Department of Finance
McCombs School of Business Administration
University of Texas at Austin
RE 386.2
Real Estate Investment and Development Decisions
Spring 2008
Wag 420
Unique # 03385 (Tuesdays, 5:00 pm – 8:00 pm)
Instructor:
Office:
Office Hours:
Lenore M. Sullivan
CBA 6.432 N
By appointment
Voice Mail:
Email:
Home Page:
(512) 232-5444
lenore.sullivan@mccombs.utexas.edu
http://www.mccombs.utexas.edu/faculty/Lenore.Sullivan
Teaching Assistant:
Email:
Office Hours:
Alan Crane
alan.crane@phd.mccombs.utexas.edu
Friday, 10 am – noon, CBA 5.334U
Course Description
The course examines the analysis of real estate investments and property developments from the
equity owner’s/developer’s point of view. Economic and financial concepts are applied to real
estate analysis with the objective of building a solid foundation in the fundamentals of real estate
valuation and deal structuring. The course will combine lectures with student discussions, case
analysis, and presentations by real estate professionals in its review of the various disciplines
involved in real estate investment analysis.
The first half of the course focuses on the evaluation of existing, income producing properties to
establish a basis for analyzing real estate markets and individual property investments. The
course starts with a discussion of the principles of urban economics; the determinants of real
estate supply and demand; the evaluation of risk and return in equity investment analysis; the
legal and financial underwriting of mortgage debt; and the impact of financial structuring
decisions on equity investors.
The second half of the course begins with an overview of the development process, and the risks
and financing issues specific to development transactions. We will then discuss the five major
categories of commercial property – industrial, multifamily, retail, office and hospitality. The
tools for evaluating various types of commercial property, as well as the debt and equity
financing of those properties, will be highlighted through the use of case analysis and class
discussion of new development projects and redevelopment/repositioning opportunities. All of
the cases will be based on actual transactions; where possible, the principles involved in each
transaction will join us in class as we review and discuss the cases in detail.
RE 386.2
Real Estate Investment and Development Decisions – Spring 2008
Course Materials
Required Texts: Basics of Real Estate Finance and Investment, Geltner and Miller
Professional Real Estate Development, Peiser etal.
Emerging Trends in Real Estate 2008, ULI/PriceWaterhouseCoopers
Additional Readings and Cases
The Geltner/Miller text is a custom compilation of material from two separate Geltner textbooks;
readings are assigned by page number. Additional readings and cases will be distributed
periodically during the semester, either in class or via Blackboard.
The use of notebook computers is not permitted in class. Each day’s class presentation will be
available on blackboard and will be printed and distributed at the start of class for note taking.
Course Requirements and Grading
Grades will be based on the student’s performance on the mid-term examination, case analysis,
class participation, and the final exam as follows:
Mid-Term Examination
Case Analysis, Assignments and Class Participation
Final Examination
30%
40%
30%
The midterm examination will be given on Thursday February 28 outside of regular class hours.
The time and location will be announced midway through the first half of the semester. It will be
a comprehensive exam and will include all of the material covered through the previous class
sessions. A comprehensive final examination will be given per the McCombs final exam
calendar.
Five cases will be analyzed over the course of the semester. Cases will be completed as team
assignments, with no more than five students working together per team. All teams will be
responsible for three (3) written case papers. The first case, the Metropolitan Capital financing
case, is due on Thursday, February 26. All teams must complete a written analysis of this
case. Each team will be assigned two of the remaining four cases to write up and submit on the
case due date; however, all students are expected to be prepared for class discussion of the cases
regardless of whether their team is preparing a written analysis or not. Team case assignments
will be distributed when the teams are finalized. Please be prepared to submit your team list
to Professor Sullivan by Thursday, January 29.
Written case papers should consist of five to six typed pages of text plus any appropriate financial
analysis. They are due at the start of class on the day the case will be discussed; papers with
formatted-to-print excel spread sheets attached may also be emailed provided they arrive one
hour before the start of class. No late papers will be accepted. Case papers should be prepared in
the format of an investment memorandum outlining your analysis and recommendations.
Neatness, organization, clarity, grammar, punctuation, spelling, and conciseness matter, and will
be taken into consideration in grading. Do not submit anything that you would not feel
comfortable submitting to the CEO of a prospective future employer!
