What you'll learn
Identify the methodologies used to calculate the primary components of return in income-producing real estate.
Establish reasonable financial return targets for each of these primary return components.
Determine the level of debt financing that a project is likely to achieve based upon applicable underwriting criteria
Prepare simple operating pro forma, capital cost pro forma, and sources and uses of funds statements.
Understand the most common real estate industry measures of return and the relative importance of each measure.
Understand the significance of Purchase, Operating, and Exit Cap Rates. Understand a simple Waterfall/Promote structure.
We will focus on real estate finance fundamentals that are important to either develop and/or invest in varied types of real estate assets, or to enhance your ability to understand how real estate finance fundamentals relate to your primary role as a member of a real estate development or investment team, all with emphasis on understanding how real estate value is created, measured, and managed.
Expect a lively and engaging interactive classroom experience! Key topics will include: establishing realistic financial objectives; identifying and calculating the primary components of return in income-producing real estate including cash flow, tax benefits, and futures; preparing operating and capital cost pro formas and sources and uses of funds statements; understanding debt-financing underwriting basics (net operating income, debt service coverage factors, annual constants, debt/equity ratios, and other lender underwriting requirements); appreciating the importance of achieving positive financial leverage; calculating and interpreting standard industry measures of return: Return on Total Asset Cost (Cap Rate), Cash-on-Cash Return, leveraged and unleveraged Net Present Value (NPV), and Internal Rate of Return (IRR); and Equity Multiples. Other topics will include preparing sensitivity analyses and understanding simple Waterfall/Promote structures (the priority and amount of cash flow distributions to the respective financial and operating partners in a real estate joint development or investment joint venture).
We will teach and discuss these principles that are applicable worldwide using examples drawn from a wide variety of asset classes.