16009 Advanced Property Finance
Warning: The information on this page is indicative. The subject outline for a
particular session, location and mode of offering is the authoritative source
of all information about the subject for that offering. Required texts, recommended texts and references in particular are likely to change. Students will be provided with a subject outline once they enrol in the subject.
Subject handbook information prior to 2018 is available in the Archives.
Credit points: 6 cp
Result type: Grade and marks
Requisite(s): 16655 Property Finance
Description
This is an elective subject taken in the third year of the Bachelor of Property Economics (C10310). It focuses on advanced-level financing theory and application in real estate investments.
The subject covers the advance financing theory (including derivatives) in financial risk management, sources of real estate debt and equity finance, and practical application of finance theory in an examination of the way that Australian real estate companies and developers finance their activities. Students gain an in-depth understanding of how real estate developers and companies make decisions regarding their finance strategies and alternative financing sources for investors and developers of real estate.
Subject learning objectives (SLOs)
On successful completion of this subject, students should be able to:
| 1. | Demonstrate an ability to understand the financial theory associated with firm?s finance strategies |
|---|---|
| 2. | Understand the risks associated with various financing strategies and how they may be mitigated by professional practice |
| 3. | Understand the alternative financing strategies available to investors and developers of real estate |
| 4. | Apply these learnings to an analysis of the financing strategies of Australian real estate companies |
| 5. | Work effectively with a team to complete assessment tasks within the framework of a practice-based studio project |
Course intended learning outcomes (CILOs)
This subject also contributes to the following Course Intended Learning Outcomes:
- Ability to apply informed sound ethical judgements in professional contexts (A.2)
- Ability to effectively apply a variety of communication skills and technologies in professional contexts (C.1)
- Ability to work effectively in a team in a professional context (C.2)
- Openness to consideration of creative and innovative ideas (I.1)
- Ability to correctly apply valuation theory and practice in the valuation of property for different purposes (P.1)
- Ability to apply financial principles in various contexts (P.5)
- Ability to engage in critical and reflective thinking in built environment contexts (R.1)
- Ability to source, evaluate and use information within defined parameters (R.2)
Teaching and learning strategies
Interactive lectures will be conducted over four blocks of four days.
Students are expected to watch the subject introduction video, read the chapters and learning material in UTSOnline before commencing their classes. Students are expected to attend at least 80 per cent of the lectures and engage with class discussions.
Students will be required to attend lectures/tutorials on advanced finance theory on financial risk management and alternative sources of real estate debt and equity finance. Students will be assessed on an individual assignment, which will require them to prepare a report based on financial risk management and alternative financing.
Students will be required to work in small groups to make a presentation, analysing the financial strategies of one of Australia’s listed real estate companies. Student’s ability to work as a team will be a key part of the assessment. Half of the mark will be sourced from a peer mark from each of the other team members, which will demonstrate the peer’s assessment of a student’s contribution to the assessment. The remainder of the mark will be given by the teaching staff.
The final assessment will be an examination, which will test the student’s absorption of the course materials.
Content (topics)
The content will include:
- Financial risk management
- Basic understanding of derivatives
- Alternative sources of financing to real estate investors and developers
- Financial strategies analysis of real estate investment trusts
- Real estate development financing structures
Assessment
Assessment task 1: Report on financial risk management and alternative financing
| Intent: | The objective of this assessment is to test the student’s understanding and knowledge of financial risk management and alternative financing, and communicate the results of their analysis in a concise and professional manner in a business report. |
|---|---|
| Objective(s): | This task addresses the following subject learning objectives: 1, 2, 3, 4 and 5 This task also addresses the following course intended learning outcomes that are linked with a code to indicate one of the five CAPRI graduate attribute categories (e.g. C.1, A.3, P.4, etc.): A.2, C.1, I.1, P.1 and R.2 |
| Type: | Report |
| Groupwork: | Individual |
| Weight: | 30% |
Assessment task 2: Financing strategy analysis
| Intent: | Students in groups of three or four are required to choose a listed Australian REIT and make a ten-minute presentation on their financing and risk management strategies. The presentation should clearly and concisely articulate the finance strategy of the chosen REIT including leverage, finance sources and risk management policies, and should include commentary and critique of how appropriate, conservative or aggressive the subject company is, relative to its peers. You will need to form your groups during the teaching block. The order in which groups make their presentations will be determined by lottery on the morning of the presentation. |
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| Objective(s): | This task addresses the following subject learning objectives: 3, 4 and 5 This task also addresses the following course intended learning outcomes that are linked with a code to indicate one of the five CAPRI graduate attribute categories (e.g. C.1, A.3, P.4, etc.): C.2 and P.5 |
| Type: | Presentation |
| Groupwork: | Group, group assessed |
| Weight: | 20% |
Assessment task 3: Formal Examination
| Intent: | The assessment will be designed to test the student’s absorption of the course material. It will also test their ability to interpret a set of accounts, with specific focus on finance structure and financial risk management. |
|---|---|
| Objective(s): | This task addresses the following subject learning objectives: 1, 2, 3 and 4 This task also addresses the following course intended learning outcomes that are linked with a code to indicate one of the five CAPRI graduate attribute categories (e.g. C.1, A.3, P.4, etc.): P.5, R.1 and R.2 |
| Type: | Examination |
| Groupwork: | Individual |
| Weight: | 50% |
References
Students are advised to regularly read the property sections of the Australian newspaper and Sydney Morning Herald, as well as articles in the property section of the Australian Financial Review.
