property financial modelling school

The real estate industry is a very important part of the global economy and a capital-intensive business. Capital flows in this industry are measured in trillions of dollars. The commercial real estate industry in Ghana in recent times has seen tremendous growth due to improving local capital mobilization, higher investment returns and the influx of sophisticated foreign investors. Top-notch expertise is a prerequisite to gain competitiveness in the global marketplace. Commercial real estate financial modelling using spreadsheets is traditionally an indispensable tool for analyzing, presenting, reporting and communicating real estate feasibility to prospective investors and for in-house use.

Prospective job seekers in real estate investment, investment banking, insurance, real estate development, fund and asset management, private equity management are most likely to fail if they lack financial and real estate project modelling skills. There are however, limited opportunities for job seekers to acquire these skills, most of which are expensive and exist beyond the borders of Ghana. However, there are skill gaps in the industry according to recent report on consultations by the representatives of the Department of Land Economy, KNUST.

As part of its vision, the Department of Land Economy is introducing this certification course in Real Estate Financial Modelling as part of a broader investment property training programme. This aims to provide an avenue to train and equip students, graduates, real estate professionals and job seekers with the computational skills and tool pack for continuous professional development needed to gain competitiveness through efficiency and effectiveness in the commercial real estate marketplace.

Credits

86

Time to Complete

30 days

Course Details

The course consists of three main practical levels designed to cover the full range of real estate investment strategies from core to opportunistic.  Spreadsheets (i.e. Ms Excel) are the basic tools used in this course.

This modelling course will benefit both Real Estate and Non-Real Estate Professionals looking to develop their financial modelling skills and apply it to real estate investment analysis proficiently.

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Level 1 - Foundational Modelling 

This course is designed with the aim of introducing participants to the general framework of investments and financial markets, real estate investments, and the essentials of financial modelling, and the mathematical and statistical tools used in analysing and modelling it.

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Level 2 - Intermediate Modelling Course

offers participants the opportunity to advance their financial modelling abilities with applications to real world real estate investments through case studies. Participants will be taught how to model different characteristics of commercial real estate investments such as the rent function, leases and cash flow programs, leverage or gearing, promote and cash sharing structures. The course is also designed to help participant think logically and analytically to model the logical processes underlying real estate investment using Ms Excel.

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Level 3 - Advanced Modelling Course

consists of two sub-courses. The first sub-course focuses on some of the complexities of real estate development analysis and modelling. Participants will be taken through the traditional Residual Method of development analysis and its Discounted Cash flow equivalents. The second sub-course delves deeper into the applications of statistical and mathematical methods to real estate modelling and forecasting. The course will significantly benefit market analysts and researchers.

Structure

REFM 100: Foundational Modelling Course (Level 1)

This course provides a basic survey for persons with little or no prior background on the financial markets, including potential investors, students etc. Participants will learn the general concepts of investments, financial markets and economy. It will be terminal for most non-professional students, but for aspiring professionals in the industry, it serves as the foundation and a prerequisite for further courses in preparation for licensing and/or advanced responsibilities.

Delivery Method: Lectures

Contact Hours: 2

Days: 1

Assessable Learning Outcomes

By the end of the session, participants will:

  • They will learn about the principles of finance, including arbitrage, market efficiency, asset pricing models and portfolio theory;
  • You will see the difference between primary and secondary markets and learn about markets for different products;
  • You will also look at various economic Indicators and their influence on the markets.
  • They will acquire some skills in modern valuation techniques, including the pricing of fixed-income securities, equities, foreign exchange and derivatives;
  • From the point of view of investors, individual as well as institutional, we will consider the principles of security valuation, portfolio selection and management, and risk control;
  • Finally, the course will look at how banks and other financial institutions make money by bringing issuers and investors together.

Outline Content

  • Investments and principles of investments;
  • Financial markets; interest rates and the economy;
  • Time value of money; applications to investment decisions, lease-versus-buy, etc;
  • The money and bond markets; measuring bond yields and risk;
  • Risk, return and diversification; international diversification;
  • Risk in the context of bond and equity portfolios;
  • Financial Accounting: understanding Financial Statements;
  • Equity valuation: theory and techniques.

This unit is designed to develop a participant’s ability to perform basic mathematical operations and to apply mathematical techniques to a wide range of real estate investment problems. The mathematics of compound interest and annuities forms a major component of the unit.

