Certified Commercial Real Estate Analysis and Investments
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English
Intermediate
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Course Overview
This course includes corporate and international real estate investment and presents the essential concepts, principles, and tools necessary to analyze incomeproducing commercial real estate from an investment perspective. The course integrates relevant aspects of urban and financial economics to provide delegates with a fundamental analytical understanding and application of real estate investments. The course also explores international real estate investments, both opportunistically and structurally, by outlining elements for developing and implementing real estate investments successfully abroad.
Key Takeaways
1
Understand Commercial real estate as an integrated analysis of corporate finance and investments within a solid financial economics framework.
2
Bridge “Wall Street to Main Street,” this course combines academic rigor with practical relevance for real estate decision-making.
3
Develop a holistic approach to the commercial real estate decision-making process using principles of financial and urban economics.
4
Develop and communicate a coherent body of knowledge to address real estate and mortgage valuation and investment issues at a basic or macro level.
5
Recognise that real estate assets trade in generally well-functioning markets and hence understand the framework that applies the fundamental economic principles of market equilibrium and opportunity cost to real estate investment analysis.
International Academy of Business and Financial Management
The International Academy of Business and Financial Management™ is one of the world’s fastest growing professional association with more than 200,000 members, associates and affiliates in 145 countries. IABFM™ hosts and organizes certification training worldwide and offers exclusive board designations to candidates who meet the highest professional standards and assessment criteria. The IABFM is credited by the American National Standards Institute (ANSI) the International Standards setting authority.
Course Outline
Part I: Introduction to Real Estate Economics
1. Real Estate Space and Asset Markets
→ Segmentation of Space Markets: The Immobility of Real Estate
→ Supply, Demand, and Rent in the Space Market
→ Supply Is ‘‘Kinked’’
→ Relation among Supply, Development Cost, and Rent
→ Forecasting the Future Direction of Rents
→ Is the Supply Function Rising, Level, or Falling?
→ Capital Markets
→ Pricing of Real Estate Assets
→ Is the Asset Market Segmented Like the Space Market?
→ Magnitude of Real Estate Assets in the Overall Capital Market
→ Supply, Demand, and Rent in the Space Market
→ Supply Is ‘‘Kinked’’
→ Relation among Supply, Development Cost, and Rent
→ Forecasting the Future Direction of Rents
→ Is the Supply Function Rising, Level, or Falling?
→ Capital Markets
→ Pricing of Real Estate Assets
→ Is the Asset Market Segmented Like the Space Market?
→ Magnitude of Real Estate Assets in the Overall Capital Market
2. Real Estate System
→ Commercial Property Development Industry
→ Overview of the Real Estate System
→ Four-Quadrant Model
→ Using the 4Q Diagram to Help Understand Boom and Burst in Real Estate Markets
Exercise: Calculating the Capitalization Rate
Discuss: Factors affecting the Capitalization Rate
Test Your Knowledge Questions
→ Overview of the Real Estate System
→ Four-Quadrant Model
→ Using the 4Q Diagram to Help Understand Boom and Burst in Real Estate Markets
Exercise: Calculating the Capitalization Rate
Discuss: Factors affecting the Capitalization Rate
Test Your Knowledge Questions
Part II: Urban Economics and Real Estate Market Analysis
3. Central Place Theory and the System of Cities
→ Pattern of City Size
→ Pattern of City Location
→ Factors Underlying the Pattern: Centripetal and Centrifugal Forces
• Centripetal Forces
• Centrifugal Forces
• Balance of Forces
• Central Place Theory and the Urban Hierarchy
• Why Does CPT Matter?
→ Economic Base and the Growth of Cities and Regions
• Definition of Economic Base
• Export Base
• Location Quotients and SICs
• Service Sector and Export Multiplier
• Classification of Cities by Economic Base
→ Pattern of City Location
→ Factors Underlying the Pattern: Centripetal and Centrifugal Forces
• Centripetal Forces
• Centrifugal Forces
• Balance of Forces
• Central Place Theory and the Urban Hierarchy
• Why Does CPT Matter?
