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UPP 533 DEVELOPMENT FINANCIAL ANALYSISUPP 533 DEVELOPMENT FINANCIAL ANALYSISFall 2003M, W 10:45-12:15316 Douglas HallProfessor Rachel Weber Office: 236 CUPPA Hall, 412 South Peoria Telephone: 312.355.0307Fax: 312.413.2314Email: [email protected] course will acquaint students with the key financial principles of real estate development, particularly those related to the financing of affordable housing and neighborhood retail/commercial development. After introducing important financing concepts and tools (e.g. mortgage mechanics, net present value), students will learn how to develop, read, use, and troubleshoot development budgets and operating pro forma. The course will then examine different sources of financing, paying particular attention tothe use of Low-Income Housing Tax Credits, Tax Increment Financing and other gap funding sources for community economic development. Through readings, discussion, case studies and projects, students will familiarize themselves with the changing landscape of development finance and learn how to make informed judgments about issues that will make or break real estate projects.Course Requirements:Requirements for this course include the following:Weekly Readings--Students are expected to do the required readings listed in the syllabus prior to attending class.Class Participation--Informed discussion of the material is one of the most important components of this class. Through class discussions, students will learn how to be more reflective listeners and more persuasive speakers.Take-home Exercises--These short homework assignments will help students to hone their research and analytical skills. Exercises will be collected at the beginning of the class period in which they are due.Final Project--Students will work in small teams and be provided with information and materials regarding particular community development projects in Chicago. Each team will conduct a financial analysis of the project and at the end of the semester, will hand in a redevelopment plan, market analysis, development and operating pro forma. Each individual will be responsible for a write-up of the project but the entire team will present itsfinal report to the class in a mock public hearing.In addition to the above, the course will include an in-class mid-term.The weight of each of these components in the final grade will be as follows:Take-home Exercises (2) 10 % (5% each)Mid-term 30 %Final Project 50 % (25% individual/25% team)Class Participation 10 %The participation grade is based on a combination of regular attendance and informed participation in class discussions. The instructor takes attendance at every class. If you are unable to come to class, please contact the instructor beforehand. Final letter grades will be assigned according to a standard ten-point scale (A = 90 to 100; B = 80 to 89, etc.).Required text:The course reader can be purchased at Kinko’s on Van Buren.Students should also purchase a Hewlett Packard 12-C financial calculator (available at Radio Shack and other stores where consumer electronic goods are sold) and be proficient Excel users.Schedule of Readings and AssignmentsPart I: Introduction August 25: Introduction August 27: Developers and the development process Readings: Richard Peiser, “Who Plans America? Planners or Developers?” from JAPA (Autumn 1990)Miles, Haney and Berens, “Developers and Their Partners” from ULI, Real Estate Development Ross Miller, “The Great Game” from Here’s the DealSeptember 1: NO CLASSSeptember 3: The architecture of financial marketsReadings: Miles, Haney and Berens, “Real Estate and the Financial Markets” from Real Estate Development September 8: Real estate market analysis Readings: Articles from Urban Land on Chicago real estate marketPart II: Financial toolkitSeptember 10: Basic financial concepts Readings: Glossary of development termsHarvard Business School, “Financial Analysis of Real Property Investments”September 15: Development budgets Readings: Bennett Hecht, “Project Feasibility and Total Development Costs” in Developing Affordable HousingExercise I dueSeptember 17: Basic mortgage mechanics September 22: Mortgage mechanics I with HP-12CReadings: HP-12C, Owner’s handbook, pp. 36-64September 24: Mortgage mechanics II with HP-12CReadings: Miles, Haney and Berens, “The Successful Loan Application” from Real Estate DevelopmentSeptember 29: Rent tables and operating budgets Meet in Computer Lab, CCC 408Please bring a floppy disk to class!Readings: Bennett Hecht, “Determining Projected Income and Expenses” in Developing Affordable HousingOctober 1: Tax considerations and appraisal techniques Readings: Bruegmann, Fisher and Stone, “Valuation of Income Properties” in Real Estate Finance October 6: NO CLASSOctober 8: NO CLASSOctober 13: Discounted cash flow analysisReadings: Harvard Business School, “Introduction to Accumulated Value, Present Value, and Internal Rate of Return”Exercise II dueOctober 15: Discounted cash flow analysis with HP-12C Readings: HP-12C, Owner’s handbook October 20: Discounted cash flow analysis with Excel Meet in Computer Lab, CCC 408Please bring a floppy disk to class!Reading: Miles, Haney and Berens, “Discounted Cash Flow Analysis” from Real Estate DevelopmentOctober 22: Study sessionPractice ExamMeet in Computer Lab, CCC408Please bring a floppy disk!October 27: Financial feasibility analysis October 29: Mid-term examIII. ApplicationsNovember 3: Gap financing for affordable housing Readings: "Deals from Hell: How Creative Nonprofits Pull Off Affordable Multifamily Housing with ONLY 11 Funders," Community Information ExchangeNovember 5: SITE VISITNovember 10: Public Sources of debt financingReadings: “Source of Capital: Loans" in Bennett Hecht, Developing Affordable HousingMaterials on Federal Home Loan Bank Affordable Housing (AHP) Program; The Illinois Affordable Housing Trust Fund Program, Chicago Multi-family Loan Program; Affordable Rents for Chicago (ARC) Program“Enhancing the Feasibility of an Affordable Housing Project” in Bennett Hecht, Developing Affordable HousingNovember 12: Low Income Housing Tax Credits IReadings: Kirk McClure, “The Low Income Housing Tax Credit as an Aid to Housing Finance: How Well Has It Worked?” from Housing Policy DebateNovember 17: Low Income Housing Tax Credits IIReadings: IHDA and City of Chicago, “Low-Income Housing Tax Credit Allocation Plan”November 19:


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