​Delivery Method: Modelling workshops (in MS Excel) using Case studies

Contact Hours: 6

Days: 2

Assessable Learning Outcomes

Upon successful completion of this course, the participants will have reliably demonstrated the ability to: 

  • Calculate commercial discount, mark-up and markdown for business purposes;
  • Solve practical problems involving simple and compound interest, including equivalent payments;
  • Solve problems in the areas of annuities, consumer mortgages, personal investment and investment planning as both consumers and members of the business community.

Outline Content

  • Calculate cash discounts for early payment of invoices.
    Calculate mark-up based on cost or selling price;
  • Simple interest;
  • Compound interest – Use the future and present value formulae to
    calculate Ghana cedi values with compound interest;
  • Calculate nominal and effective rates;
  • Simple annuities – Distinguish between different types of annuities based on term, payment date and conversion period;
  • Compute the future and present values of ordinary simple annuities and ordinary general annuities;
  • Calculate the same for annuities due, deferred annuities
    and perpetuities;
  • Calculate the payments, including mortgages for all of the above annuities.

This foundational course will introduce you to spreadsheet models using Ms Excel, modeling techniques, and common applications for investment analysis, company valuation, forecasting, and more. When you complete the Specialization, you’ll be ready to use your own data to describe realities, build scenarios, and predict performance.

​Delivery Method:

Modelling workshops (in MS Excel) using Case studies

Contact Hours: 6

Days: 2

Assessable Learning Outcomes

By the end of the session, participants will:

  • Attendees should be able to use the basic facilities of Microsoft Excel and have basic accounting knowledge;
  • Design and construct useful and robust financial modeling applications;
  • Learn financial forecasting;
  • Use several of the support tools and techniques in spreadsheet programs;
  • Utilise sensitivity and scenario analysis;
  • Develop their Ms Excel skills;

Outline Content

  • Introduction to Ms Excel;
  • Excel Functions and Functionality;
  • Using Models in Decision Support;
  • Designing Appropriate Layout, Input Data Structures and Flow;
  • Model Design and Planning;
  • Designing the Workbook Structure;
  • Model Building, Testing and Auditing;
  • Model Review, Auditing and Validation;
  • Sensitivity and Scenario Analysis, Simulation and Optimization;
  • Foundations of VBA and Macros.

REFM 200: Intermediate Modelling Course (Level 2)

This unit aims to introduce the main theoretical and practical issues involved in the appraisal and assessment of investment projects. It covers the evaluation of private and public-sector investments. A key objective of the unit is to give the participants both the knowledge and the practice of applications to be able to work as a professional in this field.

​Delivery Method: Modelling workshops (in MS Excel) using Case studies

Contact Hours: 9

Days: 4

Assessable Learning Outcomes

Upon successful completion of this course, the participants will have reliably demonstrated the ability to: 

  • Use investment appraisal techniques – including discounted cash flows and performance metrics like Net Present Value; Internal Rate of Return (IRR);
  • Building, using or evaluating investment appraisal models using spreadsheets;
  • Balancing the risk and return of potential investments;
  • Decide whether to proceed with a capital purchase or project (by using techniques such as net present value, payback and return on investment);
  • Deal with real life complications such as changing interest rates, irregular cash flows, relevant cash flows, working capital cash flows, inflation and taxation.

Outline Content

The course outline includes:

  1. Cash flow proforma;
  2. Real estate valuation techniques;
  3. Investment appraisal techniques;
  4. Performance measurement and attribution;
  5. Decision analysis involving make or buy, lease or buy, abandonment etc., replacement decisions;
  6. Risk Analysis – sensitivity analysis

This course will enable participant to advance their financial modelling skills by way of extending the foundational course. At this level, participants will be able to create flexible real estate financial models in Excel comfortably. The course will show you how to model income producing property, build rent functions, model costs and calculate returns. It also shows you how to interpret and analyse the results. Case studies focus on core, core plus and value add property investments.

Delivery Method: Modelling workshops (in MS Excel) using Case studies

Contact Hours: 12

Days: 4

Assessable Learning Outcomes

By the end of the session, participants will:

  • Learn how to structure an investment cash flow from first principles and how to value and appraise property investments;
  • Build annual and quarterly discounted cash flows;
  • Look in depth at modelling tenancy schedules: rent reviews, upward-only, break options, lease expiry;
  • Build OPEX and CAPEX into your cash flow;
  • Analyse risk using sensitivity tables and charts;
  • Employ best practice and find solutions to common modelling problems.

