Basic Real Estate Finance: Understanding Your Pro Forma (Winter)

Basic Real Estate Finance

Basic Real Estate Finance

Basic Real Estate Finance is designed to provide entry level professionals with the skills necessary to analyze the financial feasibility of real estate investment opportunities. It provides a step-by-step approach for completing a financial feasibility analysis. Students will become more familiar with real estate market participants, valuation fundamentals, determinates of real estate returns, the impact of leverage on real estate investments, and interactions between the real estate space market and the capital market. This course is ideal for developers, asset managers and owners who have very little financial analysis experience. It will therefore emphasize fundamentals and will not delve into more complex issues that are covered in NAIOP’s Advanced Real Estate Finance course.

This course is also available on-demand.

Lesson Plans

Module 1

Introduction to Space Markets and Capital Markets

Time: noon - 2 p.m. (Eastern Standard Time)

This session focuses on the relationship between the space market and the capital market, which will be used as a framework for the entire course. We'll also discuss why real estate is a unique asset class and identify major property types and classifications along with key real estate investors. In addition, this session will introduce the four quadrants of the capital market, discuss investment strategies and examine historic real estate returns.

Facilitator for this Lesson:
Jerry Franke

Jerry Franke

President

WISPARK LLC

Milwaukee, Wis.

Subject Area: Advanced Real Estate Finance, Financial Analysis of Development Projects

Jerold Franke was named president of WISPARK LLC., the real estate development subsidiary of Wisconsin Energy Corp., in August 2000. In this role, Franke has executive responsibility over the full-service, real estate development company that plans and constructs master-planned business parks in southeast Wisconsin and northeast Illinois.

Franke began his career with WISPARK in 1988 as director - Business Development. He quickly advanced to vice president in 1989 and was subsequently named senior vice president in 1998. Prior to joining WISPARK LLC., Franke was vice president for economic development of Forward Wisconsin, Inc., the state's economic development marketing organization from 1987 to 1988. Previously he was acting city manager and director of community development for the city of Janesville, Wisc., from 1980 to 1987.

Module 2

Real Estate Valuation Using Direct Capitalization

Time: noon - 2 p.m. (Eastern Standard Time)

This section will focus on the basic structure of a real estate operating statement and how capitalization rates are used in conjunction with the operating statement to derive an estimate of value.

Module 3

Real Estate Valuation Using Discounted Cash Flow Analysis

Time: noon - 2 p.m. (Eastern Standard Time)

In this section, we will differentiate discounted cash flow analysis from direct capitalization when the technique is presented to provide students with a clear understanding of the relationship between the two approaches to valuation.

Facilitator for this Lesson:
Teresa Esquivel

Teresa Esquivel

Independent Real Estate Consultant

Subject Area: Underwriting of real estate loans

Teresa Esquivel is an independent real estate consultant specializing in the underwriting of real estate loans. She has over 30 years of experience including as a lender at Prudential Mortgage Capital Co. and as a managing director in the CMBS and International Structured Finance Groups of Fitch Ratings. In these positions, she analyzed commercial real estate loans, developed models for quantifying commercial real estate risk, and covered national and international markets.

She holds an MS degree in Real Estate Appraisal and Investment Analysis from University of Wisconsin-Madison. She also had stints as property manager, real estate broker and real estate tax assessor for the Greenwich Village district of New York City. She currently teach Principles of Real Estate Finance at Baruch College’s CAPS program.

Module 4

Real Estate Leases

Time: noon - 2 p.m. (Eastern Standard Time)

This section will cover the legal aspects of real estate leases and focus on how each type of lease structure influences cash flow/value.

Facilitator for this Lesson:
George Pincus

George Pincus Esq.

Shareholder

Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A.

Ft. Lauderdale, Florida

Subject Area: Essentials of the Development Process, Basic and Advanced Real Estate Finance, Real Estate Law and Land Use Policy, and Leasing, Marketing and Negotiations

George Pincus is a transactional real estate lawyer with almost 30 years of experience. His practice includes the structuring and documentation of joint venture deals between developers and sponsors and private equity investors. He also has extensive experience in purchase and sale, real estate finance and leasing transactions. Pincus has been an active member of NAIOP for over 20 years and is a regular speaker at NAIOP education events.

