12535 Property Investment and Development Feasibility

Warning: The information on this page is indicative. The subject outline for a particular session, location and mode of offering is the authoritative source of all information about the subject for that offering. Required texts, recommended texts and references in particular are likely to change. Students will be provided with a subject outline once they enrol in the subject.

Subject handbook information prior to 2024 is available in the Archives.

UTS: Design, Architecture and Building: School of the Built Environment
Credit points: 6 cp

Subject level:

Postgraduate

Result type: Grade and marks

There are course requisites for this subject. See access conditions.

Description

This is a core subject in the Master of Real Estate Investment and Master of Property Development programs.

The subject sets out why modeling and feasibility analysis are carried out and the logic behind the methodologies used. Linked to this, the terminology and formulas that run through real estate modeling are explained on the first day and are the basis of the first of the three assignments for the course.

The subject gives an understanding of the basic principles involved in carrying feasibilities. Rather than using proprietary models, the course aims to consider first principles to give an in-depth understanding of the sensitivities within models. To do this, Excel spreadsheets are used for the creation of analytical models, thereby giving students a solid foundation for the potential future use of proprietary modeling programs.

The subject focuses on developing feasibility models for income-producing investments such as Retail, Office, and Industrial properties, and property development projects mainly applying discounted cash flow (DCF) analysis. The subject also enables students to obtain DCF modeling skills valuing land acquisition, investment, or development projects affected by changing conditions. The sensitivity factors that affect the feasibility of property investment and development projects are discussed. Basic concepts of financial analysis, e.g., time value of money, rentals, and terminology such as CAPEX that relate to feasibility analysis are studied. Student learning experiences include class engagement in discussion, DCF modeling practice, online activities, group discussions, and self-learning opportunities.

Knowledge and modeling skills learned from the subject can assist students in making decisions in real-life investment and development projects. Examples of subject contents include cash flows, time value of money, project returns, Net Present Value (NPV), Internal Rate of Return (IRR), rentals, Development and Operating costs, and how those elements affect feasibility decisions.

Assessment is designed to ensure students’ learning objectives are achieved upon completing the subject. Students are provided a real-life assignment aiming for them to understand the theory of DCF analysis, know to identify and source variables that are considered in investment and development projects and be able to interpret NPV and IRR results using DCF modeling skills. Students are tested on their understanding of DCF principles and problem-solving ability in conducting a feasibility analysis.

Subject learning objectives (SLOs)

1.	Demonstrate an understanding of the rationale of conducting feasibility analysis and modelling
2.	Identify and source relevant cash flows that related to investment and development projects
3.	Demonstrate an understanding of DCF analysis and develop DCF models using excel modelling skills.
4.	Analyse DCF modelling results affected by changed project conditions.

Course intended learning outcomes (CILOs)

This subject also contributes to the following Course Intended Learning Outcomes:

• Effectively apply a variety of communication skills and technologies in professional contexts (C.1)
• Develop alternative, appropriate creative solutions to built environment issues (I.1)
• Demonstrate a comprehensive theoretical understanding of property valuation methodologies together with the capacity to prepare valuation assessments to a professional standard (P.1)
• Apply a comprehensive understanding of property market drivers and key risk analysis techniques applicable to contemporary industry based practice (P.3)
• Demonstrate knowledge of research principles and methods applicable to property development (R.1)

Contribution to the development of graduate attributes

The term CAPRI is used for the five Design, Architecture and Building faculty graduate attribute categories where:

C = communication and groupwork

A = attitudes and values

P = practical and professional

R = research and critique

I = innovation and creativity.

Course intended learning outcomes (CILOs) are linked to these categories using codes (e.g. C-1, A-3, P-4, etc.).

Teaching and learning strategies

This subject is delivered face-to-face in two blocks separated by a one-day workshop. Students’ learning experiences include attending classes, participating in class discussions, conducting quizzes on Canvas, and completing assessments.

Block one focuses on the basic financial and valuation concepts, feasibility decisions, and modeling skills. Students will develop an understanding of the time value of money, project returns, and valuation-related terminology. The learned knowledge will assist students in learning DCF modeling techniques with a step-by-step approach using Excel software.

The one-day workshop will focus on the creation by the students of a Discounted Cash Flow Model starting with a blank Excel spreadsheet. The creation of this model is part one of Assignment 2, once created students will use the model to predict the outcomes arising from a series of sensitivities they have to consider.

The second block focuses on the feasibility application. Students apply the learned knowledge and modeling skills from the first block to different types of asset classes such as income-producing and development projects, as well as analyse the factors that impact feasibility results.