Below is a list of links to helpful websites, as well as chapters of textbooks that are essential reading for the course. With each textbook chapter, I have attempted to find articles on the internet that may help you in applying the textbook material to recent events and issues in the Australian and International real estate markets. I recommend you read each text chapter, and then the articles. As you read the articles, reflect on how what you have read in the textbooks applies to the situations and opinions discussed in the articles. The reading list below is tailored to reflect the material that we will be covering in class, as set out in the subject outline.
Rowland, P. (2010), Australian property investment and financing, Lawbook Co.
The material being covered will be available in a reader/workbook which can be downloaded from the UTSOnline
Recommended Texts
Overview of Finance Theory
Ehrhardt and Brigham “Corporate Finance” South-Western Cengage Learning 2011; Part 1, Chapter 1 : An Overview of Financial Management and the Financial Environment
Alex Frino, Amelie Hill and Zhian Chen “Corporate Finance” Pearson Education Australia 2009 Chapter 1: Preliminary Concepts and Chapter 7: Capital Asset Pricing Model Geltner, Miller, Clayton and Eichholtz "Commercial Real Estate Analysis and Investments (3rd ed.) 2014 Chapter 21: Real Estate and Portfolio Theory and Chapter 22:
Equilibrium Asset Valuation and Real Estate's Price of Risk in the Capital Market.
http://people.stern.nyu.edu/adamodar/New_Home_Page/background/cfin.htm
http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-ceos-guide-to-corporate-finance https://hbr.org/1982/01/does-the-capital-asset-pricing-model-work http://faculty.chicagobooth.edu/john.cochrane/teaching/35150_advanced_investments/Ball_2009%20EMH%20and%20the%20GFC.pdf
Capital Structure and Gearing Decisions
Brearly Myers and Allen “Principles of Corporate Finance” McGraw Hill Irwin, 2008; Chapter 17 : Payout Policy; Chapter 18: Does Debt policy Matter?; and Chapter 19: How Much Should a firm Borrow?
Alex Frino, Amelie Hill and Zhian Chen “Corporate Finance” Pearson Education Australia 2009 Chapter 12: Capital Structure Policy
Geltner, Miller, Clayton and Eichholtz "Commercial Real Estate Analysis and Investments (3rd ed.) 2014 Chapter 15: Real Estate Investment Capital Structure
http://www.asx.com.au/education/investor-update-newsletter/a-reits-back-on-course.htm http://www.schroders.com/en/SysGlobalAssets/schroders/sites/australia/pdf/articles/20141118-a-wolf-in-reits-clothing-.pdf/ http://www.smh.com.au/business/markets/atlassian-ipo-the-line-in-the-prospectus-everyone-missed-20151115-gkzp0w.html http://www.smh.com.au/business/mining-and-resources/bhp-dividend-tweak-wont-cut-it-sp-20160203-gmko5c.html
Impact of Leverage on Corporate Risk
Alex Frino, Amelie Hill and Zhian Chen “Corporate Finance” Pearson Education Australia 2009 Chapter 6: Risk and Return
Geltner, Miller, Clayton and Eichholtz "Commercial Real Estate Analysis and Investments (3rd ed.) 2014 Chapter 13: Use of Debt in Real Estate Investments: The Effect of Leverage
http://www.smh.com.au/money/investing/turnaround-rebuilds-trust-20120828-24xpo.html
http://www.smh.com.au/business/in-property-we-trusted-making-sense-of-centro-20091021-h93n.html http://kevindavis.com.au/secondpages/acadpubs/2009/Brown-Davis_GFC_Kolb_chapter_final2.pdf http://cuffelinks.com.au/best-worst-managed-fund/
Financial Risk Management (including derivatives)
Brearly Myers and Allen “Principles of Corporate Finance” McGraw Hill Irwin, 2008; Chapter 27 : Managing Risk, and Chapters 24.1 and 24.4. Alex Frino, Amelie Hill and Zhian Chen “Corporate Finance” Pearson Education Australia 2009 Chapter 13: Risk Management.
Geltner, Miller, Clayton and Eichholtz "Commercial Real Estate Analysis and Investments (3rd ed.) 2014 Chapter 26.3: Real Estate Derivatives
http://www.npr.org/sections/money/2012/10/17/163038597/ask-a-banker-whats-a-derivative