→ Economic Base and the Growth of Cities and Regions
• Definition of Economic Base
• Export Base
• Location Quotients and SICs
• Service Sector and Export Multiplier
• Classification of Cities by Economic Base
4. Real Estate Market Analysis
→ General Features of Real Estate Market Analysis
• Purpose of Market Analysis
• Market Supply and Demand Variables and Indications
• Defining the Scope of the Analysis
• Trend Extrapolation versus Structural Analysis
• Major General Tasks in Conducting a Basic Short-Term Structural Market Analysis
Test Your Knowledge Questions
• Purpose of Market Analysis
• Market Supply and Demand Variables and Indications
• Defining the Scope of the Analysis
• Trend Extrapolation versus Structural Analysis
• Major General Tasks in Conducting a Basic Short-Term Structural Market Analysis
Test Your Knowledge Questions
Part III: Basic Financial Economic Concepts and Tools
5. Real Estate as an Investment: Some Background Information
→ Investment Industry, and Real Estate’s Role Therein
• Investor Objectives and Concerns
• Implications of investor Heterogeneity
• General Structure of Investment Products and Vehicles
→ Real Estate as an Asset Class
• Four Major Investment Asset Classes
• Historical Investment Performance
→ Perspective on the US Institutional Property Market
• Brief History of Commercial Real Estate Investment during Recent Decades
• Sources of Debt and Equity Capital
• Investor Objectives and Concerns
• Implications of investor Heterogeneity
• General Structure of Investment Products and Vehicles
→ Real Estate as an Asset Class
• Four Major Investment Asset Classes
• Historical Investment Performance
→ Perspective on the US Institutional Property Market
• Brief History of Commercial Real Estate Investment during Recent Decades
• Sources of Debt and Equity Capital
6. Present Value Mathematics for Real Estate
→ Single-Sum Formulas
• Single-Period Discounting and Growing
• Single-Sums over Multiple Periods of Time
• Simple versus Compound Interest
• Effective versus Nominal Rates
• Bond Equivalent and Mortgage Equivalent Rates
• Continuously Compounded Interest Rates
→ Multiperiod Problems
• Present Value of a Level Annuity in Arrears
• Present Value of a Level Annuity in Advance
• Present Value of a Constant-Growth Annuity in Arrears
• Present Value of a Constant-Growth Perpetuity
• Introducing Long-Term Leases
• How to Convert Annuities to Future Values
• Solving for the Cash Flows
• Solving for the Number of Payments
• IRR and Multi-period DCF Formula
• Single-Period Discounting and Growing
• Single-Sums over Multiple Periods of Time
• Simple versus Compound Interest
• Effective versus Nominal Rates
• Bond Equivalent and Mortgage Equivalent Rates
• Continuously Compounded Interest Rates
→ Multiperiod Problems
• Present Value of a Level Annuity in Arrears
• Present Value of a Level Annuity in Advance
• Present Value of a Constant-Growth Annuity in Arrears
• Present Value of a Constant-Growth Perpetuity
• Introducing Long-Term Leases
• How to Convert Annuities to Future Values
• Solving for the Cash Flows
• Solving for the Number of Payments
• IRR and Multi-period DCF Formula
7. Measuring Investment Performance: The Concept of Returns
→ Investment Returns: Basic Definition and Classification
• Two Fundamental Types of Return Measures
• Advances and Disadvantages of Periodic and Multiperiod Return Measures
→ Periodic Returns
• Formal Definition of the Periodic Return
• Time-Weighted Investment
• Real versus Nominal Returns
• Measuring Risk in Returns
• Relationship between Risk and Return
• Summarising Periodic Returns: Synthesizing the Three Ways to Break Down the Total Return
→ Multiperiod and Money-Weighted Returns
• Time-Weighted Average Return
• Internal Rate of Return (IRR)
Test Your Knowledge Questions
• Two Fundamental Types of Return Measures
• Advances and Disadvantages of Periodic and Multiperiod Return Measures
→ Periodic Returns
• Formal Definition of the Periodic Return
• Time-Weighted Investment