Students are also facilitated to develop creative and critical thinking skills. Students will complete a milestone assessment task while learning this subject to develop academic and professional language and communication skills.

Content (topics)

• Time value of money
• Cash flows
• Valuation
• DCF modelling
• Feasibility Analysis
• ESG implications upon real estate modelling going forward

Assessment

Assessment task 1: In Class Test

Intent:	This QUIZ will provide students with an opportunity to understand the financial theory and basic concepts relevant to feasibility studies. Feedback will be provided immediately after the quiz through discussion of the results. Please refer to the assessment documents for model details.
Objective(s):	This task addresses the following subject learning objectives: 1 and 2 This task also addresses the following course intended learning outcomes that are linked with a code to indicate one of the five CAPRI graduate attribute categories (e.g. C.1, A.3, P.4, etc.): P.1 and P.3
Type:	Quiz/test
Groupwork:	Individual
Weight:	20%
Criteria linkages:	Criteria Weight (%) SLOs CILOs Demonstrate an understanding of financial theory, concepts and terminologies used in the feasibility study 60 1 P.1 Ability demonstrated in identifying and sourcing variables related to the investment and development projects 40 2 P.3 SLOs: subject learning objectives CILOs: course intended learning outcomes

Assessment task 2: Development Feasibility Modelling

Intent:	This assessment aims to develop students’ ability to develop feasibility models using the DCF modeling technique. Students’ learning experiences involve with investigating a commercial, industrial, or retail income-producing property, searching for relevant information, and developing a DCF model for the selected investment property. You are required to create a DCF model and investigate the sensitivity of changing the input assumptions. The Assignment is put forward in the format of a Briefing Paper that contains the response sheets to be submitted.
Objective(s):	This task addresses the following subject learning objectives: 2, 3 and 4 This task also addresses the following course intended learning outcomes that are linked with a code to indicate one of the five CAPRI graduate attribute categories (e.g. C.1, A.3, P.4, etc.): C.1, P.1 and P.3
Type:	Report
Groupwork:	Individual
Weight:	30%
Criteria:	This is an individual assignment focusing DCF model development.
Criteria linkages:	Criteria Weight (%) SLOs CILOs Evidence of searching and analysing relevant information for developing a DCF model 30 2 P.3 Ability demonstrated a DCF model development technique 40 3 P.1 Ability to explain financial indicators from the developed DCF model 30 4 C.1 SLOs: subject learning objectives CILOs: course intended learning outcomes

Assessment task 3: Complex DCF Model Sensitivity Analysis

Intent:	This assessment aims to develop students’ ability to analyse property development feasibility using DCF modeling skills. The student learning experience includes explaining the factors that affect development feasibility, income projections, and skills used for developing a DCF model, analysing results, and conducting sensitivity analysis for a given project.
Objective(s):	This task addresses the following subject learning objectives: 2, 3 and 4 This task also addresses the following course intended learning outcomes that are linked with a code to indicate one of the five CAPRI graduate attribute categories (e.g. C.1, A.3, P.4, etc.): C.1, I.1 and R.1
Type:	Report
Groupwork:	Individual
Weight:	50%
Criteria:	This is an individual assignment focusing on analysing DCF feasibility models.
Criteria linkages:	Criteria Weight (%) SLOs CILOs Ability demonstrated feasibility modelling skills 25 4 I.1 Evidence of critical thinking in understanding of DCF modelling results 30 3 R.1 Ability to analyzing sensitivity analysis and explain the impacted variables 15 4 C.1 Ability to analyze factors affect feasibility 30 2 R.1 SLOs: subject learning objectives CILOs: course intended learning outcomes

Minimum requirements

The DAB attendance policy requires students to attend no less than 80% of formal teaching sessions (lectures and tutorials) for each class they are enrolled in to remain eligible for assessment.

Recommended texts

There is no required textbook for this subject. Students are encouraged to search relevant books or articles for self-directed learning.

Study References

Professional Reports

• Knight Frank: http://www.knightfrank.com.au/research/
• Colliers: https://www.colliers.com.au/

References

Referencing: In the Faculty of DAB, referencing is done using the APA 7th edition referencing style.
Referencing is a standardised method of acknowledging sources of information and ideas that you have used in your assignments or research, in a way that uniquely identifies the source. It is not only necessary for avoiding plagiarism, but also for supporting your ideas and arguments.
The UTS Library has developed additional support materials to guide students in the use of the APA referencing style.

Further support may be accessed via visiting the following link: https://www.lib.uts.edu.au/help/referencing/apa-referencing-guide

Other resources

A laptop with Microsoft Excel software.