25818 Real Estate Finance and Investment

Subject level: Postgraduate

Handbook description

This subject examines real estate/property as an asset class. Various property sectors are considered as well as mainstream techniques of finance such as discounted cash flow, modern portfolio theory and efficient market hypothesis which are applied to the selection, evaluation and management of real estate.

Subject objectives/outcomes

On successful completion of this subject students should be able to:

1. Evaluate the property investment decision – both direct and indirect
2. Understand the underlying nature of the property investment cycle
3. Understand the relationship between finance and property markets
4. Evaluate investment performance in property markets; have some understanding of how modern portfolio theory applies to cases which include property as an asset class
5. Demonstrate an understanding of key legal issues associated with property investment.

Contribution to graduate profile

Real Estate Finance and Investment examines real estate/property as an asset class. Various property sectors are considered: For example: Office, Industrial, and Retail. Mainstream techniques of finance, including Discounted Cash Row (DCF) project analysis, Modem Portfolio Theory (MPT), the Efficient Market Hypothesis (EMH), and valuation models are applied to the selection, evaluation and management of real estate investments. The legal environment in Australia with regard to property is examined. The subject unit also considers contemporary issues of concern to the Australian property industry: for example: property performance indices (BOMA in Australia and similar property index series in USA, Canada, UK and Europe), lease incentives and effective rentals, unlisted property trusts, and methods of property valuation, including the increasing use of DCF based techniques in the property valuation/appraisal profession in Australia and overseas.

Teaching and learning strategies

The subject will be taught using a combination of lectures and workshops. These classes will be supplemented with both printed and electronic learning materials and resources. The UTS web-based communication tool (UTS Online) will be used to share information and encourage interaction between staff and students. Students will also use appropriate computer software such as spreadsheets and word processors to complete assigned tasks.

Content

• Overview in the context of real estate/property as an asset class of previous studies in finance of relevance to this subject unit and the use of Modern Portfolio Theory (MPT) in property analysis
• The legal environment of property investment
• Formal approaches to property valuation:, which includes comparative sales, capitalisation rate, cost based techniques and DCF based techniques
• Financing decisions including sources of finance
• Property sectors and their investment characteristics (as listed above)
• International approaches to property investment
• MPT approaches to real estate in pooled or mixed asset portfolio
• Property and economic cycles.

Assessment

Recommended text(s)

Brueggeman , William B. and Fisher, J. D., (1997), Real Estate Finance and Investments, 10th ed., McGraw-Hill

Indicative references

Rowland, P.J., (1997), Property Investments and Their Financing, Sydney

Corgel, J., Ling, D. and Smith, H., (2001), Real Estate Perspectives, 4th ed., McGraw-Hill

Clauretie, T.M and Sirmans, G.Stacy (1999), Real Estate Finance - Theory and Practice, PH, NJ

Schwartz, A. and Kapplin, S. (1995), Alternative Ideas in Real Estate Investment, Lluwer, Boston

Jaffe, A. and Sirmans, C.F. (1995), Fundamentals of Real Estate Investment, PH, NJ

Hargitay, S.E. and Shi-Ming Y. (1993), Property Investment Decisions, Chapman and Hall, London

Cadman, D. and Topping, R. (1991), Property Development, Chapman and Hall, London

Pyhrr, S. et. al. (1989), Real Estate Investment - Strategy, Analysis, Decisions, John Wiley and Sons, NY.