• Real versus Nominal Returns
• Measuring Risk in Returns
• Relationship between Risk and Return
• Summarising Periodic Returns: Synthesizing the Three Ways to Break Down the Total Return
→ Multiperiod and Money-Weighted Returns
• Time-Weighted Average Return
• Internal Rate of Return (IRR)
Test Your Knowledge Questions
Part IV: Real Estate Valuation and Investment Analysis & at the Micro Level
8. The Basic Idea: DCF and NPV
→ Relation between Return Expectations and Property Values in the Asset Market
→ Discounted Cash Flow Valuation Procedure
• Match the Discount Rate to the Risk: intralease and interlease Discount Rates
• Blended IRR: A single Discount Rate
• Unbundling Cash Flows: An Example
→ Ratio Valuation Procedures: Direct Capitalisation and GIM as Shortcuts
• Relationship of the Cap Rate to the Total Return
• Empirical Cap Rates and Market Values
→ Typical Mistakes in DCF Application to Commercial Property
• If Your Case lacks Merit, Dazzle Them with Numbers
• Excessive Laziness
• Watch out for the Cycle
→ Underwriting Haircuts
→ Capital Budgeting and the NPV Investment Decision Rule
• NPV Rule Corollary: Zero-NPV Deals Are OK
• Choosing among Alternative Zero-NPV Investments
• Hurdle Rate Version of the Decision Rule
→ Discounted Cash Flow Valuation Procedure
• Match the Discount Rate to the Risk: intralease and interlease Discount Rates
• Blended IRR: A single Discount Rate
• Unbundling Cash Flows: An Example
→ Ratio Valuation Procedures: Direct Capitalisation and GIM as Shortcuts
• Relationship of the Cap Rate to the Total Return
• Empirical Cap Rates and Market Values
→ Typical Mistakes in DCF Application to Commercial Property
• If Your Case lacks Merit, Dazzle Them with Numbers
• Excessive Laziness
• Watch out for the Cycle
→ Underwriting Haircuts
→ Capital Budgeting and the NPV Investment Decision Rule
• NPV Rule Corollary: Zero-NPV Deals Are OK
• Choosing among Alternative Zero-NPV Investments
• Hurdle Rate Version of the Decision Rule
9. Nuts and Bolts for Real Estate Valuation: Cash Flow Proformas and Discount Rates
→ Proformas and Cash Flow Projection
• PGI and Market Rent Projection
• Vacancy Allowance and EGi
• Operating Expenses
• Net Operating Income
• Capital Improvements Expenditures
• The Bottom Line: PBTCF
• Reversion Cash Flows
• Summary of Cash Flow Projection
→ Discount Rates: The Opportunity Cost of Capital
• General Observations about Real Estate Discount Rates
• Putting in Some Numbers: The Risk-Free Rate
• Putting in Some More Numbers: Historical Evidence on the OCC for Institutional Commercial Property
• Another Perspective: Survey Evidence
• Getting an Indication of Realistic Total Return Expectations by Observing Current Cap Rates in the Property Market
• Double Checking: Two Perspectives on the OCC Estimate
• Variation in Return Expectations for Different Types of Property
• PGI and Market Rent Projection
• Vacancy Allowance and EGi
• Operating Expenses
• Net Operating Income
• Capital Improvements Expenditures
• The Bottom Line: PBTCF
• Reversion Cash Flows
• Summary of Cash Flow Projection
→ Discount Rates: The Opportunity Cost of Capital
• General Observations about Real Estate Discount Rates
• Putting in Some Numbers: The Risk-Free Rate
• Putting in Some More Numbers: Historical Evidence on the OCC for Institutional Commercial Property
• Another Perspective: Survey Evidence
• Getting an Indication of Realistic Total Return Expectations by Observing Current Cap Rates in the Property Market
• Double Checking: Two Perspectives on the OCC Estimate
• Variation in Return Expectations for Different Types of Property
10. Advanced Micro level Valuation
→ Market Value and Investment Value
• How to Measure Investment Value
• Joint Use of IV and MV in Decision Making
• The Asset Market Model with Marginal and Intramarg→ Danger and Opportunity in Market Inefficiency
• Valuation Noise
• Asset Market Predictability
→ Duelling Asset Markets: The REIT Market and the property Market
