Table of Contents

BUSI 331 - Real Estate Investment Analysis and Advanced Income Appraisal

UBC Real Estate Division. 2017. 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
• 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
• 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
• 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
• 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
• Mortgage-Equity 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