Foundations of Real Estate Development and Investment

• Why invest in real estate
• Four quadrants of real estate investment
• Real estate market cycles and their impact on investment decision

Overview of Private Equity in Real Estate

• Definition and key concepts
• Importance and role in the real estate market
• Current trends and market dynamics

Investment Strategies and Processes

• Core, core-plus, value-add, and opportunistic strategies
• Risk-return profiles of different strategies

The Investment Lifecycle

• Sourcing and acquiring properties
• Due diligence and underwriting
• Asset management and value creation
• Exit strategies and dispositions

Evaluating Real Estate Developments

• Gross Development Value (GDV) and Net Development Value (NDV)
• Residual Land Value (RLV)

Evaluating Real Estate Private Equity Deals
Performance Metrics and KPIs

• Internal Rate of Return (IRR)
• Equity Multiple
• Net Operating Income (NOI)
• Yields
• Worth or Investment Value

Case Study Analysis

• Real-world example of a private equity real estate development deal

Foundations of REITs

• Introduction to REITs: History and purpose
• Overview of REIT structures in different countries
• Emerging Markets and REITs: Opportunities and risks
• Market size and structure
• Types of REITs: development, operating, internal vs external
• The economic rationale for investing in REITs

REIT Investment Strategies

• Portfolio Diversification with REITs
• Public vs. Private REITs: Pros and cons

Legal and Regulatory Framework

• REIT Legislation: A global overview
• Tax considerations and requirements for REITs
• Governance and compliance in REIT operations

REIT Financials and Performance Metrics

• Understanding REIT Financial Statements
• Key Performance Indicators for REITs (FFO, AFFO, NAV)
• Analysing REIT dividend payout and sustainability

Valuation Techniques for REITs

• Intrinsic vs Relative Value
• Comparative analysis and benchmarking
• Identifying value and stock selection
• Market Trends Affecting REIT Sectors (Retail, Residential, Office, etc.)
• The impact of economic cycles on REIT performance

Risks and Opportunities in REIT Investment

• Macro-economic, sector and stock-specific risks
• ESG Risks
• Identifying and managing risks in REIT investment portfolios
• Legal and Regulatory Changes: Impacts on REITs

The Future of REITs

• Innovations in Real Estate: REITs and technology
• The outlook for REITs: Trends and predictions

Fundamentals of Real Estate Debt Finance

• The Real estate transactions’ capital stack
• The importance of debt in real estate transactions

Real Estate Market Analysis

• Understanding market trends
• Asset class demand pre- and post-COVID-19
• ESG, lenders’ and borrowers’ approaches
• Evaluating market conditions for financing decisions
• Geographic and sector-specific considerations

Types of Real Estate Debt Instruments

• Commercial Real Estate Loans

        –   Characteristics of commercial loans

• Risk-Return

        –   Loan structures

• Interest-only
• Constant amortisation and remaining balloon payment
• Annuity
• Cash Sweep

Development Financing

• Financing new development projects

        –   Strategy: Residential/ Commercial; domestic/ international

• Risks and considerations

        –   Developing entity, credit worthiness, project experience
        –   Land development risks
        –   Design risks
        –   Entitlement risks
        –   Financing risks
        –   Cost overrun/ delay risk
        –   Lease risk
        –   Sale Risk

• Phases of development financing

        –   Total Development Costs and Sources of Funds
        –   S-Curve and Debt Drawdowns

Key terms and covenants

• Maturities: Development facility vs Investment properties
• Financial covenants/ Default covenants
• Reporting covenants/ Information covenants

Analysing real estate debt

• Financial Analysis Techniques from an investment and lending perspective

        –   Property Investment
              –   Net present value (NPV) and internal rate of return (IRR)
        –   Lending
              –   Debt service coverage ratio (DSCR)/ Interest Cover Ratio (ICR)
              –   Debt Yield
              –   Loan-to-value ratio (LTV)

Risk Assessment

• Identifying and mitigating risks
• Sensitivity analysis
• Stress testing financial models

Commenting on Legal and Regulatory Framework

• Legal Aspects of Real Estate Debt

        –   Key legal documents (Loan agreement/ Security documents including Fixed charge/ mortgages deed, floating charge, pledges over rental income accounts)
        –   Foreclosure process and implications
        –   Lender liability and borrower protections

• Regulatory Environment

        –   Overview of relevant regulations
              –   Basel III
                    –   Output Floors
               –   Sustainable Finance Disclosure Regulation
                    –   Art. 8 and 9
               –   Shariah Finance

         –   Impact of regulations on real estate finance

Introduction to Financial Models

• Definition and importance of financial models in real estate.
• Best practices in creating financial models
  • Phase 1: Understanding the business case
  • Phase 2: Creating a robust model layout
  • Phase 3: Developing accurate formulas
  • Phase 4: Revising the model structure
  • Phase 5: Testing the model rigorously