Exercise: Calculate Real Estate Valuations and Investment Analysis
Case Study: Comparing Real Estate Investments
Test Your Knowledge Questions
• How to Measure Investment Value
• Joint Use of IV and MV in Decision Making
• The Asset Market Model with Marginal and Intramarg→ Danger and Opportunity in Market Inefficiency
• Valuation Noise
• Asset Market Predictability
→ Duelling Asset Markets: The REIT Market and the property Market
Exercise: Calculate Real Estate Valuations and Investment Analysis
Case Study: Comparing Real Estate Investments
Test Your Knowledge Questions
Part V: Completing the Basic Investment Analysis Picture
11. Use of Debt in Real Estate Investment: The Effect of Leverage The “Big Picture”
→ Basic Definitions and Mechanics of Leverage
→ Effect of Leverage on the Risk and Return to Equity
• Effect on the Expected Return
• Effect on the Risk in the Return
• Risk and Return: The Security Market Line
→ A Useful Formula: The WACC
• The WACC and REIT Cost of Capital
• Use of the WACC in Direct Property Investment
• The WACC and Return Components
• The WACC and Risk
→ Positive and Negative Leverage
→ Effect of Leverage on Growth and Yield
→ Effect of Leverage on the Risk and Return to Equity
• Effect on the Expected Return
• Effect on the Risk in the Return
• Risk and Return: The Security Market Line
→ A Useful Formula: The WACC
• The WACC and REIT Cost of Capital
• Use of the WACC in Direct Property Investment
• The WACC and Return Components
• The WACC and Risk
→ Positive and Negative Leverage
→ Effect of Leverage on Growth and Yield
12. Real Estate Investment Capital Structure
→ Debt When There is an Equity Capital Constraint
• Debt to Obtain Positive Equity NPV
• Debt and Diversification
• Limitations on the Equity Constraint Argument for the Use of Debt
→ Other Considerations Regarding the Role of Debt in Real Estate Investments
• Debt as an Incentive and Disciplinary Tool for Management
• Debt and Liquidity
• Cost of Financial Distress
• Debt and Inflation
→ Project-Level Capital Structure in Real Estate
• Enriching the Traditional Capital Structure Plate
Group Discussion: The Dark side of Debt – Lessons from the Financial Crisis
Test Your Knowledge Questions
• Debt to Obtain Positive Equity NPV
• Debt and Diversification
• Limitations on the Equity Constraint Argument for the Use of Debt
→ Other Considerations Regarding the Role of Debt in Real Estate Investments
• Debt as an Incentive and Disciplinary Tool for Management
• Debt and Liquidity
• Cost of Financial Distress
• Debt and Inflation
→ Project-Level Capital Structure in Real Estate
• Enriching the Traditional Capital Structure Plate
Group Discussion: The Dark side of Debt – Lessons from the Financial Crisis
Test Your Knowledge Questions
Part VI: Mortgages from an Investment Perspective
13. Mortgage Basics I: An Introduction and Overview
→ Basic Legal Concepts and Terminology for Mortgages
• Legal Structure of Mortgages
• Priority of Claims in Foreclosure
• Typical Mortgage Covenants
→ Default, Foreclosure and Bankruptcy
• Legal Structure of Mortgages
• Priority of Claims in Foreclosure
• Typical Mortgage Covenants
→ Default, Foreclosure and Bankruptcy
Part VII: Macro Level Real Estate Investment Issues
14. Real Estate Investment Trusts (REITs)
→ Introduction to REITs
• Tax Status and Regulatory Constraints
• Tax Status and Regulatory Constraints
15. International Real Estate Investment: Markets, Strategies, and Implementation
→ There’s a Big World out There
• The Global Real Estate Capital Market: Size and Flows
• The Institutions of Globalisation
→ Going International: Rationales and Obstacles
• Return Opportunities
• International Diversification
• Managerial Considerations
• Obstacles to International Property Investment
→ Developing and Implementing International Real Estate Strategies
• Public Real Estate Investment
• Determining Country Allocation
• The “Home Market” Concept
Group Discussion: Political and other risk factors associated with International Real Estate investment.