Module 5

Determinants of Real Estate Returns

Time: noon - 2 p.m. (Eastern Standard Time)

Capitalization rates and discount rates will be broken down into their component parts to help students estimate potential changes in the rates over time.

Facilitator for this Lesson:
Jerry Franke

Jerry Franke

President

WISPARK LLC

Milwaukee, Wis.

Subject Area: Advanced Real Estate Finance, Financial Analysis of Development Projects

Jerold Franke was named president of WISPARK LLC., the real estate development subsidiary of Wisconsin Energy Corp., in August 2000. In this role, Franke has executive responsibility over the full-service, real estate development company that plans and constructs master-planned business parks in southeast Wisconsin and northeast Illinois.

Franke began his career with WISPARK in 1988 as director - Business Development. He quickly advanced to vice president in 1989 and was subsequently named senior vice president in 1998. Prior to joining WISPARK LLC., Franke was vice president for economic development of Forward Wisconsin, Inc., the state's economic development marketing organization from 1987 to 1988. Previously he was acting city manager and director of community development for the city of Janesville, Wisc., from 1980 to 1987.

Module 6

Introduction to Debt Financing

Time: noon - 2 p.m. (Eastern Standard Time)

This session will emphasize mortgage terminology and basic skills such as calculating mortgage payments and balances in this module. We'll also discuss the relationship between leverage and investment risk.

Facilitator for this Lesson:
Charles Tu

Charles C. Tu, PhD, CFA

Daniel F. Mulvihill Professor of Commercial Real Estate & Academic Director of MSRE Program

University of San Diego

San Diego, California

Subject Area:

Charles Tu is the Daniel F. Mulvihill Professor of Commercial Real Estate and Academic Director of the MS in Real Estate program in the Burnham-Moores Center for Real Estate at the University of San Diego. He teaches a variety of courses at both the graduate and undergraduate levels, including real estate finance and investment, real estate capital markets, real estate management, and real estate development.  He is also the principal instructor of Advanced Real Estate Finance in Urban Land Institute’s Real Estate School.  Tu earned his PhD in business administration from The George Washington University in 1999 and received the Chartered Financial Analyst (CFA) designation in 2000.  He became a LEED Accredited Professional in 2009 and is ARGUS Software Certified for both ARGUS Valuation-DCF and Developer. Tu is also a NAIOP Distinguished Fellow.

Module 7

Leveraged Real Estate Investments

Time: noon - 2 p.m. (Eastern Standard Time)

Leverage is incorporated into the reconstructed operating statement in this section to analyze the financial performance of a real estate investment.

Facilitator for this Lesson:
Charles Tu

Charles C. Tu, PhD, CFA

Daniel F. Mulvihill Professor of Commercial Real Estate & Academic Director of MSRE Program

University of San Diego

San Diego, California

Subject Area:

Charles Tu is the Daniel F. Mulvihill Professor of Commercial Real Estate and Academic Director of the MS in Real Estate program in the Burnham-Moores Center for Real Estate at the University of San Diego. He teaches a variety of courses at both the graduate and undergraduate levels, including real estate finance and investment, real estate capital markets, real estate management, and real estate development.  He is also the principal instructor of Advanced Real Estate Finance in Urban Land Institute’s Real Estate School.  Tu earned his PhD in business administration from The George Washington University in 1999 and received the Chartered Financial Analyst (CFA) designation in 2000.  He became a LEED Accredited Professional in 2009 and is ARGUS Software Certified for both ARGUS Valuation-DCF and Developer. Tu is also a NAIOP Distinguished Fellow.

Module 8

Analyzing Debt Financing Options

Time: noon - 2 p.m. (Eastern Standard Time)

We'll discuss the skills necessary to estimate the maximum loan amount a property will support and to choose between financing options with different terms.

Facilitator for this Lesson:
Charles Tu

Charles C. Tu, PhD, CFA

Daniel F. Mulvihill Professor of Commercial Real Estate & Academic Director of MSRE Program

University of San Diego

San Diego, California

Subject Area:

Charles Tu is the Daniel F. Mulvihill Professor of Commercial Real Estate and Academic Director of the MS in Real Estate program in the Burnham-Moores Center for Real Estate at the University of San Diego. He teaches a variety of courses at both the graduate and undergraduate levels, including real estate finance and investment, real estate capital markets, real estate management, and real estate development.  He is also the principal instructor of Advanced Real Estate Finance in Urban Land Institute’s Real Estate School.  Tu earned his PhD in business administration from The George Washington University in 1999 and received the Chartered Financial Analyst (CFA) designation in 2000.  He became a LEED Accredited Professional in 2009 and is ARGUS Software Certified for both ARGUS Valuation-DCF and Developer. Tu is also a NAIOP Distinguished Fellow.