RE 386.2
Real Estate Investment and Development Decisions - Spring 2008
Attendance will not be taken, but students will be held responsible for everything covered or
assigned in class. Please make every effort to be present on days when guest speakers will be
joining us. Our guest speakers are making a special effort to share their experience with us and a
good reception is warranted. On other days, in addition to reviewing assigned material, class
time may be devoted to industry situations and conditions that place the material in context and
enhance students’ understanding and appreciation of the issues. Your general conduct in class,
including attendance, promptness and participation, will be a factor in your final grade.
Policy on Scholastic Dishonesty
Students who violate University rules on scholastic dishonesty are subject to disciplinary
penalties, including the possibility of failure in the course and/or dismissal from the University.
Since dishonesty harms the individual, all students, and the integrity of the University, policies on
scholastic dishonesty will be strictly enforced. You should refer to the Student Judicial Services
website at http://www.utexas.edu/depts/dos/ or the General Information Catalog to access the
official University policies and procedures on scholastic dishonesty as well as further elaboration
on what constitutes scholastic dishonesty.
Students With Disabilities
The University of Texas at Austin provides upon request appropriate academic accommodations
for qualified students with disabilities. For more information, contact the Office of the Dean of
Students at 471-6259.
RE 386.2
Real Estate Investment and Development Decisions – Spring 2008
Part I – Real Estate Investment Analysis
Tues., Jan. 15
Introduction, Course Overview, Course Administration
Principals of Urban Economic Analysis; Market Research and
Determinants of Supply and Demand; Understanding Real Property
Leases
Recommended Reading: Geltner and Miller, pgs 1-19, 20-112
Tues., Jan. 22
Real Estate Valuation and Investment Analysis
Discounted Cash Flow Assignment – Due Tuesday, February 5
Recommended Reading: Geltner and Miller, pages 132 – 228
Tues., Jan 29
Analyzing Real Estate Markets
Guest Speaker:
David Evemy, SVP of Strategic Planning
Sarofim Realty Advisors, Dallas
Recommended Reading: Emerging Trends 2008
Tues., Feb. 5
Discussion of DCF Assignment
Debt Financing and the Capital Structure Decision; the Legal and
Financial Basics
Recommended Reading: Geltner and Miller, pages 113 – 130
and 229 - 252
Tues., Feb. 12
Mortgage Underwriting and Financing of Real Estate Investments
Mortgage Debt Assignment – Due Tuesday, February 19
Recommended Reading: Geltner and Miller, pages 253 – 360
Tues., Feb. 19
Discussion of Mortgage Debt Assignment
Sources of Real Estate Equity Capital; Determination of Equity Returns
Recommended Reading: “Why Real Estate?” An Expanding
Role for Institutional Investors”, S.
Hudson-Wilson, F. Fabozzi, and J.
Gordon,
Journal
of
Portfolio
Management (article on Professor
Sullivan’s web site)
RE 386.2
Real Estate Investment and Development Decisions – Spring 2008
Tues., Feb. 26
Metropolitan Capital Financing Case
Guest Speakers:
Scott Lynn, Director
Kevan McCormack, Associate
Metropolitan Capital Advisors, Dallas
Thurs., Feb. 28
Midterm Exam – location TBD
March 3 – 7
Global Plus Trip
Enrichment Activities During Plus Week:
Tues., March 4
Video Presentation: “Land, and How it Got That Way”
Film Courtesy of Walter Brock Productions
March 10-14
Spring Break
Part II – Real Estate Property Types - Development and Financing Decisions
Tues., March 18
Introduction to Development; Valuing and Financing Land
Single and Multi Family Residential Properties
Recommended Reading: Peiser, Chapters 1- 4
Tues., March 25
Land Development Case - Newland Communities
Tues., April 1
Industrial and Office Properties
Recommended Reading: Peiser, Chapters 5 & 6
Tues., April 8
Industrial Properties Case – McClane Distribution
Guest Speaker: Bruce Petersen, VP
USAA Real Estate Company
Tues., April 15
Retail and Hotel Properties
Recommended Reading: Peiser, Chapter 7
Tues., April 22
Retail Property Case – The Plaza
Guest Speaker: Dan Feeney, Managing Director
Bob McClain, Managing Director
Crow Holdings
RE 386.2
Real Estate Investment and Development Decisions – Spring 2008
Tues., April 29
Hospitality Case - Project Snowstorm
Guest Speakers:
Final Exam
Will Mundinger, Senior Vice President
Robin Bot-Miller, Vice President
Archon
Time and Date TBD, per McCombs final examination schedule