Forget about the failed Wall Street rocket-science financial engineering that contributed to many of today's real estate industry problems. This two-day program focuses on the application of nuts-and-bolts real estate finance fundamentals to develop varied real estate asset types and/or acquire both performing and distressed assets. Emphasis will be placed on understanding how real estate value is created and recognized.
The program will present critical real estate finance and development principles and practices in a simple, understandable, and interactive manner that will demystify the real estate financing and development process, regardless of participants' prior real estate experience. Key topics 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, appraisals, debt/equity ratios and other lender requirements) and how they have been affected by current financial conditions; calculating standard industry measures of return: Return on Total Asset Cost (ROTAC), Cash-on-Cash return, Net Present Value (NPV), and Internal Rate of Return (IRR); and using a residual land value methodology to determine land value.
The program is intended for developers, architects, engineers, contractors, lenders, brokers, investors and any other participants in the real estate development, investment, or entitlement process, including private, public, and NGO-sector players. The basic principles discussed in this program should be applicable to both domestic and global real estate.
New features include:
- Information on how lenders are underwriting loans in today's changed economic environment;
- Methodologies to determine land value;
- Tips on how to prepare a simple feasibility analyses for evaluating acquisition and/or development projects.
Learning Objectives:
- Identify the methodologies used to calculate the primary components of return in income-producing real estate.
- Establish reasonable financial targets for each of these primary return components.
- Determine the level of debt financing that a project is likely to achieve based upon current underwriting criteria.
- Prepare simple operating pro forma, capital cost pro forma, and sources and uses of funds statements.
- Understand standard real estate industry measures of financial return and the relative importance of each measure.
- Determine land value using a Residual Land Value methodology.