• Golden rules of financial modelling

Introduction to Real Estate Development

• Overview of how to analyse development opportunities
• Identifying and evaluating development potential
• Feasibility analysis based on Profit on Cost
• Residual Land Value based on Profit on Cost
• Residual Land Value and Land Market Value

Development Valuation

• Development appraisal fundamentals:
  • Residential and Commercial Property Valuation
  • Net initial yield (NIY) and gross internal area (GIA) analysis
  • Gross Development Value (GDV), Net Development Value (NDV)
• Residual Land Valuation (RLV)
• Advanced Excel tools for valuation:
  • Goal Seek
  • Solver

Affordable Housing and Levies

• Section 106 (Lump Sum)
• Required affordable housing units and associated calculations

Development Costs

• Efficiency rate: Gross Internal Area (GIA) versus Net Internal Area (NIA)
• Hard Costs: Construction and refurbishment, site purchase and vacant possession value, contingency
• Soft Costs: Professional fees, Planning obligation fees, statutory costs, allowances and rights
• Finance Costs: Nominal finance costs
• Land Value: Asking price and purchaser’s costs

Pro-Forma Real Estate Development Cash Flow

Development Cash Flow Modelling

• Inputs, assumptions, and timeline management
• Hard and soft cost analysis
• Sources and uses of capital

Sources of Investment Capital

• Financing phases:
  • Preliminary phase
  • Construction phase
  • Lease-up and fit-out phase
  • Stabilisation phase

Development Debt Finance

• Equity first capital deployment waterfall
• Debt repayment structures for development finance
• Rolled-up interest debt structuring (PIK – payment in kind)
• Senior and mezzanine finance structures

Joint-venture structures

• Equity waterfall structure
• Preferred returns
• Promote cash flow and hurdle rates

Joint Ventures and Promote Structures

• Structuring joint ventures
• Understanding promote cash flow, hurdle rates and distribution

Leveraged and Unleveraged Real Estate Development Returns Profile

Creating and interpreting returns profiles

• Internal Rate of Return (IRR) using XIRR
• Net Present Value (NPV) using XNPV

Residual Land Value (RLV)

• RLV based on Profit on Cost, IRR and NPV
• Analysing and deriving the maximum bid price for land purchase based on leveraged and unleveraged target returns

Multiple tenancy properties

• Modelling tenancy schedules and rents forecast
• Rent reviews, upward-only, break options, lease expiry
• Modelling hypothetical second leases
• Void period, rent free and estimated rental values

• Time-varying rental growth

• Net Operating Income Forecast
  • OPEX and CAPEX modelling
  • Modelling capital expenditure for refurbishment and operating costs (letting fees, void costs, empty or business rates)

• Investment decision
  • How to make the optimal investment decision based on IRR, NPV, Profit, Return on Equity (ROE) and Equity Multiple

• When to accept the project and make investment recommendation

Capital Structure, Sources of Debt Finance and Lending Criteria

• Capital structures: debt & equity
• Explanation of different debt & equity structures
• Sources of debt fund & lending criteria

Senior debt repayment modelling

• Interest Only
• Constant Amortisation
• Fully-Amortising Constant Payment
• Partially-Amortising Constant Payment
• Rolled-Up (Capitalised) Interest (Payment in Kind – PIK)

Debt covenants modelling and analysis

• Interest Coverage Ratio (ICR), Debt Service Coverage Ratio (DSCR), Loan to Value (LTV), Debt Yield (DY)
• What happens when covenants are breached
  • Cash sweep
  • Revolving debt facilities
• Finding maximum borrowing amount and highest LTV
• Dynamic debt modelling using varying debt structures
• Leveraged return analysis based on IRR, NPV and Equity Multiples (MOIC)

Value-Add Strategies Modelling: Investment Options

• Acquire, lease re-gearing, hold or sell
• Acquire, re-develop, refinance and hold
• Acquire, re-develop, stabilise and sell
• Hold vs. sell decision

Lead-in period

• Current in-place leases, operating expenses – vacancy costs, including rates and empty costs
• Site acquisition including options, pre-development and planning costs
• Equity and debt drawdowns, including mezzanine finance

Construction period

• Development hard and soft costs using S-curve, Straight line and Known curves
• Construction finance drawdowns following an equity-first model

Lease-up and stabilisation period

• New leases with gross and net lease clauses
• Tenant incentives such as rent-free and capital expenditure contributions
• Operating expenses – delayed rates, letting fees, service charges and void costs

Sources of funds

• Calculating debt and equity requirements
• Modelling the debt repayment waterfall
• Calculating total cost of debt (interest and fees)

Refinacing strategy

• Determining optimal refinance date
• Quantitative analysis of refinancing strateg

Joint-Venture Structures

• Profit shares and preferred equity returns
• Equity returns based on different IRR tiers

Risk modelling and presentation

• Sensitivity analysis
• Scenario analysis
• Financial ratios analysis: IRR, NPV, Residual Land Value, Profit on Cost, Return on Equity and Equity Multiple