17704 Property Development Finance
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Credit points: 6 cp
Subject level:
Postgraduate
Result type: Grade and marksRequisite(s): 12535c Property Investment and Development Feasibility AND 15142c Property Development Process
The lower case 'c' after the subject code indicates that the subject is a corequisite. See definitions for details.
These requisites may not apply to students in certain courses. See access conditions.
Description
This is a core subject in the Master of Property Development (C04008). It is essential to develop problem-solving capabilities and understand the fundamental finance theories and their practical application in property development, together with communication and client presentation skills.
The subject covers the sources and types of finance available for various property developments; debt versus equity; specialized financing techniques including hybrids, long-term, and offshore finance; project finance; and evaluation techniques and risk management. Students develop financing strategies for property development projects, build discounted cash flow (DCF) models for making financing decisions, and analyze risk using sensitivity and scenario analysis. Students learning experiences include working in the computer laboratory, online activities, group discussions, and independent reading.
Subject learning objectives (SLOs)
On successful completion of this subject, students should be able to:
| 1. | explain financial management as applied to real estate property development and sources and types of finance in the various types of property development |
|---|---|
| 2. | make critical assessment between theory and practical application for financing property development |
| 3. | apply discounted cash flow models to assist with financial design of property development projects |
| 4. | demonstrate understanding of development risks and their evaluations |
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)
- Apply a comprehensive understanding of contemporary theory in the financial management and financing of property developments to professional practice (P.7)
Teaching and learning strategies
A project-based learning approach is applied in this subject. Students are provided a real life project and asked to develop finance strategies to make the project viable and successful. Tutors work as facilitators to assist students with DCF modeling in computer laboratory and working on solutions for the given project. Student’s learning experiences consist of attending class workshop, group discuss, self-directed reading, writing reports, and so on.
Content (topics)
- Sources and types of finance
- Discounted cash flow model
- Cost of capital
- Capital structures
- Assessing risks using sensitivities and scenario techniques
- Joint ventures
- Option theory
- Derivatives
- Real Estate Investment Trust (REIT)
- Commercial Mortgage-Backed Security (CMBS)
Assessment
Assessment task 1: Individual report on analysing finance options using DCF
| Intent: | This assessment is designed for students to understand the effects of leverage and the use of discounted cash flow modelling, sensitivity and scenario analysis skills to make financing decisions. | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Objective(s): | This task addresses the following subject learning objectives: 1 and 3 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 and P.7 | ||||||||||||||||||||
| Type: | Report | ||||||||||||||||||||
| Groupwork: | Individual | ||||||||||||||||||||
| Weight: | 40% | ||||||||||||||||||||
| Criteria: | This is an individual assessment. Students must analyse the effects of leverage by developing Discounted Cash Flow models and conduct sensitivity and scenario analysis for a given project. A report and an excel file are required. | ||||||||||||||||||||
| Criteria linkages: |
SLOs: subject learning objectives CILOs: course intended learning outcomes |
Assessment task 2: Developing Finance Strategies
| Intent: | This assignment is designed to assist students in developing critical analysis skills by selecting property development financing options that meet a client's critical business KPIs. This involves demonstrating knowledge of discounted cash flow, and ESG risk management. | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Objective(s): | This task addresses the following subject learning objectives: 1, 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 and P.7 | ||||||||||||||||||||||||
| Type: | Report | ||||||||||||||||||||||||
| Groupwork: | Group, individually assessed | ||||||||||||||||||||||||
| Weight: | 60% | ||||||||||||||||||||||||
| Criteria: | This assignment includes two parts: The first part is an individual assignment. Students must study an A-REIT to understand the industry’s financing strategies, and explain how ESG improves risk management. An essay of fewer than 1,000 words is required. The second part is a group assessment which involves the analysis, presentation, and documentation of financing strategies for specific development and a recommended approach to meet the Client's key business KPIs. Discounted Cash Flow, sensitivity, and risk analysis should support the recommended financing strategy and address how it meets the Client's key business KPIs for the development. | ||||||||||||||||||||||||
| Criteria linkages: |
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.
Required texts
Rowland, Patrick (2010), Australian Property Investment and Financing, Lawbook Co. Thomson Reuters
References
Brueggeman, W B and Fisher, J D (2008), Real Estate Finance and Investment, 13th edition, McGraw_Hill/Irwin.
Ross, S A; Westerfield, R W; Jaffe, J F and Jordan, B D (2007), Corporate Finance: core principles and applications, McGraw-Hill/Irwin.
Frino, A, Hell, A and Chen, Z (2009), Introduction to Corporate Finance, Pearson/Education Australia.
Clauretie, T.M. and Sirmans, G.S. (2014) Real Estate Finance: Theory and Practice, 7th edition, Thomson South-Western.
Petty, J.W.; Keown, A.J.; Scott, D.F. and Martin, J.D. (2009), Financial Management (5th Edition), Pearson/Education Australia
Other resources
Journal of Real Estate Development
Journal of Property Investment and Finance
Journal of Real Estate Finance and Economics
Journal of Property Valuation and Investment
Journal of Real Estate Research
Project Finance
Refer to Canvas