MSRED Courses
11.431J/15.426J: Real Estate Finance & Investments I: Micro-Level Fundamentals
Fall 2008
Instructors
Tod
McGrath, Lecturer, Department of Urban Studies & Planning
President, AdvisoRE, LLC.
Phone:
617-283-2338,
E-mail: wtod@advisore.com
David Geltner, Professor, Department of Urban Studies & Planning
MIT
Office: W31-310G
Phone: 617-253-5131
Fax: 617-259-6991,
E-mail: dgeltner@mit.edu
Teaching assistants
TBA
Lecture
Tuesday, Thursday, 4:00 - 5:30pm
Location: W31-301
Recitation
Thursdays, 5:30 - 7:00pm
Location: W31-301
Course Information
- Description and Objectives
- Requirements
- Administration/Recitations
- Grading
- Examination Dates
- Syllabus
Description and Objectives
This course is an introduction to the most fundamental concepts, principles, analytical methods and tools useful for making investment and finance decisions regarding commercial real estate assets. As the first of a two-course sequence, this course will focus on the basic building blocks and the "micro" level, which pertains to individual properties and deals (as distinguished from the "macro" level that pertains to portfolio, firm level, and investment management considerations - the macro level will be covered in 11.432 next spring).
This course will consider investment in both "stabilized" (fully operational) income properties, and development investments. Our perspective will be that of so-called "institutional" real estate decision-making (e.g., pension funds, REITs, banks, life insurance companies), regarding large-scale commercial property.
At this level it is important to integrate the perspectives of "Wall Street" (the mainstream securities investments and corporate finance establishment) and "Main Street" (local, traditional real estate business community). This requires a treatment of real estate investment rigorously integrated with, and built upon, the modern corporate finance and investments perspective as taught, for example, in the Brealey-Myers text in the Sloan introductory finance theory curriculum (15.401). However, a key objective of this course is to recognize the unique features of real estate that distinguish it from so-called "mainstream" securities investments and corporate finance.
Requirements
- Text: (required) D.Geltner & N.Miller, "Commercial Real Estate Analysis & Investments", 2nd Edition, South-Western College Publishing Co., Cincinnati, 2007 (ISBN# 9780324305487) (www.swcollege.com).
- Argus: Students will be required to buy a student version of the "Argus" real estate analysis software from The Realm (www.therealm.com).
- Calculator: A financial calculator
is required, of a type that can do discounted
cash flow and internal rate of return calculations
(DCF, IRR). The Hewlett-Packard HP-10B
will be used for in-class examples.
Administration/Recitations
In addition to twice-weekly lectures, there will be weekly recitation classes. These will be used to review the material presented in lecture and the text, and in some cases as extensions to the class to allow more complete coverage of case and project assignments. With one exception, problem sets will not be required or graded. The recitation instructors will present cases and other project assignments. The teaching assistant will serve as the exam grader (with appeals to the primary instructor), the recitation instructors will grade the project assignments. Recitation attendance is advisable for most students, but is mandatory only when the case and term projects are being covered during these sessions.
Note: Lecture notes (either Word or PowerPoint) will generally be available on the course website prior to lecture.
Grading
The grade will be based on two exams, three out of four case assignments, and one term project. All students are required to do the term project and the Danziger Case. Students must hand in two out of the three earlier (McGrath) cases, and should be prepared to discuss the third case as well even though you won't be graded on it. Cases and project will be done in student groups of three students each. A number of practice problem sets have also been prepared (approximately weekly) which will generally not be required or graded (with one exception). Problem sets are recommended for practice to insure mastery of the lecture and text material and as preparation for the exams. Problem sets will be discussed by the TA during recitations when answer sheets will be handed out and made available on the course web site. Overall course grading will be approximately as follows:
| Exam 1 | 25.0% |
|---|---|
| Exam 2 | 25.0% |
| Term Project | 20.0% |
| Case(s) | 30.0% |
| 100% |
Examination Dates
Exam 1: TBA
Final: TBA
