17778 Real Estate Initial Public Offer Methodology
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Credit points: 6 cp
Result type: Grade and marks
There are course requisites for this subject. See access conditions.
Description
Real Estate Initial Public Offerings (IPO) introduces students to the broad range of requisite skills needed to produce a comprehensive IPO document suitable for either a listed or unlisted IPO. The subject covers:
- Overview of managed Investment Scheme legislation
- Real estate asset class research methodology appropriate for an IPO
- Alternative sources of capital funding namely, equity and debt
- Ascertaining the appropriate level of debt given the specific earnings/revenue risks associated with either the pool of assets or single asset that forms the cornerstone investment
- Alternative Return on Equity (ROE) outcomes under alternative debt level ratios
- Forecast income growth from either the single asset or pool offsets given its WALE (Weighted Average Lease Expiry) profile, tenant covenant and rent review profile
- Alternative debt structures in terms of tenor/pricing scenarios
- Deriving the substantiated revenue/earnings forecast for the IPO over an initial 2 year period.
Subject learning objectives (SLOs)
On successful completion of this subject, students should be able to:
| 1. | Conduct appropriate real estate research in order to screen a potential portfolio of assets suitable for a portfolio that would form the basis of establishing an IPO. |
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| 2. | Understand the relationship between alternative real estate funding options overlaid with the earnings profile of an identified portfolio in order to develop the optimum debt funding structure. |
| 3. | Calculate alternative Return on Equity (ROE) scenarios under several alternative debt funding scenarios and the related equity yield to ascertain the optimum outcome that would be appropriate for the targeted investor base. |
| 4. | Learn report writing skills appropriate for an IPO using the appropriate mix of descriptive and analytical text in order to provide potential investors with a full understanding of the risks/returns offered by the IPO. |
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 solutions to property finance and investment (I.1)
- Apply financial principles to property investment decisions (P.3)
- Comprehensive understanding of investment risks including environmental risks (P.5)
- Engage in an advanced level of critical and reflective thinking and judgement in property investment contexts (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
The focus will be on a workshop approach whereby students form small groups with each member responsible for designated aspects of the final IPO document. The nature of the specific key learnings mandates a workshop approach whereby students are stepped through the development of the key elements of an IPO in an interactive manner.
Content (topics)
- IPO documentation procedures
- Alternative sources of debt and equity
- Impact of alternative debt/equity ratios and related investment return scenarios
- Relationship between Weighted Average Cost of Capital (WACC) and forecast investment returns
- Analysis of comparable IPO case studies
- Build a financial model applying forecast investment returns linked to property revenue and capital structures to produce a Profit/Loss Statement that will form the core of the IPO document.
Assessment
Assessment task 1: Identify the most suitable pool of real estate assets for an IPO
| Intent: | Conduct the initial research in order to identify the most suitable pool of real estate assets suitable for an IPO including the underlining income risk/ returns and key portfolio measures such as WACR (Weighted Average Cap Rate), tenant base, current or forecast vacancy and WALE (Weighted Average Lease Expiry). |
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| 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.): C.1, I.1 and R.1 |
| Type: | Presentation |
| Groupwork: | Individual |
| Weight: | 30% |
Assessment task 2: Create a proforma profit and loss statement and make forecasting
| Intent: | Create a proforma Profit and Loss Statement using an excel model with forecasts on a 6 monthly period for two sequential financial years i.e., four consecutive periods using data from the underlying real estate and the initial debt structure set in place. An abbreviated short report of 1500 words describing the Profit & Loss Statement needs to be included. |
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| Objective(s): | This task addresses the following subject learning objectives: 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.3 |
| Type: | Presentation |
| Groupwork: | Individual |
| Weight: | 30% |
Assessment task 3: Prepare IPO and final submission
| Intent: | Students will prepare and submit their final IPO submission and give a 15-minute presentation of the findings and recommendations in the IPO covering both the risk/return benefits. |
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| Objective(s): | This task addresses the following subject learning objectives: 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.5 and R.1 |
| Type: | Report |
| Groupwork: | Group, individually assessed |
| Weight: | 40% |
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.