Test Your Knowledge Questions
• The Global Real Estate Capital Market: Size and Flows
• The Institutions of Globalisation
→ Going International: Rationales and Obstacles
• Return Opportunities
• International Diversification
• Managerial Considerations
• Obstacles to International Property Investment
→ Developing and Implementing International Real Estate Strategies
• Public Real Estate Investment
• Determining Country Allocation
• The “Home Market” Concept
Group Discussion: Political and other risk factors associated with International Real Estate investment.
Test Your Knowledge Questions
Part VIII: Real Estate Development and Other Selected Topics
16. Investment Analysis of Real Estate Development Projects: Overview & Background
→ Overview of the Development DecisionMaking Process
→ Basic information: Enumerating project Costs and Benefits
→ Construction Budget Mechanics
→ Simple Financial Feasibility Analysis in Current practice
• Simple Feasibility Analysis Explained
• Problems with the Simple Approach
→ Basic information: Enumerating project Costs and Benefits
→ Construction Budget Mechanics
→ Simple Financial Feasibility Analysis in Current practice
• Simple Feasibility Analysis Explained
• Problems with the Simple Approach
17. Islamic Finance in Real Estate
→ Islamic Finance Fundamentals – Principles, Rules & Prohibitions
→ Contracts - Debt and Equity Structures used to finance Real Estate
→ Sharia Conditions applying to Real Estate Investments
→ Contracts - Debt and Equity Structures used to finance Real Estate
→ Sharia Conditions applying to Real Estate Investments
Who Should Attend?
This highly practical and interactive course has been specifically designed for
This program will be of benefit to senior personnel involved in any aspect of commercial real estate investments, analysis, management, transactions and decision making. It will also be particularly relevant to investment and wealth managers at a retail and institutional level that include commercial real estate in their asset allocation. Some of the specific job roles or types of organization the course is suitable for include:
→ Investment Banks
→ Institutional Investors, including Sovereign Wealth Funds, Pension Funds, Life Assurance Fund Managers and Private Equity firms
→ Commercial Real Estate companies
→ Real Estate and Multi Asset Investment Managers
→ Financial Advisers and Wealth Managers
→ Private Banking Relationship Managers responsible for clients with large scale Real Estate investments
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FAQ
What language will the course be taught in and what level of English do I need to take part in an LEORON training program?
Most of our public courses are delivered in English language. You need to be proficient in English to be able to fully participate in the workshop and network with other delegates. For in-house courses we have the capability to train in Arabic, Dutch, German and Portuguese.
Are LEORON Public courses certified by an official body/organization?
LEORON Institute partners with 20+ international bodies and associations.We also award continuing professional development credits (CPE/PDUs) for:1. NASBA (National Association of State Boards of Accountancy) 2. Project Management Institute PDUs 3. CISI credits 4. GARP credits 5. HRCI recertification credits 6. SHRM recertification credits
What is the deadline for registering to a public course?
The deadline to register for a public course is 14 days before the course starts. Kindly note that occasionally we do accept late registrations as well, but this needs to be confirmed with the project manager of the training program or with our registration desk that can be reached at +1071 4 1075 5711 or [email protected].
What does the course fee cover?
The course fee covers a premium training experience in a 5-star hotel, learning materials, lunches & refreshments, and for some courses, the certification fee and membership with the accrediting bodies.
Does LEORON give discounts?
Yes, we can provide discounts for group bookings. If you would like to discuss a discount on a corporate level, we will be happy to talk to you.