CCREAI

Certified Commercial Real Estate Analysis and Investments

→ Investment Industry, and Real Estate’s Role Therein
• Investor Objectives and Concerns
• Implications of investor Heterogeneity
• General Structure of Investment Products and Vehicles
→ Real Estate as an Asset Class
• Four Major Investment Asset Classes
• Historical Investment Performance
→ Perspective on the US Institutional Property Market
• Brief History of Commercial Real Estate Investment during Recent Decades
• Sources of Debt and Equity Capital

→ Single-Sum Formulas
• Single-Period Discounting and Growing
• Single-Sums over Multiple Periods of Time
• Simple versus Compound Interest
• Effective versus Nominal Rates
• Bond Equivalent and Mortgage Equivalent Rates
• Continuously Compounded Interest Rates
→ Multiperiod Problems
• Present Value of a Level Annuity in Arrears
• Present Value of a Level Annuity in Advance
• Present Value of a Constant-Growth Annuity in Arrears
• Present Value of a Constant-Growth Perpetuity
• Introducing Long-Term Leases
• How to Convert Annuities to Future Values
• Solving for the Cash Flows
• Solving for the Number of Payments
• IRR and Multi-period DCF Formula

→ Investment Returns: Basic Definition and Classification
• Two Fundamental Types of Return Measures
• Advances and Disadvantages of Periodic and Multiperiod Return Measures
→ Periodic Returns
• Formal Definition of the Periodic Return
• Time-Weighted Investment
• Real versus Nominal Returns
• Measuring Risk in Returns
• Relationship between Risk and Return
• Summarising Periodic Returns: Synthesizing the Three Ways to Break Down the Total Return
→ Multiperiod and Money-Weighted Returns
• Time-Weighted Average Return
• Internal Rate of Return (IRR)
Test Your Knowledge Questions

→ Relation between Return Expectations and Property Values in the Asset Market
→ Discounted Cash Flow Valuation Procedure
• Match the Discount Rate to the Risk: intralease and interlease Discount Rates
• Blended IRR: A single Discount Rate
• Unbundling Cash Flows: An Example
→ Ratio Valuation Procedures: Direct Capitalisation and GIM as Shortcuts
• Relationship of the Cap Rate to the Total Return
• Empirical Cap Rates and Market Values
→ Typical Mistakes in DCF Application to Commercial Property
• If Your Case lacks Merit, Dazzle Them with Numbers
• Excessive Laziness
• Watch out for the Cycle
→ Underwriting Haircuts
→ Capital Budgeting and the NPV Investment Decision Rule
• NPV Rule Corollary: Zero-NPV Deals Are OK
• Choosing among Alternative Zero-NPV Investments
• Hurdle Rate Version of the Decision Rule

→ Proformas and Cash Flow Projection
• PGI and Market Rent Projection
• Vacancy Allowance and EGi
• Operating Expenses
• Net Operating Income
• Capital Improvements Expenditures
• The Bottom Line: PBTCF
• Reversion Cash Flows
• Summary of Cash Flow Projection
→ Discount Rates: The Opportunity Cost of Capital
• General Observations about Real Estate Discount Rates
• Putting in Some Numbers: The Risk-Free Rate
• Putting in Some More Numbers: Historical Evidence on the OCC for Institutional Commercial Property
• Another Perspective: Survey Evidence
• Getting an Indication of Realistic Total Return Expectations by Observing Current Cap Rates in the Property Market
• Double Checking: Two Perspectives on the OCC Estimate
• Variation in Return Expectations for Different Types of Property

→ Market Value and Investment Value
• How to Measure Investment Value
• Joint Use of IV and MV in Decision Making
• The Asset Market Model with Marginal and Intramarg→ Danger and Opportunity in Market Inefficiency
• Valuation Noise
• Asset Market Predictability
→ Duelling Asset Markets: The REIT Market and the property Market
Exercise: Calculate Real Estate Valuations and Investment Analysis
Case Study: Comparing Real Estate Investments
Test Your Knowledge Questions

→ Basic Definitions and Mechanics of Leverage
→ Effect of Leverage on the Risk and Return to Equity
• Effect on the Expected Return
• Effect on the Risk in the Return
• Risk and Return: The Security Market Line
→ A Useful Formula: The WACC
• The WACC and REIT Cost of Capital
• Use of the WACC in Direct Property Investment
• The WACC and Return Components
• The WACC and Risk
→ Positive and Negative Leverage
→ Effect of Leverage on Growth and Yield

→ Debt When There is an Equity Capital Constraint
• Debt to Obtain Positive Equity NPV
• Debt and Diversification
• Limitations on the Equity Constraint Argument for the Use of Debt
→ Other Considerations Regarding the Role of Debt in Real Estate Investments
• Debt as an Incentive and Disciplinary Tool for Management
• Debt and Liquidity
• Cost of Financial Distress
• Debt and Inflation
→ Project-Level Capital Structure in Real Estate
• Enriching the Traditional Capital Structure Plate
Group Discussion: The Dark side of Debt – Lessons from the Financial Crisis
Test Your Knowledge Questions

→ Basic Legal Concepts and Terminology for Mortgages
• Legal Structure of Mortgages
• Priority of Claims in Foreclosure
• Typical Mortgage Covenants
→ Default, Foreclosure and Bankruptcy

→ Introduction to REITs
• Tax Status and Regulatory Constraints

→ There’s a Big World out There
• The Global Real Estate Capital Market: Size and Flows
• The Institutions of Globalisation
→ Going International: Rationales and Obstacles
• Return Opportunities
• International Diversification
• Managerial Considerations
• Obstacles to International Property Investment
→ Developing and Implementing International Real Estate Strategies
• Public Real Estate Investment
• Determining Country Allocation
• The “Home Market” Concept
Group Discussion: Political and other risk factors associated with International Real Estate investment.
Test Your Knowledge Questions

→ Overview of the Development DecisionMaking Process
→ Basic information: Enumerating project Costs and Benefits
→ Construction Budget Mechanics
→ Simple Financial Feasibility Analysis in Current practice
• Simple Feasibility Analysis Explained
• Problems with the Simple Approach

→ Islamic Finance Fundamentals – Principles, Rules & Prohibitions
→ Contracts - Debt and Equity Structures used to finance Real Estate
→ Sharia Conditions applying to Real Estate Investments