Syllabus for Course URBG 742: Economics of Real Estate Development
Hunter College - City University of New York - Department of Urban Affairs and Planning
Professor Robert C. Rosenberg
Tuesdays, 7:45 - 9:35 PM
Room 1640 - West Building
Required Text: Real Estate Development: Principles & Process. Fourth Edition. Miles, Berens, and Weiss. ULI., 2007
Other Reading: The Big Short by Michael Lewis, Norton & Co, 2011; Finance for Real Estate Development by Charles Long, ULI., 2011
Tools/Materials: (e.g. calculator, software (e.g. Argus), online technology (e.g. blackboard or canvas) proficiency, etc.)
This course is intended to enhance understanding and provide a guide for would be developers looking to analyze potential development opportunities, and, to successfully arrange and structure equity and debt financing for a real estate development project. The course also focuses on the aspect of obtaining governmental approvals and assistance for a prospective development and the skills needed to navigate through community and political processes. Lastly, we will examine the ways in which developers seek to profit from their development, and limit tax liability.
- A broad understanding of the historic changes that have taken place since the 1950s in both the financing of real estate and real estate ownership.
- An understanding of how policy and funding affect the real estate environment.
- To provide working knowledge of the composition and usage of various financial tools currently available (local, state, national).
- An introduction to the different types of real estate developers and an understanding of the role of a private developer, a non- profit developer, a planner, an advocate, a community member, a politician, etc. in developing real estate.
- An understanding of how to create a financial model and the demonstrated ability to create one which will predict feasibility and sensitivity to the market.
- An ability to create and present a feasible, site-specific development proposal which reflects demographic, market and financial factors, within a team setting.
- An assessable knowledge of each of the above.
Financing a real estate development project is a challenging undertaking that requires sweat equity, working capital, market knowledge, financial experience, connections, and strong analytical and communication skills. It involves both art and science. In essence, a real estate developer must connect with and convince both equity and debt capital providers-who will likely to put up most of the capital for a project-that the developer can successfully invest and deploy such capital, in an inherently risky business, and not only return that capital to the investor; but, also deliver promised returns on that capital. Needless to say, investors and lenders expect to see a great deal of solid evidence that their capital will be well managed in this process. We seek to put finance into context within the development process highlighting four dimensions for successful development-values, information, financial viability, and relationships. We then go on to cover the basics of real estate finance; land valuation and acquisition; task management and budgeting; the capital markets for real estate; obtaining financing for development; and, ownership entity and financing structures. We explore managing risk in the entitlement process, public/private partnerships, and real life experiences and stories about how developers find capital and arrange financing.
Grades will be a composite of the take home financial analysis (30%); take home exam (10%); your class participation (30%); and your group's project presentation of a potential development site your group selects (30%).
I will both lecture and present guests to discuss certain aspects of the industry. You are expected to complete the readings and actively participate in discussions. I will hand out case studies which will be discussed in class the following week. I assume each member of the seminar is able to work with computer spreadsheets such as Excel. If not, please learn immediately! I also assume you are reading the assigned materials; I will not repeat in class the materials you are to read, but will answer questions relating to the text. Weekly class topics and reading assignments are listed below:
Course Topics, Schedule, & Reading
August 28th, 2012
1. Overview of Seminar
Basic terminology and tools of the trade; the players then and today; emerging trends, a review and explanation of the course objectives
Reading homework: Miles Chapter(s) 2 (The Raw Material: Land and Demographics in the U.S.) 3 (Developers and Their Partners) and 6 (Past WWII to the Present
September 4th, 2012
2. Understanding a Pro Forma
Reading homework: Miles Chapter(s) 1 (The Real Estate Process) and 8 (R.E. Finance: The Logic behind R.E. Financing Decisions)
September 11th, 2012
3. Financing Affordable Housing
Guest: Emily Allison, Duvernay & Brooks LLC
Reading homework: Miles Chapter(s) 15 (Affordable Housing) and 16 (Stage Three: The Feasibility Study) and Appendix B (Gateway Business Center Offering memorandum)
October 2nd, 2012
4. The Role of the Developer
Guest: Avery Seavey, The Seavey Organization
Reading homework: Miles Chapter 10 (Inception of an Idea) 11 (Market Research) and 12 ( Refinement of an Idea), Class discussion Long pp 12-16
October 9th, 2012
5. Government as an Agent for Change
Guest: Ruth Anne Visnanskas, Deputy Commissioner for Development, NYC HPD
Reading homework: Miles Chapter(s) 13 (The Roles of the Public Sector) and 14 (Meshing Public and Private Roles in the Development Process)
October 16th, 2012
6. Developers with City Planning
Guest: Cecilia Kushner, Director of Special Initiatives, CPC
After the lecture, a case study and take home exam will be distributed for discussion at class session in three weeks
Reading homework: Miles Chapter(s) 8 (Real Estate Finance- The Logic) and 9 (Discounted Cash Flow: The Equity Perspective in More Detail)
October 23rd, 2012
7. Let's Make a Deal- Risk Control
Guest: Jeffrey Levine, Levine Builders
Reading homework: Miles Chapter(s) 7 (R.E. Finance: Background) and 10 (Stage One: Inception of an Idea)
October 30th, 2012
8. "Inside Job" The Movie and "What Went Wrong"
Guest: Norman Kranzdorf, Urdang & Associates
Reading homework: ULI Chapter(s) 17 (Market Analysis: Collecting, Validating and Understanding Market Data) and 18 (Data Sources Supporting Market Studies), "The Big Short" Chapter 3, "How Can a Guy Who Can't Speak English Lie?"
I will assign teams which will each find and analyze a potential development site.
November 6th, 2012
9. Valuation of Income Properties; Appraisal and The Market and Sources for Capital
Lecture followed by discussion of case study and take home exam
Reading homework: Miles Chapter(s) 11 (Market Research) and 12 (Stage 11- Refinement)
November 13th, 2012
10. The Public Approval Process
Guest: James Lima, James Lima Planning and Development
Reading homework: Miles Chapter 19 (Stages Four and Five: Contract Negotiation and Formal Commitment) Chapter 22 (The Challenge of Marketing and Sales)
November 20th, 2012
11. Financing a Deal
Lecture and class discussion of relative merits of alternatives
Reading homework: ULI Chapter 20 (Stages Six and Seven: Construction, Completion and Formal Opening)
Discussion of class reactions to "The Big Short" chapter
November 27th, 2012
12. Team Presentations
December 4th, 2012
13. Team Presentations
December 11th, 2012
14. Detailed Assessment of Student Presentations and Course Review
Financial Analysis to be handed out (in lieu of Final Exam) - due December 19th, 2012
December 19th, 2012
FINAL PAPER DUE TODAY
Papers should be delivered to:
Robert C. Rosenberg, Esq.
c/o Rosenberg Housing Group, Inc.
125 E. 23rd St.
New York, NY 10010
* Include a self-addressed, stamped envelope. Your analysis grade and course grade will be mailed back to you.