Outline Content

Participants will know how to build a property asset cash flow, analyse geared, and un-geared IRRs. Participants will also know now how to build a multi-let property cash flow and apply the concepts on a hypothetical case study. Details include:

  • Term & Reversion and Layer Method Valuation (Intro to Excel);
  • Equivalent Yield (Solver, Scenario and Goal Seek functions);
  • Single-Let Discounted Cash Flow;
  • Cash Flow inputs (Rents, Yields, Growth Rates, Target Returns);
  • Analysis and use of date series;
  • Internal Rate of Return (IRR) and Net Present Value (NPV);
  • Comparing Value, Price and Worth;
  • Adding borrowing and analysing geared returns;
  • Introducing Rent Reviews and other ‘events’ into cash flows;
  • The ‘Rent Function’ concept and Logic functions (IF,OR,AND);
  • Sensitivity analysis;
  • The ‘Rent Function’ and Multi-let cash flows;
  • The ‘date problem’ and assumptions in property asset cash flows;
  • Reducing the rent function, intermediate calculations and modelling theory;
  • Modelling lease expiries, break clauses, voids, and upward only covenants;
  • Incorporating time-varying rental growth rates;
  • Analysing multi-let cash flows to see if the leases are sufficiently diversified;
  • Further IRR analysis (XIRR, MIRR); Promote and cash sharing arrangements.

This aspect of the course presents concepts of real estate finance both theoretically and empirically. It can be seen as a course in corporate finance (funding and valuation) applied to real estate topics. It is particularly relevant for investment appraisal because it presents models to determine the discount rate in real estate investment decisions and it reconcile types of cash flows and discount rates to obtain investment values.

​Delivery Method: Modelling workshops (in MS Excel) using Case studies

Contact Hours: 12

Days: 4

Aims

By the end of the session, participants will be able to:

  • Understand how financial issues influence decisions involving real estate within the firm;
  • Analyse the capital structure of a firm and its weighted average cost of capital;
  • Understand the problems that have to be overcome if real estate is to be treated on the same basis as other assets that are managed by companies;
  • Understand concepts of market efficiency as applied to property and the different approaches that can be taken to incorporate market perspectives into real estate management and decision making;
  • Critically discuss the choices of target return required for real estate investments.

Outline Content

  • Approaches to investment appraisal using financial techniques;
  • Capital budgeting and the use of the Weighted Average Cost of Capital;
  • Financing decisions using different techniques to deal with property and other assets;
  • How capital is raised and what the implications are for company decision makers;
  • Modelling of cost of financing;
  • Understanding company accounts;
  • Identifying capital structure and the role of real estate in influencing capital structure;
  • Application of lease or buy decision analysis.

Assessable Learning Outcomes

By the end of the session, participants will:

  • Demonstrate understanding of how financial issues influence decisions involving real estate within the firm;
  • Show awareness of the problems that have to be overcome if real estate is to be treated on the same basis as other assets that are managed by companies;
  • Be able to extract information from company accounts and to understand the concepts of market efficiency as applied to property and the different approaches that can be taken to incorporate market perspectives into real estate management and decision making;
  • Understand the forms of financing available to real estate companies/funds and their relative costs;
  • Be able to apply formal models to determine discount rates to be used in investment appraisal;

Additional Learning Outcomes

  • Opportunities to improve their analytical andITskills, specifically, their spreadsheet skills.

REFM 300: Advanced Modelling Course (Level 3)

Value add and opportunistic property investments are complex both in their initial scope and their cash flow projections. Development projects require greater skill and flexibility from Analysts and an ability to work with simultaneously with project partners. This course will show delegates how to appraise projects in Excel, incorporate and communicate updates as they happen and ultimately understand how to convert an opportunistic property investment into a core asset that can be sold on.

Residual models (profit & site) are demonstrated first to illustrate the main components of any scheme and the traditional methods of evaluation such as profit on cost ratio, rental yield and interest cover. Development cash flows are then constructed in detail looking in particular at phased income as well as fixed, variable and incidental construction costs and their impact on the net cash flow. Additional performance metrics are calculated including geared IRR and return on equity.

