Table of Contents

BUSI 331 - Real Estate Investment Analysis and Advanced Income Appraisal

UBC Real Estate Division. 2019. Real Estate Investment Analysis and Advanced Income Appraisal. Vancouver, BC: UBC Real Estate Division.

Chapter 1: Overview of Real Estate Assets and Markets

  • Investment Characteristics
  • Competitive Real Estate Markets
  • Attributes of Real Estate Investments: Advantages
  • Attributes of Real Estate Investments: Disadvantages
  • Investment Analysis Process
  • Feasibility Studies and Appraisals
  • Appendix 1.1: Review of Mortgage Finance Calculations

Chapter 2: Analysis of Income and Expenses

  • Traditional Accounting Statements
  • Moving from GAAP to IFRS
  • Forecasted Financial Statements for Appraisal and Analysis
  • Gross Potential Income
  • Vacancy and Collection Loss
  • Expense Covenants
  • Operating Expenses
  • Appraisal vs. Investment Analysis: Forecasting Considerations
  • Ratio Analysis
  • Operating Leverage
  • Cash Flow Analysis
  • Forecasting for Appraisers
  • Operating Cash Flows and Income
  • Pro Forma Statements
  • Property Appreciation and Reversionary Flow
  • Debt Refinancing and Capital Expenditures
  • Appendix 2.1: Rental Covenants
  • Appendix 2.2: Major Expense Classifications

Chapter 3: Introduction to Leasing

  • The Rights and Obligations of the Parties
  • Remedies for Breach
  • Termination of Tenancy
  • Registration and Priority of Leases
  • Dispute Resolution
  • Comparing Residential and Commercial Tenancies
  • Lease Documents
  • Types of Property Commonly Leased
  • Advantages to Landlord and Tenant of Leases
  • Types of Risk
  • Appendix 3.1: Glossary of Lease Terminology

Chapter 4: Lease Analysis

  • Lease Negotiations
  • Lease Review
  • Sample Leases
  • Sample Lease 1: Shopping Centre
  • Sample Lease 2: Office Unit in Traditional Office Building
  • Sample Lease 3: Gross Lease with Operating Cost Adjusting Clause

Chapter 5: Appraisal of Income-Producing Properties

  • Income Capitalization
  • Discounted Cash Flow: Appraisal with Multiple Periods’ Income
  • Income Approach in Practice
  • Case Study 5.1
  • Case Study 5.2
  • Appendix 5.1: Analyzing the Implicit Assumption of the Direct Capitalization Model
  • Appendix 5.2: Case Study 2: Year 1 Calculations of Actual Rent and Recoveries

Chapter 6: Valuation of Leasehold Interests

  • Identification of Interests in a Leased Property
  • What Creates Leasehold Value
  • Selection of Discount Rates for Various Interests
  • Illustrations of Market and Contract Rents
  • Percentage Leases

Chapter 7: Taxation of Real Estate Investments

  • Canadian Income Tax System
  • Sources of Income
  • Rules in Computing Taxable Income
  • Capital Cost Allowance (CCA)
  • Development of Real Estate: Soft Costs
  • Disposition of Assets
  • Adjusted Cost Base - Partnerships
  • Using Real Estate to Reduce Taxable Income
  • Implications for Real Estate Valuation and Investment
  • Goods and Services Tax/Harmonized Sales Tax (GST/HST) and Real Estate Transactions
  • Other Taxes
  • Appendix 7.1: Taxation of Non-Resident Income from Canadian Real Estate Investments
  • Appendix 7.2: Victoria Medical Centre

Chapter 8: Real Estate Investment Analysis

  • Investor’s Investment Criteria
  • Single-Period Measures
  • Case Study: Kelowna Office Complex
  • Discounted Cash Flow analysis
  • Appendix 8.1: Kelowna Office Complex Analysis
  • Appendix 8.2: Calculator Steps for Select Illustrations

Chapter 9: Mortgage-Equity and Residual Valuation Techniques

  • Part I – Mortgage-Equity Valuation Techniques
  • Part II – Residential Valuation Techniques: The Capitalization of a Dual Stream of Income
  • Applying Residual Techniques
  • Application: Developer’s Residual Method of Appraisal
  • Appendix 9.1: Modified Band of Investments À La Ellwood
  • Appendix 9.2: Calculation of Mortgage Constant and Other Variables
  • Appendix 9.3: Mortgage-Equity Capitalization Techniques: An Indirect Estimation of Value
  • Appendix 9.4: Calculator Steps for Select Illustrations

Chapter 10: Risk Determination, Measurement, and Analysis

  • The Anatomy of Risk Taking
  • Risk Measurement
  • Single Project Risk Analysis
  • Appendix 10.1: Degree of Total Leverage Example
  • Appendix 10.2: Standard Normal Distribution Area
  • Appendix 10.3: How to Read a Standardized Normal Curve
  • Appendix 10.4: IRR and Probabilities
  • Appendix 10.5: Calculator Steps for Select Illustrations

Chapter 11: Real Estate Ownership Structures

  • Co-Ownership
  • Divided Ownership
  • Corporate Ownership
  • Trusts
  • Partnership
  • Joint Venture
  • Implications of Organizational Form
  • Partnership Option
  • Syndication
  • Real Estate Investment Trusts in the Canadian Context
  • Appendix 11.1: Real Estate Syndication

Chapter 12: Real Estate Investments: Portfolio Analysis and Management

  • Investor Objectives
  • Portfolio Returns and Risks
  • Real Estate Portfolios
  • Real Estate in a Mixed-Asset Portfolio