GSD 5204Real Estate Development and Finance

Prof. Richard Peiser

Course Goal

• This course serves students in the real estate concentration and all students interested in understanding real estate investment and development. It teaches all of the critical financial skills necessary to participate in the real estate market as a buyer, seller, developer, or professional services provider.

Who should take this class

• This is a basic real estate designed for students who have no prior background in finance as well as those with finance training. An economics course is helpful as bacground.

• Students in architecture, planning, urban design, and landscape architecture will find the class very helpful both for personal real estate investment and for developing and/or acquiring real estate assets

Basic financial skills

• 6 functions of a dollar (PV, FV, PMT)• IRRs and NPVs• Mortgage analysis• Valuation and appraisal• Investment analysis• REITs and Secondary markets

How to finance your project

• Financing alternatives– Private equity versus public markets– Debt versus equity– Joint ventures– Public-private development

• Mortgage financing, securitization, capital markets

All Property Types

• Residential– For-sale and rental apartments

• Office• Industrial• Retail• Land• Hotel, resorts, recreation

What creates long-term value?

Why are some office buildings more profitable than others?

How do you evaluate building upgrades for sustainability?

How do you determine residential profit?

How do you add value to retail?

How do you create profitable economic development?

Why do new towns almost always go bankrupt?

5 Stages of Analysis

• Stage 1 - Simple Capitalization methods• Stage 2 - Discounted Cash Flows during

Operating Period (Investment Analysis for income properties)

• Stage 3 - Combined Cash Flows of Development and Operating Periods

• Stage 4 - Monthly Cash Flows during Development Period

• Stage 5 - Joint Venture and Syndication Analysis

Process

• Development process– Site selection, due diligence, design, financing,

leasing/marketing, construction, operations, sale

• Existing versus new development– You make money in real estate by adding value

through many different means (zoning, entitlements, leasing, finance, ownership, tax)

Issues

• Factors that have impact on real estate value (location, market, financing, government, infrastructure, ownership)

• Investment value• Urban growth, sprawl, and redevelopment –

impact on the city’s short-term and long-term health

• Impact on society

Class Meetings

• Class meetings M-W 11:30-1:00• Discussion Section – Thursdays 6:00-7:15

– Weekly homework assignments due– Review of financial computations and

homework problems