraisals & Viability
- Methods & Approaches: From residuals to cash flows
- Line by line items down to affordable land cost or profit
- Refurbishment & repositioning e.g. conversion to co-working or residential
- Ratio analysis: What indicates a viable project?
Spreadsheet Analysis: Development Appraisals
A spreadsheet model 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.
Appraisal: Residuals to Cash Flow
- Capital Budgeting Technique (NPV)
- Accumulated cash flow and Drawdowns
- Project Discounted Cash Flow
- Structuring the Cash Flows
- Analysing the Outputs: IRR & NPV issues
Case Study: Structuring a Development project
Appraisal of a new development project. Participants will discuss issues include the risks associated with this project (how should they be measured?), the projected yield on cost ,reasons why this project could be successful or a failure, right price for the land, and pros and cons of how the finance should be structured.
Day 5: Real Estate Project Finance and JVs
Structuring the Development Finance
- Pre-let or speculative?
- Construction loan mechanics
- Main Underwriting Criteria
- Project Monitoring: What do Investors & lenders want to know?
Joint Ventures & Private Equity
- Landowner & Developer JVs
- Traditional JVs and capital partners
- Priority of distributions
- Allocating risk & return
- Prefs, Promotes & waterfalls
- Showing the Exit and Risk
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.
Case Study: Development JV
Participants will work in small groups to consider a deal with a new development partner, the suitability of the development, potential risks & returns and consider appropriate JV terms to achieve alignment of interests of the parties involved.
Spreadsheet Analysis: JVs & Private Equity
Spreadsheet models will be used to demonstrate the set-up of Joint Ventures, ground leases and private equity models. Delegates will test possible outcomes on the templates provided.
Further Reading & References
The course director is a Chartered Surveyor whose career has spanned both private and public sector work, including large-scale development schemes, urban regeneration projects, project finance and Private Finance Initiatives (PFI). He has undertaken research and consultancy projects in developme...
Videos and materials
Because of COVID-19, many providers are cancelling or postponing in-person programs or providing online participation options.
We are happy to help you find a suitable online alternative.