Real Estate Finance And Development Course – 3 Days

This 3 day course provides participants with in-depth coverage of the principal factors impacting real estate development and financing. The real estate finance course canvasses the full property development cycle, from the methods used by developers to originate and source deals, right through to the financing of projects by banks, and the way institutions analyse risk and return. The course includes the opportunity to apply key financial analysis tools such as IRR and NPV to property investment. Class discussion, working through up-to-date case studies, and role play are all key components of the learning methodology for this course.

Day one of the real estate finance course – money and property

• Session 1 – introduction to real estate development and finance
  • The real estate market
  • Types of property
  • Key constituents
  • Legal structures used in property finance and development
  • Structuring investments
  • Securitisation, Real Estate Investment Trusts (REITs) and other property funds

• Session 2 – the real estate market
  • Demand and supply of real estate
  • The asset conversion cycle
  • Gestation periods in real estate projects
  • Public vs. unpublished information sources
  • The dynamics of estimation
  • Opportunities in real estate finance and development: land, investment, re-development

Group case study: groups form teams to discuss and analyse different types of real-estate case transactions

• Session 3 – types of real estate
  • Analysing real estate by function: commercial, residential
  • Categorising real estate by purpose: own use, investment
  • Development property
  • Leases and depreciating real estate assets
  • Bases of real estate valuation
  • Determinants of value
  • The real estate decision making process

• Session 4 – building a cash flow model to analyse real estate investments
  • Simple elements of investment property
  • Real estate held for development
  • Real estate sale/ pre-sale
  • Monitoring covenants

Group case study: participants work in teams to build an Excel cash flow model for a pre-let office building. During this exercise, participants are provided with assistance and help from the course tutor as they work in Excel to construct a cash flow forecast for the buildingDay two of the real estate development and finance course

• Session 5 – financial mathematics for real estate property
  • The time value of money
  • Property yields and rates of return
  • Discounted Cash Flow (DCF) as it applies to real estate investment
  • Conducting sensitivity analysis for property investments – the role of table functions

• Session 6 – real estate valuation methods
  • The comparison method
  • Sources of data
  • Units of comparison
  • Making and adjusting comparisons when valuing real estate
  • The investment method
  • Tenanted units
  • Revisionary freehold value
  • Leasehold valuation for real estate
  • The profits method
  • The residual property valuation method and its application to land
  • The replacement cost method of real estate valuation

Group case study: delegates work together to use their Excel model (constructed earlier in the course) to estimate valuation for the property. Participants are provided with the opportunity to apply returns measures and investment analysis (NPV, IRR, DCF) into their Excel model

• Session 7 – the impact on real estate valuation of:
  • Rent review clauses
  • Rent free periods
  • Real estate premiums
  • Capital contributions (renovations)
  • Stepped real estate rents
  • Leases with options to break/ renew
  • Real estate rents based on turnover

• Session 8 – financing structures for real estate investment
  • The application of sources and uses of funds to real estate investment
  • Capital structures for real estate investments
  • Valuation vs. land cost
  • Vendor financing
  • Financing capacity
  • Rules of thumb in real estate investment
  • Key covenant tests: Loan To Value (LTV), debt coverage, interest cover

Group case study: delegates work together to structure a term sheet for a real estate financing. Groups are assigned scenarios and different roles (e.g. banker, buyer, existing lender, seller). What’s the best deal you can develop?

• Session 9 – stages in financing real estate
  • Financing and acquiring land for real estate development
  • Financing property construction
  • Long term financing
  • Project financing and its application to real estate development

Day three of the real estate course

• Session 10 – sources of finance for real estate development
  • Conventional sources of finance
  • Unconventional property development
  • Financing real estate with interest only mortgages
  • Convertible mortgages
  • Real estate sale and leaseback
  • Negative amortisation

• Session 11 – risk management for real estate development and financing
  • Operational risk management
  • Managing financial real estate risk
  • Liquidity risk
  • Economic/ inflation risk
  • Interest rate risk
  • Management
  • Legislative risk
  • Environmental risk
  • Other real estate financing risks

• Session 12 – real estate credit considerations
  • Construction companies
  • Real estate investment properties
  • Development properties
  • Operating company credit considerations
  • Project risk vs. promoter risk
  • Cross default
  • Currency risk
  • Real estate project completion risk
  • Property market risk

Group case study: writing a feasibility study/ loan proposal for a real estate development project. Course delegates are assigned into groups and given different types of real estate development project. What key points would you want to see covered in the feasibility/ financing proposal?

• Session 13 – real estate capital markets
  • The role of capital markets for real estate financing and development
  • The use of senior debt
  • Construction and development loans
  • Mortgage financing
  • Mezzanine and exotic debt products
  • Real Estate Investment Trusts (REITs)
  • Private equity financing for real estate development

• Session 14 – lessons learned from times of crisis
  • Real estate property securitisation as a source of finance: the fundamentals
  • Structured finance
  • Issuer advantages
  • What can go wrong?
  • Disadvantages
  • Risks for investors in securitised real estate assets
  • Mortgage backed property securities

Contact us about a real estate finance and development course for delivery inside your company

Financial Training Associates’ real estate courses are only offered for delivery inside your company. If your firm has a group of 4-5 employees who are interested in a real estate course, in-company training will prove cost-effective. If you are interested in a real estate course for a small group of your company’s staff, please let us know by using Financial Training Associates’ contact details at the top right.