1. Real Estate Finance © JR DeLisle, Ph. D. Lecture 1: Introduction to Real Estate Finance by James R. DeLisle, Ph.D. January 5, 2010

2. Real Estate Finance © JR DeLisle, Ph. D. Lecture Overview Course Organization Critical Thinking The Economic Problem: an Example in Critical Thinking Other Real Estate Trends/Issues Real Estate Process Review

3. Real Estate Finance © JR DeLisle, Ph. D. Course Overview Course Background –Course Objectives –Timetable –Computer and Technology Requirements –Grading Strategy and Policy –Project Decision: Rationale and Alternatives Organization of Real Estate Finance 2010 –Part 1: Residential Finance –Part 2: Commercial Property Finance –Part 3: Capital Markets –Part 4: Institutional Finance

4. Real Estate Finance © JR DeLisle, Ph. D. Course Objectives Foster Creative thinking and Problem-solving –Helping students Systematically think about financial decisions related to real estate –Develop ability to model a variety of financial decisions Develop Understanding of Real Estate Financial Markets –Market fundamentals: products and processes –Market Decision-making: players and market drivers –Residential Finance & Income Property Finance –Construction and Development Finance Cultivate Appreciation for Capital Markets –Sources and Uses of Capital –Capital Flows to Real Estate –Private Market –Public Market Develop Individual and Team-based Problem solving skills –Emerging Trends: class discussion of emerging issues and trends –Financial modeling: team-based modeling and application of appropriate tools Excel Modeling Argus Decision-support

5. Real Estate Finance © JR DeLisle, Ph. D. Finance and Investments Text Hard Copy –Brueggeman and Fisher, Real Estate Finance and Investments, 13 th Edition, Irwin, (2008) On-line Resources –General Resources Excel Spreadsheet with selected examples from Chapter problems. Argus Data Files & Argus Free Trial Link –Chapter Resources New Articles and Weblinks. A listing of Internet resources Quizzes. A series of 10 questions per chapter with automatic grading. PowerPoint Presentations.

6. Real Estate Finance © JR DeLisle, Ph. D. Supplemental Materials Cases and Review material from Real Estate Process –Time Value of Money & Primer on Mathematics of Real Estate Finance,” (DeLisle) –Case 1: Building Envelope –Case 2: Total Replacement Cost –Case 3: Frontdoor/Backdoor Analysis –Case 4: Alternative Use Analysis –Case 5: Discounted Cash Flow Problems in Real Estate Finance (hyperlinked files) –Problem Set 1: Basic Time Value of Money –Problem Set 2: Basic Mortgage Finance –Problem Set 3: Intermediate Mortgage Finance –Problem Set 4: Basic Corporate Real Estate Decisions Argus Guides/Portfolio Case Studies –A Guide to Argus –Case Study in Argus Glossary of Real Estate Finance Terms

7. Real Estate Finance © JR DeLisle, Ph. D. Course Organization: Grading Policy Grading Philosophy –Basis: curved –Emphasis: achievement vs. process/speed Metrics –4Multiple Choice/Matching Quizzes & calculated quizzes on fundamentals of real estate finance –2Mortgage Spreadsheet Modeling: fixed rate and variable rate mortgages –2DCF Modeling: Enhancement to Excel model with rent roll, partnerships and portfolio integration –2Argus Cases. Argus Model for an individual project and a portfolio project. –1Final Exam. Individual paper in which students explore a contemporary issue in real estate finance Grading Components –Quizzes424% –Financial Modeling: Mortgages220% –DCF Modeling230% –Argus/Portfolio Decision Support220% –Final Exam110% –Class Participation and Forum 6%

8. Real Estate Finance © JR DeLisle, Ph. D. Course Objectives Develop a conceptual understanding of: –Real estate market at the macro and micro levels, –Linkages between the spatial and capital markets, –Integration of property, asset and portfolio management, and –Roles, drivers, and decision-making processes of major classes of space users, producers, and investors. Cultivate an appreciation for: –Sustainable development, operation, transaction and investment, and –Integrate related disciplines to support real estate decision-making with the appropriate breadth and depth of inquiry. Be able to make decisions drawing on: –Industry best practices, academic and theoretical concepts, and an –Understanding of basic technical and analytical tools.

