Recommended Revised Catalog Description:
University of Southern CaliforniaMarshall School of BusinessDepartment of Finance and Business EconomicsFBE 400XRobert Bridges, A.I.A.FBE 400X Introduction to Real Estate Finance and DevelopmentCourse Overview:This course examines the ownership of real estate from the perspective of an investor with little prior exposure to real estate finance or economics. Utilizing 575 Robinson Blvd. - an extensive case study that traces the growth in understanding on the part of an individual who is considering one of the largest and most important investments of his life – the course explains in detail the basic financial concepts that are central to real estate analysis. It begins with an evaluation of how real estate properties are valued, from the interdisciplinary perspectives of owner, developer, appraiser, lender, and, importantly, from the point of view of a purchaser. It progresses through an evaluation of the issue of risk; both from fluctuation in income and value on a property level, but also whether the particular risk that a real estate investment may pose is consistent with an individual’s financial objectives.The course explores the economics of the purchase of existing properties, but also the development of properties with fixed attributes; sites with a given land cost and on which building types and sizes are predetermined. It ultimately focuses on the issue of highest and best use. From an investor’s or developer’s standpoint, what is the use for the property that produces the highest financial return? And a related question: What should be paid for a property given the range of development options and investor expectations? Computer applications for financial and market analysis, as well as those that dovetail into building design, are introduced during class and laboratory exercises. FBE 400X is one of the electives for the undergraduate business minor. Students successfully completing this course will be eligible to participate in FBE 466, which is a more advanced exploration of the topic of real estate development. It is hoped that students, particularly those majoring in design and construction management, will consider participation in both FBE 400X and FBE 466 to gain a thorough exposure to real estate finance and economics, as well as the development process.Learning Objectives:Upon successful completion of this course, students will have a practical understanding of the way in which the various disciplines of finance, economics and design are integrated in the context of real estate ownership and development. Students will be able to value income-producing properties, analyze financial instruments such as mortgages and loans, as well as understand how real estate markets and market cycles affect the underlying value of real property. Those completing the course will have experience in using computer applications for solving financial and economic problems in real estate, as well as having a working knowledge of industry terminology, practice, and procedures.Course Organization:This course is in lecture format with a number of assignments including spreadsheet exercises, case analyses, a mid-term and final exam. The class meets twice weekly and students are expected to have read the textbook and other assigned material prior to the classes during which the topics are to be discussed.Grading Criteria:Mid-Term Exam30%Final Exam30%Assignments30%Attendance, preparedness and making a meaningful contribution10%to the intellectual environment of the classroomAssignments:The assignments will be drawn from the case, and from the back of the chapters in the textbook, computer laboratories, or will be related to current and newsworthy material covered in class.All homework assignments must be submitted in printed form during the class session on the day they are due. No late work will be accepted. Textbook, Equipment, Cases and Readings:Bridges, Robert, and Dale-Johnson, David 575 Robinson Blvd.