Development financing can be trickier than straightforward senior debt investment financing. This is because finance is often required in stages. The brought forward carried forward method demonstrated on the course, is the easiest way to deal with programmed debt drawdown functions and rolled-up interest. The assessment of project specific risk is arguably much more important in development schemes. Sensitivity analysis and scenario analysis are covered in the final section of the course.

 

​Delivery Method: Modelling workshops (in MS Excel) using Case studies

Contact Hours: 18

Days: 6

Assessable Learning Outcomes

By the end of the session, participants will:

  • Learn how to calculate land and profit residuals;
  • Learn how to structure a full development cash flow, including phased sales, S-curve and straight-line cost functions;
  • You will be taught how to find maximum bidding prices for site development and building refurbishments;
  • Understanding development financing considerations and learn how to optimise financing;
  • Analyse financial and project completion risks;
  • Employ best practice and find solutions to common modelling problems.

Course Content

Participants will learn how to build a discounted cash flow, analyse returns and understand the components of development models. Participants will also learn how to build a detailed property development project cash flow, add financing and perform risk analysis on commercial development projects.

  • Gross versus Net Yields, calculating Net Development Value (NDV);
  • Profit residual, with and without financing;
  • Site residual, how to calculate profit without knowing your costs;
  • Introducing financing to site residual calculations;
  • Purchase price and acquisition costs;
  • Phased Sales, marketing and disposal costs;
  • Modelling construction costs using straight line basis, fixed costs, variable costs, incidental costs and construction fees
  • Professional fees;
  • Income and expenditure project functions;
  • Logic functions, logic tables and array formulae;
  • Multiple IRRs, competing projects, scoping and linear programming, maximising performance;
  • Return metrics: Equity profit ratio (EPR), Costs paid out of proceeds (POP), Profit on cost ratio (PCR);
  • Alternative site calculation, Net present value (NPV);
  • Modelling construction costs using S-curve, variable costs, incidental costs and construction fees;
  • Switching between scenarios;
  • Introduction to Development financing, Pari Passu versus Equity First Financing;
  • Debt scheduling: brought forward and carried forward method;
  • Consideration of the impact of development finance interest, fees and covenants.

 

The course introduces participants to contemporary statistical, econometric and other quantitative techniques used in modelling and forecasting real estate markets. The importance of the unique characteristics of property markets will be emphasised and its impact upon the nature of applied quantitative analysis. Topics will include introductory data analysis and statistical inference, regression analysis, modelling and forecasting relationships. At the end of the module students will have developed skills enabling them to substantially enhance their understanding and application of quantitative and modelling methods used in the property industry. The module will be a blend of lectures and computing workshops/group exercises using Excel software applied to real estate data.

 

Delivery Method: Modelling workshops (in MS Excel) using Case studies

Contact Hours: 18

Days: 6

Assessable Learning Outcomes

Upon completion of this module, participants will be able to:

  • Examine real estate problems from a quantitative angle;
  • Describe and summarize data and variable relationships using basic statistics;
  • Apply appropriate quantitative methods to perform computer-assisted analysis;
  • Understand concepts relating to econometric modelling;
  • Understand the application and the use of quantitative methods with real estate data;
  • Understand techniques of index construction in real estate and the implications in relation to performance and risk measurement;
  • Understand the core issues relating to investment based quantitative techniques concerning risk and return and portfolio analysis.
  • Interpret the quantitative results of analyses and communicate those results to a non-statistical audience;
  • Utilize spreadsheets tools to perform analysis;

Additional Outcomes

  • enhance their oral and communication skills through discussions of the applied workshop exercises, results and terminologies;
  • develop their IT skills through the computer-based workshops;
  • enhance their capacity to read complex published material in a critical fashion;
  • develop their business report writing skills through the coursework

Course Content

  • Summarising data and descriptive statistics;
  • Statistical distributions;
  • Real Estate Indices and Performance Measurement;
  • Statistical measures for portfolio investment applications: Portfolio Risk & Return and Portfolio Optimization;
  • Hypothesis testing and confidence intervals;
  • Regression analysis and associated diagnostics;
  • Multivariate OLS and Diagnostic Testing;
  • Building, estimating and evaluating forecasting models;
  • Developing econometric and time-series real estate models.

​Delivery Method: Workshop using Case studies

Contact Hours: 3

Days: 1

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