9. Real Estate Finance © JR DeLisle, Ph. D. How we Got Where we Are?

10. Real Estate Finance © JR DeLisle, Ph. D. Critical Thinking

11. Real Estate Finance © JR DeLisle, Ph. D. Feasibility Analysis: Critical Problem Solving

12. Real Estate Finance © JR DeLisle, Ph. D. Legal Elements of Real Estate

13. Real Estate Finance © JR DeLisle, Ph. D. Players and Perspectives

14. Real Estate Finance © JR DeLisle, Ph. D. Land Use Controls

15. Real Estate Finance © JR DeLisle, Ph. D. Parcel Research

16. Real Estate Finance © JR DeLisle, Ph. D. TRCm

17. Real Estate Finance © JR DeLisle, Ph. D. Money-Time Dimension of Real Estate Value

18. Real Estate Finance © JR DeLisle, Ph. D. Frontdoor Model

19. Real Estate Finance © JR DeLisle, Ph. D. Backdoor Model

20. Real Estate Finance © JR DeLisle, Ph. D. Social Responsibility Irretrievable Commitment Of Scarce Resources

21. Real Estate Finance © JR DeLisle, Ph. D. Appraisal Objective and Process

22. Real Estate Finance © JR DeLisle, Ph. D. Appraisal Theory and Application

23. Real Estate Finance © JR DeLisle, Ph. D. Market Analysis

24. Real Estate Finance © JR DeLisle, Ph. D. Market Segmentation & Product Stratification

25. Real Estate Finance © JR DeLisle, Ph. D. Alternative Uses

26. Real Estate Finance © JR DeLisle, Ph. D. H&B Use and Most Fitting Use

27. Real Estate Finance © JR DeLisle, Ph. D. TMV

28. Real Estate Finance © JR DeLisle, Ph. D. Risk Management

29. Real Estate Finance © JR DeLisle, Ph. D. Mortgage Cycle

30. Real Estate Finance © JR DeLisle, Ph. D. Mortgage Loans

31. Real Estate Finance © JR DeLisle, Ph. D. Traditional Mortgage Amortization Patterns

32. Real Estate Finance © JR DeLisle, Ph. D. DCF

33. Real Estate Finance © JR DeLisle, Ph. D. Leases as Risk Management

34. Real Estate Finance © JR DeLisle, Ph. D. Capital Market

35. Real Estate Finance © JR DeLisle, Ph. D. REITs and CMBS

36. Real Estate Finance © JR DeLisle, Ph. D. Portfolio Management

37. Real Estate Finance © JR DeLisle, Ph. D. Development

38. Real Estate Finance © JR DeLisle, Ph. D. Timetable: Part 1 Timetable as of 1/5/2010 WkDateTopicChapter Readings/CasesQuizzes/Projects OutProblem Sets/Due Dates 11/5Course Overview and Process Review Ch 1: RE Finance Overview DeLisle, No Bottom, No NetNo Bottom, No Net Graaskamp, Finance Educ. & Risk Management Review Cases: located in Moodle Process Review 1/7Capital Markets & Real Estate Ch 2: Money, Credit and Rates; Ch 3: Finance Theory & RE 2010 Emerging Trends; DeLisle: RE Asset Class or Sector?DeLisle: RE Asset Class or Sector? Prob Set1: Basic Time Value of Money 21/12Financing Notes & Mortgages Ch 4: History of Res Finance; Ch 5: Postwar Residential Finance DeLisle, Primer 1: Res. Mortgage DeLisle, Primer 1: Res. Mortgage pgs 1-48. Mortgage Project 1 Base Mtgs. Out; Quiz 1 Out 1/14Residential Mortgage Loans Ch 6: Alternative Mortgages DeLisle: Primer 1: Alt Mortgages DeLisle: Primer 1: Alt Mortgages pgs 48-72. Prob Set 2: Intro to Mortgage Finance Mortgage Project 1 Due 31/19Residential Finance; Housing Affordability Ch 7: Financing and Property Value; Ch 8-9 Federal Housing DeLisle, Housing Affordability Cost Study Quiz 2 Out Project 2 Alt Mtgs. Out Prob Set 3: Intermediate Mtg FinProb Set 3: Intermediate Mtg Fin; Quiz 1: Due 1/21Underwriting Residential Property Ch 13: Loan Orig; Ch 14: Mortgage Ins, Title Insurance 41/26Discounted Cash Flow; Investment Analysis Ch 19: Perm Financing Case 1: FD/BD Analysis Case 2: DCF Analysis DCF Enhanced Mortgage Project 2 Due 1/28Introduction to Income Property & Leases To be assigned Primer 2: Rent Roll Modeling in Excel Project 3: DCF Leases Out Quiz 2: Due Prob Set 4: Intro Corp RE 52/2Valuation of Income Property To be assigned 2/4Financial Leverage & Alt. Financing Ch 15 Value, Leverage Prob Set 5: Adv Corp RE

39. Real Estate Finance © JR DeLisle, Ph. D. Timetable: Part 2 WkDateTopicChapterReadings/CasesQuizzes/Projects Out Problem Sets/Due Dates 62/09Risk AnalysisCh 12: Controlling Risk; 2/11Disposition/Renovat ion Corporate RE Finance To be assigned Quiz 3: OutProject 3: DCF Leases Due 72/16Financing & Land Development Ch 18: ADC Loans Argus Model Tutorial 2/18Real Estate Portfolio Management Ch 21: RE in a Portfolio Context DeLisle, “A Holistic RE Portfolio Mgmt.” 82/23To be assignedPrimer 3: Argus Project Analysis Proj. 4: Argus RR- DCF Out 2/25JVs, Syndications, Partnerships, Ch 20: Ownership Proj. 5 Argus Portfolio: Out Project 4: Argus RR-DCF 9 3/02Public Equity Market Ch 17: Sources of Funds Quiz 4: Out 3/04Secondary Market: Pass-Throughs Ch 10: Secondary Market 103/9Secondary Market: CMOs, CMBSs Ch 11: Valuation of RE Securities Primer 4: Argus Portfolio Analysis Final Out 3/11Issues in RE Finance Ch 22: Liability, Fraud and Ethics. Project 5 Argus: Due Quiz 3: Due 113/15Finals WeekFinal ExamFinal Due 3/21