Real Estate Finance and Investments Boise State University Department of Marketing and Finance Instructor: Scott Roark Office: MBEB 3110 Office Hours: MW 11-12 or by appt E-mail:
[email protected] Prerequisites: Finan 303
Course: FINAN 470-001 Semester: Fall 2016 Time: M/W 12.00 – 1.15 Room: MBEB 2010
Textbooks and Reading Material: Recommended: Real Estate Finance and Investments (Brueggeman & Fisher, 14e) Required: Foundations of Real Estate Financial Modelling (Staiger, 1e) Required: Harvard Business Cases Suggested: Access to Wall Street Journal – Wednesday Real Estate articles. Calculator and Computer A calculator with time-value-of-money capabilities (HP 10Bii, TI BA2, etc.) may be useful for the class. In addition, we will be using Excel throughout the class and students are expected to learn applicable skills and to demonstrate problem solving on Exams using Excel. Course Overview The objective of this course is to examine fundamental concepts and to utilize analytical methods and software (Excel and ARGUS Enterprise) related to real estate investment and finance. The course will primarily focus on commercial real estate, although we will briefly touch on topics related to housing. The perspective of the class is that of a decision-maker so the class should be quite practical and you should be equipped at the conclusion of the class to effectively analyze real estate so that an appropriate decision can be made: Should we buy this? How much should we be willing to pay? How should this be financed? Which loan is better? Course Objectives: Upon successful completion of this course the student should: • Describe the characteristics of real estate as an asset class in an investment portfolio. • Connect ideas from prior and concurrent finance courses to topics covered in this class. • Understand characteristics of mortgages and financial markets for real estate. • Evaluate the benefits of different financing choices for real estate purchases. • Analyze a real estate investment and make a buy / no-buy decision. • Effectively use Excel to analyze real estate related scenarios. • Effectively use ARGUS Enterprise to model the cash flows for office, retail and industrial properties. • Apply appropriate analytical tools to solve problems and make sound financial decisions. • Solve problems that are unfamiliar. Class Policies: Please be considerate of your instructor and fellow classmates and mute all cell phones, pagers and computer speakers. If you must take an emergency call, you may leave the classroom. I request that you do not use laptops during class, except for those occasions that I will mention ahead of time. Please do not text in class either – it is a distraction to the instructor and distracts you from the material covered in class. Repeated violations of these policies will have a negative effect on your grade. If you have any special needs or require special accommodations, please let me know as soon as possible so suitable arrangements can be made.
Academic Honesty and Integrity: For all assignments, you must properly cite sources of information as well as the ideas and words of others. Misrepresenting someone else’s work as one’s own is a serious offense in any academic setting and it will not be condoned. Cheating of any sort will not be tolerated and will result in a failure of the exam or assignment, deduction in the class participation grading component, and potential failure of the course. A student who knowingly assists another student in committing an act of academic misconduct shall be equally accountable for the violation, and shall be subject to the sanctions listed above. Grade Determination: Item Participation Assignments Quizzes Cases Exams Extra Credit: Bloomberg Certification*
Weights 10% 15% 15% 15% 45% 3%
