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R E 376G REAL ESTATE INVESTMENT-Smitheal

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R E 376G REAL ESTATE INVESTMENT-Smitheal

     College of Business Administration

    University of Texas at Austin

    RE 376G

    Real Estate Investment

    Fall 2008

    Unique # 03620

    UTC 1.118, T 5:00 8:00 pm

Instructor: Jeremy Smitheal

    Email: jsmitheal@riversideresources.com

    Phone: (512) 426-9412

T.A. Clay Phillips

    Email: clay.phillips@mba09.mccombs.utexas.edu

    Phone: 214-458-7002

Office hours are by appointment

Course Prerequisites

Real Estate 358 Introduction to Real Estate and Urban Land Development

Course Description

    The course examines debt and equity financing for residential and commercial real estate properties. The objective of the course is to establish a solid foundation in the fundamentals of real property valuation and underwriting, as well as an understanding of the various debt and equity financing alternatives available and in use in the capital markets. The course will also examine lender and investor perspectives on risk and reward across property types.

    The course begins with an overview of the legal aspects of real estate finance, followed by the application of financial mathematics to the calculation of payment streams, mortgage yields, outstanding loan balances, equity returns and other basic financial measurements. We will then turn to a discussion of financing issues specific to various types of real property, starting with mortgage underwriting and valuation of residential real estate. The course will then turn to the financing of existing, income producing commercial properties, including a review of valuation and appraisal methodologies and cash flow analysis across property types. We will examine income producing properties as investments, evaluating the components of risk and understanding the impact of taxation on equity returns. We will also review a variety of loan instruments, and various ownership vehicles such as joint ventures, limited partnerships and syndications, and discuss their application in structuring real estate investments. We will then take a brief look at the risks of new development from both the lender and investor/developer perspectives.

    The final section of the course will focus on real estate capital markets, and will include a brief review of the secondary mortgage markets and REITs. We will complete the course with a discussion of real estate investment in the context of an investment portfolio, with a presentation by a manager of an institutional real estate investment portfolio.

    RE 376 G

    Real Estate Investment

    Fall 2008 (cont.)

Required Text

     thBruggeman and Fisher, Real Estate Finance and Investments, 13 Edition

Course Requirements and Grading

Course grades will be based on the following:

Mid-Term Examinations (2) 60%

    Final Examination 35%

    Homework and Attendance 5%

    There will be homework assignments given during the semester. These assignments will utilize the analytical tools covered in the text and in class lectures and give students the opportunity to apply them to specific valuation problems and financing situations. These assignments will be given out during the semester. Homework will be assigned and turned in via blackboard.

    Two (2) mid-term exams will be given during the semester. Both exams will have equal weightings. The first exam will cover material discussed up through the previous class session; the second exam will cover material since the date of the first exam. Scheduled dates for the exams are included in the Course Outline below; exam reviews will be held prior to each exam.

    The final examination will be comprehensive and will be given during the scheduled period during Finals week. No makeup exams will be given without the prior written consent of the instructor, and only in special circumstances and with proper documentation.

    Attendance will randomly be taken and students will be held responsible for everything covered or assigned in class. In addition to reviewing the material assigned in the textbook and any outside materials introduced during the course of the semester, class time will be devoted to industry situations and conditions that will place the material in context and enhance students’ understanding and appreciation of the material. Your general conduct in class, including attendance, promptness and participation, will be a factor in your final grade. Notebook computers are permitted in class only when we are working on a cash flow assignment.

    Note: A financial calculator capable of performing present value and rate of return functions with unequal cash flows is required.

    RE 376G

    Real Estate Investment

    Fall 2008 (cont.)

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 Catalogue to access the

    official University policies and procedures on scholastic dishonesty as well as further elaboration on what constitutes scholastic dishonesty.

Student 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 376G

    Real Estate Investment

    Fall 2008 (cont.)

