Real Estate Finance II: Case Studies

Building on the fundamental analytical tools and methods of Real Estate Finance I, this course extends the investigation to the financial aspects of the development and construction phase, and to the equity investment structures and returns for real estate deals: The development and construction phase comprises the following analytical processes: quick Back-of-the-Envelope analysis, evaluating Highest & Best Use, establishing sources and uses for the project, formulating the construction loan and repayment, valuation of completed project, and project returns. These tools and methods will be learnt and applied to example situations and case studies. Real estate investors can choose among many vehicles through which to gain equity exposure, and the structuring of the deal’s capital stack to achieve maximized returns, the alignment of interests, liquidity, operator incentives, and tax-efficiency provides added complexity. Specifying the format and timing of the investors’ returns on the deal requires advanced cash flow modeling. Various equity structures are reviewed to determine the associated cash flow patterns and tax implications, paying particular attention to limited partnership promotes and waterfall distributions. Additionally, the utilization of the REIT and UPREIT structures to finance acquisitions will be introduced.