We will use the +/- grading system for the class. A (93+); A- (90-93); B+ (87-90); B (83-87); etc. Class Participation / Assignments: Class participation is an important component of this class and is critical to your deeper understanding of the material. I expect you to be an active participant – prepared for class, asking questions where concepts are unclear, answering questions that I ask and being involved in the discussions/problem solving we have in class. Please note that while attending class is necessary for active participation, it is not the same thing. On the days when I am going over how to use ARGUS, it is critical that you be in class and that you actively participate in using the software. If you are absent on any of the “ARGUS” days, your class participation score will be reduced by 20% for each day missed (if you miss 2 days, for example, your class participation score will be 60% at best – and will reduce your overall grade by 4pts). Quizzes: There will be quizzes through the semester. The quizzes will cover material including assigned readings and lectures – you will need to be prepared for class throughout the semester. The quizzes will be online and will generally occur weekly, with at least three quizzes being held prior to each of the tests. I will conditionally drop some quizzes (depending on how many we eventually take). All you need to do is complete the online course evaluation at the end of the semester to have the lowest quizzes dropped. The quizzes should represent your individual work, not a collective effort, unless I direct otherwise. Please refer to the Academic Honesty and Integrity section above. Cases: There will be several real estate related cases to work on during the course. You will need to set up an account with Harvard Business Publishing and purchase the Coursepack. The cases are intended to be an application and extension of your learning in class and provide some hands-on experience with analysis and problem solving. The cases are to be completed individually. Exams: The three exams and the final exam are intended to test your knowledge of the subject matter covered up to that point in the course – both from the textbook/readings and lectures. The final exam will be cumulative and you will be expected to be able to use concepts covered throughout the course. The exams may consist of multiple choice, short answer, problem solving and essay questions. You will know what material will be covered on the exams; there should be no mysteries. The exams are weighted at 0%, 20% and 25% - with your lowest score being dropped and your highest score receiving the highest weight. If there are any questions on the grading of your test, you need to see me within one week of the time I return the test to you. After that, I will not make any changes. Because I drop the lowest test grade, I will deny requests for a makeup exam unless the circumstances are extraordinary and any makeups will be given only for acceptably documented medical reasons.
Tentative Course Outline: Week: Week 1 (Aug 22-26)
Topic Introduction & Syllabus review Time Value Review (BF Ch3) Fixed Rate Mortgages (BF Ch4, St Ch4)
Week 2 (Aug 29-Sep 2) Week 3 (Sep 5-9) Week 4 (Sep 12-16)
Adjustable Rate Mortgages (BF Ch5, St Ch4) More on Mortgages (BF Ch6) Single Family Housing (BF Ch7, St Ch5)
Week 5 (Sep 19-23)
Underwriting (BF Ch8)
Week 6 (Sep 26-30)
Leases – Commercial Properties (BF Ch9) 5-Unit Multifamily (St Ch6); “N” unit multifamily (St Ch7) Flex Day / Review Exam I – OCTOBER 5 (Weeks 1-6) Leases – Retail/Office ARGUS TRAINING ARGUS TRAINING No Class Wednesday Leases - Industrial ARGUS TRAINING Valuation (BF Ch10)
Week 7 (Oct 3-7) Week 8 (Oct 10-14) Week 9 (Oct 17-21) Week 10 (Oct 24-28) Week 11 (Oct 31- Nov 4) Week 12 (Nov 7-11) Week 13 (Nov 14-18)
Investment Analysis (BF Ch11) Argus Mini-Cases Commercial Financing (BF Ch12, St Ch9)
Week 14 (Nov 21-25)
Thanksgiving Break
Week 15 (Nov 28 - Dec 2) Week 16 (Dec 5-9)
Flex Day / Review Exam II – NOVEMBER 30 (Weeks 8-13) Final Argus Project
Dec 12 (Monday 12.30 – 2.30)
Final Exam (Cumulative)
College of Business and Economics Core Curriculum Student Learning Goals and Objectives FINAN 470 Students in this class will learn or practice the following COBE Core Curriculum concepts, methods, and skills:
1. Understand and apply analytical and disciplinary concepts and methods related to business and economics:
1.1. Accounting
2.1. Communicate effectively: Write messages and documents that are clear, concise, and compelling 2.2. Communicate effectively: Give oral presentations that use effective content, organization, and delivery
1.2. Business Policy and Strategy 1.3. Economics 1.4. Finance 1.5. Information Technology Management 1.6. International environment of business 1.7. Legal environment of business 1.10. Mathematics & Statistics
3. Solve problems, including unstructured problems, related to business and economics 4. Use effective teamwork and collaboration skills 5. Demonstrate appropriate principles of responsible business practices
