17704 Property Development Finance

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 2025 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

Requisite(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)

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:

• Interpret, assess, and communicate complex relevant knowledge across the property development process to multidisciplinary stakeholders for positive outcomes. (C.1)

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.): .7 and C.1
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:	Criteria Weight (%) SLOs CILOs Evidence of clarity documenting the market study and variables required for developing DCF models and analysis 25 3 C.1 Evidence of clarity interpreting and analysing the effects of financing options from the results of DCF models 25 1 .7 Evidence of correct DCF model and sensitivity & scenario analysis were developed 25 3 .7 Evidence of critical thinking in applying finance theory in the practical solution and analysing & recommending the best financing option 25 1 .7 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.): .7 and C.1
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:	Criteria Weight (%) SLOs CILOs Evidence of clarity explaining the selected A-REIT and its financial position applying ratio analysis 22 2 C.1 Level of critical thinking evident in discussing of financing options applied in property development 18 2 .7 Clarity of recommended financing strategy for the development of the Client's land 22 1 .7 Clarity of analysis & presentation of recommended financing strategy & how it meets the Client's key business KPIs for the land while minimising risk 20 4 .7 Evidence of a correct DCF using WACC with sensitivity & risk analysis to the Client's KPIs for the land 18 3 .7 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