Education Credits

Education Credits

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Basic Real Estate Finance is approved for the following Education Credit:
16 hours credit toward either the Certificate of Advanced Study in Commercial Real Estate Development or the Certificate of Advanced Study in Real Estate Finance.

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16 AIA/CES Learning Units
16 Professional Development Hours (PDH)
1.6 Continuing Education Units (CEUs)

Learning Objectives

Learning Objectives

  • Defining "space markets" and "capital markets"
  • Identifying the four quadrants of the capital market
  • Developing an operating statement
  • Understanding capitalization rates
  • Differentiating capitalization rates from total yield
  • Defining and calculating net present value (NPV)
  • Defining and calculating unlevered internal rate of return (RR)
  • Differentiating between gross leases and net leases
  • Incorporating tenant reimbursements into the operating statement
  • Identifying the factors that cause capitalization rates and discount rates to change over time
  • Identifying sources of discount rate and capitalization rate data
  • Examining the relationship between leverage and risk
  • Calculating loan payments and loan balance

Tuition & Register

Tuition & Register

Payment for a NAIOP online course entitles access for one person only to the course and all materials.

Course Tuition

  • Member: $795
  • Nonmember: $995
  • Developing Leader: $595
  • Student Member: $95
  • Student Nonmember: $145

Cancellation Policy

All cancellations must be in writing. Cancellations of registrants received after December 14, 2016, will be charged a fee of $100 per attendee. Cancellations received after December 27, 2016 will forfeit the registration fee. No refunds will be made for no-shows. Substitutions are permitted until January 3, 2017. Nonmembers substituting for members will pay the difference in fees. Cancellation/substitution notices should be sent to education@naiop.org or faxed to 703-674-1471.

FAQs

FAQs

What does tuition cover?

Payment for a NAIOP online course entitles access for one person only to the course and all materials.

Is there an online instructor?

Yes, there is a live instructor presenting each class. Students are able and encouraged to engage and interact with the instructor and each other.

How much out-of-class work is required for each course?

Courses offered online require no more than one hour per week of additional work outside of the scheduled class times.

What if I miss a scheduled class?

If a student misses a class, all materials and a recording of each class is posted in the material library for the student to review before the next class. A student must attend a minimum of 75 percent of the classes to receive credit.

Do I have to take an exam?

Course exams are not required unless you are enrolled as a candidate for the Certificate of Advanced Study in Commercial Real Estate or the Certificate of Advanced Study in Real Estate Finance.

What records are kept of my coursework?

The Center maintains records of all the coursework you complete, as well as optional exam scores, in a confidential transcript. Transcripts are available to candidates upon request. Please contact education@naiop.org.

What are the computer requirements?

The interactive sessions will be accessed via GoToWebinar.com.

Please use the list below to determine if your computer meets the minimum requirements recommended to participate in the online courses:

To attend on a PC, the following is required:

  • Internet Explorer® 6.0 or newer, Mozilla® Firefox® 2.0 or newer (JavaScript™ and Java™ enabled)
  • Windows® 2000, XP, 2003 Server or Vista
  • Cable modem, DSL or better Internet connection
  • Minimum of Pentium® class 1GHz CPU with 512 MB of RAM (Recommended) (2 GB of RAM for Windows® Vista)

To attend on a Mac®, the following is required:

  • Mac OS X 10.4 (Tiger®) or newer
  • Safari 3.0 or newer, Firefox 2.0 or newer (JavaScript™ and Java™ enabled)
  • Cable modem, DSL or better Internet connection
  • Power PC G4/G5 or Intel processor (521 MB of RAM or better recommended)

Participants wishing to connect to audio using VoIP will need a fast Internet connection, a microphone and speakers (a USB headset is recommended).

Contact Barb Parnarouskis at barbp@naiop.org for more information.