(This case, and other materials, will be available from the instructor at the beginning of the term)Wurtzebach, Charles H. and Miles, Mike E., Modern Real Estate, 5th edition, Wiley and Sons, New York, The student is required to have a financial calculator during each class session, and must have a thorough working knowledge of its operation prior to the beginning of the course. The Hewlett-Packard 17B II will be used by the instructor for the course, and no class time will be devoted to the operation of other calculator puter exercises will be conducted using the latest version of Microsoft Excel. Students are advised to gain a basic understanding of the program, and have access to a computer for homework exercises. Students should read the Wall Street Journal regularly in order to track real estate market and mortgage market activity. Also, in Barron’s, The Ground Floor column is periodically devoted to real estate. The Los Angeles Business Journal is the best periodic source of local information and news on California and Los Angeles regional real estate activity.Class Meetings:Note: Student readings from the 575 Robinson Blvd. case in preparation for lectures and class sessions are shown in boldface type.Week 1Course Overview (No student preparation required) Week 1The Financial CalculatorSection 1, 575 Robinson Blvd.(Students must have course text and financial calculator in class for all sessions beginning with this session)Week 2Mathematics of Finance: Present Value and Net Present ValueSection 2: 575 Robinson Blvd. Case (For Study)Week 2Mathematics of Finance: Present Value and Net Present Value Section 2 and 3: 575 Robinson Blvd. CaseWeek 3Mathematics of Finance: Internal Rate of ReturnSection 4: 575 Robinson Blvd. CaseWeek 3Basic Finance Review and ExercisesSection 4: 575 Robinson Blvd. CaseWeek 4University View Case Computer Lab: Introduction to Spreadsheet Computer ApplicationsUniversity View Case (Unleveraged): To be distributed by instructorWeek 4 The Pro-Forma Statement of Project IncomeSection 5: 575 Robinson Blvd. Case Week 5 Computer Lab: The Pro-Forma Statement of Project IncomeSection 6: 575 Robinson Blvd. CaseWeek 5Leveraged AnalysisSection 6: 575 Robinson Blvd. CaseWeek 6 AnnuitiesSection 7: 574 Robinson Blvd. CaseWeek 6University View Case Computer Lab: Leveraged AnalysisThe University View Case (Leveraged): To be distributed by instructor.Week 7Real Estate LoansWeek 7 Fixed Rate LoansSection 7: 575 Robinson Blvd. CaseWeek 8Variable Rate and Other LoansSection 8: 575 Robinson Blvd. CaseWeek 8The Lender’s Perspective: The PropertySection 8: 575 Robinson Blvd. CaseWeek 9ReviewWeek 9Mid-Term ExaminationWeek 10Review Corrected Exams, The Lender’s Perspective: The BorrowerSection 9: 575 Robinson Blvd. CaseWeek 10Appraisal: The Reasons for Appraisal, Historical PerspectiveSection 9: 575 Robinson Blvd. CaseWeek 11Appraisal: The 3 ApproachesSection 9: 575 Robinson Blvd. CaseWeek 11Market Analysis: Supply and DemandSection 10: Market AnalysisWeek 12Market Analysis: Market Timing and Net AbsorptionSection 10: Market Analysis Week 12Slack Week 13Market Analysis: Market Timing and Net Absorption (Continued)Section 10: Market AnalysisWeek 14The Purchase Decision: Developer ReturnsSection 11: The Purchase DecisionWeek 14The Purchase Decision: The Revised Pro-FormaSection 11: The Purchase DecisionWeek 15The Development ProcessSection 12: The Development Process and the Concept of Highest and Best Use.Week 15Residual Land Value and the Optimization ModelSection 12: The Development Process and the Concept of Highest and Best Use.Exam Preparation and Review Final Exam Location and Time: TBAInstructor Access:The instructor will hold office hours by appointment only. E-mail is the preferred method of communicating with the instructor.Campus Office:301f AccountingE-mail:rbridges@marshall.usc.eduAcademic Integrity:The use of unauthorized material, communication with fellow students during an examination, attempting to benefit from the work of another student, and similar behavior that defeats the intent of an examination or other class work is unacceptable to the University. It is often difficult to distinguish between a culpable act and inadvertent behavior resulting from the nervous tensions accompanying examinations. Where a clear violation has occurred, however, the instructor may disqualify the student’s work as unacceptable and assign a failing mark on the paper.Returned Paperwork:Returned paperwork, unclaimed by a student, will be discarded after 4 weeks and, hence, will not be available should a grade appeal be pursued by a student following receipt of his/her grade.Students With Disabilities:Any student requesting academic accommodations based on a disability is required to register with Disability Services and Programs (DSP) each semester. A letter of verification for approved accommodations can be obtained from DSP. Please be sure the letter is delivered to the instructor as early in the semester as possible. DSP is located in STU 301 and is open 8:30 a.m. - 5:00 p.m., Monday through Friday. The phone number for DSP is (213) 740-0776. ................
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