16655 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 2020 is available in the Archives.
Credit points: 6 cp
Result type: Grade and marks
Requisite(s): 16642 Property Investment and Valuation
Description
This is a core subject usually taken in year 3 of the Bachelor of Property Economics (C10310). It focuses on the theories of property finance and investment, the firm's capital structure, leverage impact, financial analysis, source and cost of capital, and financial risk management.
The subject also covers a practical application of finance theory and examines the way that Australian real estate companies and developers finance their activities. Students gain an understanding of why and how real estate companies make decisions regarding gearing, which financing sources to use and the different financial markets typically accessed.
Subject learning objectives (SLOs)
On successful completion of this subject, students should be able to:
| 1. | Understand financial theories in property investment |
|---|---|
| 2. | Analyse financial models to demonstrate understanding of the corporate capital structure, sources and cost of capital |
| 3. | Calculate key financial metrics in corporate real estate lending |
| 4. | Carry out a spreadsheet project financial analysis and demonstrate the leverage impact |
| 5. | Apply these learning in property finance and financial risk management |
| 6. | Work effectively with a team to complete a project financing assessment task |
Course intended learning outcomes (CILOs)
This subject also contributes to the following Course Intended Learning Outcomes:
- Work effectively in a team in a professional context (C.2)
- Apply financial principles to property economics issues (P.5)
- Engage in critical and reflective thinking in built environment contexts (R.1)
- Source, evaluate and use information within defined parameters (R.2)
Teaching and learning strategies
The course consists of 6 week lectures, 2 weeks computer labs and 1 block day for group presentations plus weekly drop-in tutorials.
Students will engage and participate in learning financial theories during the normal lecture time. Through in-class activities, discussions and learning students should actively demonstrate their understanding on modern portfolio theory, capital asset pricing model and optimal capital structure. Topics on sources and cost of capital, key financial metrics in real estate lending, leverage impact, funding application and financial risk management will be thoroughly discussed in the lectures. Weekly tutorials and online quiz questions will help students to grasp concepts and practise questions. A summative in-class test and feedback will be provided at the end of first 6 week lectures.
Students are then engaged in a time varying cash flow analysis regarding the firm's gearing positions using Excel spreadsheet in computer labs. Based on the financial theories and calculations demonstrated in the first 6 week lectures, students will be assessed on an individual assignment which will require them to conduct a project financial analysis and test the impact of financing decisions on corporate finance risk. Extensive help and tutoring on Excel modelling will be provided during the normal lab time. Written feedback on individual submitted cash flow modelling and the project financial analysing will be given in two weeks' time after the submission via UTS online.
Lastly, group work on project finance and risk management will be examined in a block day. Students will be required to work collaboratively in small groups to make a presentation and submit a report on a hypothetical property investment case study. Verbal feedback will be provided at the time of student's group presentation for allowing them to further improve their learning and incorporate the feedback into their group report writing. Summative feedback on student's submitted group reports will be supplied online. The group work will require students to integrate all knowledge and learning on this subject, in particular to demonstrate understanding of the source and cost of capital available to property investors and developers, proposed capital structure, key financial metrics required by the banks or non-bank financing sector, funding application process and financial risk management.
Content (topics)
- Theory on capital investment, structure and gearing decisions
- Sources and cost of capital
- Leverage impact and risk management
- Property finance and funding application
- Spreadsheet financial analysis
- Case study of property financing and risk management
Assessment
Assessment task 1: In-Class Test
| Intent: | The objective of this assessment is to test the student’s understanding on financial theories and their implications in property finance and investment. This assessment covers first 1-4 week lectures including topics on modern portfolio theory, capital asset pricing model, capital structure, sources and cost of capital, and key financial metrics in corporate real estate lending. | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Objective(s): | This task addresses the following subject learning objectives: 1, 2 and 3 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 | ||||||||||||||||
| Type: | Quiz/test | ||||||||||||||||
| Groupwork: | Individual | ||||||||||||||||
| Weight: | 40% | ||||||||||||||||
| Criteria linkages: |
SLOs: subject learning objectives CILOs: course intended learning outcomes |
Assessment task 2: Financial Analysis and Leverage Impact
| Intent: | The objective of this assessment is to help and assess the student’s ability to conduct a financial analysis using excel spreadsheet. In order to successfully complete the task, students will first require to attend all computer labs, and later demonstrate their understanding of financial theories and apply financial analysis using Excel spreadsheet in their spreadsheet assignments, including the ability to correctly source and apply financial market information in the sensitivity analysis of leverage impact on firm's borrowing risk. The task requires students to be proficient in Excel such as using formulas, links, sensitivity and scenario analysis. | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Objective(s): | This task addresses the following subject learning objectives: 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: | Exercises | ||||||||||||||||
| Groupwork: | Individual | ||||||||||||||||
| Weight: | 30% | ||||||||||||||||
| Criteria linkages: |
SLOs: subject learning objectives CILOs: course intended learning outcomes |
Assessment task 3: Group Work on Property Finance and Financial Risk Management
| Intent: | Students in groups of 5 are required to make a ten-minute PowerPoint presentation on a given hypothetical real estate case and submit their final reports a week later after the presentations. The presentation and final report should clearly and concisely articulate the capital structure of the proposed real estate project, available sources and costs of capital, their respective financial impacts, funding application process, and financial risk management. The task requires students to integrate all knowledge learned on this subject. | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Objective(s): | This task addresses the following subject learning objectives: 2, 5 and 6 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, P.5, R.1 and R.2 | ||||||||||||||||||||
| Type: | Case study | ||||||||||||||||||||
| Groupwork: | Group, group and individually assessed | ||||||||||||||||||||
| Weight: | 30% | ||||||||||||||||||||
| Criteria: | Students will be assessed on their ability to concisely and comprehensively articulate the financing strategy of the proposed project. Ability to collaboratively work as a team will be a key part of the assessment. 10% marks applicable to this assessment will be sourced from a peer mark from each of team members, which will demonstrate peers’ assessment of the student's contribution to the assessment. The remainder 20% of the mark will be given from submitted group report marked by the teaching staff. More detailed breakdown will be available on the assessment briefs. Feedback of group presentation will be provided on spot; and students can take the feedback to improve their final report drafting later. | ||||||||||||||||||||
| Criteria linkages: |
SLOs: subject learning objectives CILOs: course intended learning outcomes |
Minimum requirements
A minimum attendance of 80% is required.
Required texts
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.
There isn't a required textbook for this subject. For additional reading, I recommend the following:
1. Brown, G.R., & Matysiak, G. A. (2000). Real Estate Investment: A Capital Market Approach. Pearson Education, Essex, England.
2. Brealey, R.A., Myers, S.C., & Allen, F. (2017). Principles of Corporate Finance (12th ed.). McGraw Hill Education, New York.
3. Geltner, D.M., Miller, N.G., Clayton, J., & Eichholtz, P. (2007). Commercial Real Estate Analysis and Investments. OnCourse Learning, Mason, USA.
More details about weekly reading list is updated on UTSonline.
References
Financial reports and notes to the accounts of various listed Australian REITs can be found from ASX.