    Course Outline

    Sept. 2 Introduction and Course Administration

     Overview of Real Estate Finance and Investments

    Reading Assignment: Text, Chapters 1

I. A Brief Look at the Legal Considerations in Real Estate Finance

     Legal Issues in Real Estate Finance and Income-Producing Properties

    Reading Assignment: Text, Chapters 2

II. Discounted Cash Flow Analysis, IRR, Amortization

Sept. 9

    Fixed Rate Mortgage Loans

    Reading Assignment: Text, Chapters 3 & 4

    Review problems:

    Chapter 4, Problems #2, #3, #6, and #10

    Variable Rate Mortgage Pricing and Valuation

    Reading Assignment: Text, Chapters 5

II. Interest Factors, Mortgage Pricing and Valuation

     Sept. 16 Introduction to Cash Flow Modeling

     Assignment: Single Family Financing

     hReading Assignment: Text, Chapters 7 &8

Sept. 23 Discuss Chapters 7&8

    Income Producing Properties : Leases, Rents and the Market for Space

    Reading Assignment: Text, Chapters 9

    Review problems:

     Chapter 9, Problems #4,#5,#6 and #7

III. Commercial Real Estate Valuation Fundamentals

    Sept 30 Valuation of Income-Producing Properties: Appraisal

    Reading Assignment: Text, Chapters 10

    Review Problems:

     Chapter 10, Problems #1,#2,#3, #4 and #5

    Guest Speaker: Larry Decovic of American Realty

    Oct.7 Review Chapters 1-10 (excluding chapter 6)

     Cash Flow Modeling Assignment #1 will be assigned

Oct. 14 EXAMINATION #1

III. Commercial Real Estate Valuation Fundamentals

Oct. 21 Income Analysis and Taxation of Income Properties

     Reading Assignment: Text, Chapter 11

    Review Problems:

     Chapter 11, Problems #1,#2,#3 and #4

V. Making Commercial Real Estate Investment and Financing Decisions

     Financial Leverage and Financing Alternatives

     Reading Assignment: Text, Chapter 12

    Review Problems:

     Chapter 12, Problems #1,#2,#3 and #4

    Cash Flow Modeling Assignment #1 Due

Oct 28 Risk Analysis

     Reading Assignment: Text, Chapter 13

    Review Problems:

     Chapter 13, Problems #1,#2,#3 and #4

     Disposition and Renovation of Income Properties

     Reading Assignment: Text, Chapter 14

    Review Problems:

     Chapter 14, Problems #1,#2,#3 and #4

    Cash Flow Modeling Assignment #2 will be assigned

Nov 4,

     Financing Corporate Real Estate

    Reading Assignment: Text, Chapter 15

     Review Problems

    Chapter 15, Problems #1,#2,#3 and #4

    Financing Project Development

     Reading Assignment: Text, Chapter 16

    Review Problems:

    Chapter 16, Problems #1,#2,#3 and #4

Nov 11 Financing Land Development

     Reading Assignment: Text, Chapter 17

    Review Problems:

    Chapter 17, Problems #1,#2,#3 and #4

     Review Period for Exam

     Nov. 18 EXAMINATION #2

VI. Real Estate Development Analysis

    Dec 2 Joint Ventures, Syndications and Partnerships

     Financing and Development Projects

     Reading Assignment: Text, Chapter 18

    Review Problems:

    Chapter 18, Problems #1,#2,#3 and #4

VII. Real Estate Debt and Equity Capital Markets

     The Secondary Market: Pass-Through Securities

     Reading Assignment: Text, Chapter 19

    Review Problems:

    Chapter 19, Problems #1,#2,#3 and #4

    Cash Flow Modeling Assignment #2 Due

Dec 9 The Secondary Market: CMO’s and Derivative Securities

     Reading Assignment: Text, Chapter 20

    Review Problems:

    Chapter 20, Problems #1,#2,#3 and #4

     REITS

     Reading Assignment: Text, Chapter 21

    Review Problems:

    Chapter 21, Problems #1,#2,#3 and #4

    VIII. Institutional Real Estate Investment Portfolio Performance and Considerations

Dec 16 RE Investment Performance and Portfolio Considerations

     Reading Assignment: Text, Chapter 22

    Review Problems:

    Chapter 22, Problems #1,#2,#3 and #4

    Web Site Review: http://www.NAREIT.com.

     Final Exam Review Session

     FINAL EXAMINATION Confirm with Registrar

     th December 16 7-10 pm

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