Real Estate Valuation

Course Overview:

 The purpose of this seminar is to train participants in all of the important aspects of valuing property. It begins with a thorough review of the relevant techniques in appraising commercial property and then covers the methodology of assessing the capital value of residential property.

 Special emphasis is given to the underlying approaches, such as net operating income, the projection of cash flows, the assessment of the cost of capital, the cost and sales comparison approaches and the use of real options.

 The theoretical techniques are fully compared to the techniques that are deployed in practice.

Course Content:

Commercial Property – Assessing Income

Ø       Appraisal of Income Property – the RICS Guidelines and their international equivalents

Ø       Comparison with corporate finance valuation

Ø       Reporting according to IFRS standards

Ø       Case Study: Impact of International Accounting Standard 17 (leases) on real estate valuation

Ø       Bricks, Mortar, and the Building Envelope

Ø       Lifecycle costing

Ø       Tests of Financial Solvency (Static Analysis)

Ø       Tests of Profitability (Dynamic Analysis)

Case Study: Applying the depreciated replacement cost methodology to value specialized (iconic) buildings

Residential Property – Assessing Capital Value

Ø       Why buy residential real estate?

Ø       Does rental income matter for residential property?

Ø       What are the main problems?

Ø       Evidence from pension fund holding in Europe

Ø       Qualitative issues, competition, style and marketing

Case Study: The addition of real estate to the GIPS (CFA Institute) valuation guidelines 

Net Operating Income (NOI)

Ø       Gross and net income

Ø       Differences in calculating NOI

Ø       Overall capitalisation rate

Ø       Capital expenditure issues

Ø       Differences between property types

Ø       Approaches to the cap rate

Case Study: The band of investment approach

Projecting Cash Flows

Ø       The dynamic behaviour of the 4-Q model: stability versus oscillations.

Ø       Real Estate Pricing Behaviour: backward or forward looking?

Ø       Forecasting markets: Univariate analysis, Vector Auto regressions, structured models.

Ø       Forecasting examples.

Ø       The definition and evaluation of “risk”

Case Study: Forecasting Techniques 

Creating and using a detailed Discounted Cash Flow (DCF) model

Ø       Debt service and pre-tax cash flow

Ø       The sinking fund

Ø       Lease variations

Ø       Differences between sectors

Ø       Estimating resale value

Ø       Terminal capitalisation rates

Exercises: Delegates will use a number of real world examples to create and use spreadsheets for DCF valuation

Cost of Capital for Real Estate Companies

Ø       What is the significance of the cost of capital?

Ø       Differentiation between debt and equity

Ø       Hybrid products

Ø       The pecking order theory of cost of capital

Ø       The role of debt in corporate management

Case Study: Economic Value Added (EVAtm) as applied to real estate companies

Real Options and the Real Estate process 

Ø       Does property possess real options?

Ø       Examples of possible real estate real options

Ø       Call Option approach to land value

Ø       Samuelson-McKean approach

Ø       Difficulties of measurement

Ø       Potential benefits

Exercise: Participants will value a potential development on the basis of conventional DCF and real option analysis

Land Prices

Ø       Should land prices be calculated separately?

Ø       How cyclical are land prices?

Ø       Modelling land prices

Ø       Empirical evidence on land prices

Ø       Forecasting land prices

Case Study: Data availability on land prices

The Cost Approach

Ø       Type of costs

Ø       Methods of evaluating costs

Ø       Sources of cost estimation

Ø       Incurable and curable depreciation

Ø       Market extraction method

Exercises: Delegates will use spreadsheet models to calculate a range of cost estimates for individual properties

The Sales Comparison Approach

Ø       Value, Worth and Price

Ø       Sources of Comparable Data

Ø       Identifying points of comparison and difference

Ø       Sales Comparison Approach Example

Exercises: Using the sales comparison approach in practice

Highest and Best Use Approach

Ø       Definitions of HBU

Ø       Site Value

Ø       Improved Value

Ø       Calculating HBU

Case Study: Business Plan for Dubai Sports City analysed

Valuation in Practice

Ø       How is valuation practiced by chartered surveyors?

Ø       What are the key elements of the RICS and TEGOVOFA Valuation Guidelines?

Ø       What is the evidence on valuation practice in the UK?

Ø       How is valuation practiced differently elsewhere in the world?

Times 09.30-17.00

Cost £1,125+ VAT (£1,321.88)

Solicitors Regulation Authority (SRA) CPD Hours

12

Training Courses in Banking and Corporate Finance

Redcliffe is a banking and corporate finance training company which specialises in the delivery of bespoke courses to the financial community. It is run by the trainers themselves, all of whom have many years of practical experience at senior levels.

Our programmes are delivered both on an open basis in the City of London and also on an in-house basis for investment banks, stockbrokers, corporate financial advisers, accountants, lawyers and corporates. Redcliffe has a very prestigious client base and during the past two years it has delivered in-house seminars to many leading financial institutions and professional advisers. During 2007 and 2008 almost 3,500 executives attended Redcliffe's open courses. In 2009 Redcliffe will also present some of its courses in Manchester.

The topics that we cover include all areas of corporate finance (including mergers and acquisitions, buy-outs, debt finance, restructuring, valuation, modelling and regulation), banking (including treasury products, risk management and trade finance), project finance (including PPP / PFI), accounts topics, tax and property (including REITS and sale and leaseback).

Details of over 130 courses which Redcliffe can present can be found under Courses and Dates on our website. Most of these are presented on a public basis and all of them may be presented in-house to the client's specification.