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    Investment Analysis of Real Estate Development Projects: Overview & Background

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    Ahmed EL-Osaily
    This chapter discusses investment analysis of real estate development projects. It covers the development decision making process and trends towards greener development. It also discusses enumerating project costs and benefits, construction budgets, and simple financial feasibility analysis techniques that are commonly used in practice.

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    Investment Analysis of Real Estate Development Projects: Overview & Background

    Uploaded by

    Ahmed EL-Osaily
    16 views17 pages
    This chapter discusses investment analysis of real estate development projects. It covers the development decision making process and trends towards greener development. It also discusses enumerating project costs and benefits, construction budgets, and simple financial feasibility analysis techniques that are commonly used in practice.

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    This chapter discusses investment analysis of real estate development projects. It covers the development decision making process and trends towards greener development. It also discusses enumerating project costs and benefits, construction budgets, and simple financial feasibility analysis techniques that are commonly used in practice.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    16 views17 pages

    Investment Analysis of Real Estate Development Projects: Overview & Background

    Uploaded by

    Ahmed EL-Osaily
    This chapter discusses investment analysis of real estate development projects. It covers the development decision making process and trends towards greener development. It also discusses enumerating project costs and benefits, construction budgets, and simple financial feasibility analysis techniques that are commonly used in practice.

    Copyright:

    © All Rights Reserved
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    You are on page 1of 17

    CHAPTER

    28

    Chapter 28
    Investment Analysis of Real
    Estate Development Projects:
    Overview & Background
    SLIDE 1
    ©2014 OnCourse Learning. All Rights Reserved.
    CHAPTER
    28

    CHAPTER OUTLINE

    28.1 Overview of the Development Decision-Making


    Process
    The Trend Towards Greener Development
    28.2 Basic Information: Enumerating Project Costs and
    Benefits
    28.3 Construction Budget Mechanics
    28.4 Simple Financial Feasibility Analysis in Current Practice
    28.4.1Simple Feasibility Analysis Explained
    28.4.2Problems with the Simple Approach
    28.5 Chapter Summary

    SLIDE 2 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28

    LEARNING OBJECTIVES

    After reading this chapter, you should understand:


     The typical real estate development project decision
    process, at a broad-brush level, and the trend
    towards greener and more sustainable buildings.
     The role of financial analysis in development project
    decision making and the mortgage-based simplified
    techniques that are widely employed in this role in
    current practice, including their strengths and
    weaknesses.
     The basics of construction loan mechanics.

    SLIDE 3 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28.1 Overview of the Development Decision- 28

    Making Process The Trend Towards Greener


    Development

    SLIDE 4 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28

    EXHIBIT 28-1 Iterative, Multidisciplinary Process of Real Estate


    Development Decision Making (the Graaskamp Model)

    © OnCourse Learning
    SLIDE 5 ©2014 OnCourse Learning. All Rights Reserved.
    CHAPTER
    28
    EXHIBIT 28-2 Development Project Phases:
    Typical Cumulative Capital Investment Profile and Investment Risk
    Regimes

    © OnCourse Learning
    SLIDE 6 ©2014 OnCourse Learning. All Rights Reserved.
    CHAPTER
    28

    EXHIBIT 28-3 Development Project Typical


    Sources of Investment Capital

    © OnCourse Learning
    SLIDE 7 ©2014 OnCourse Learning. All Rights Reserved.
    CHAPTER
    28

    The Trend Towards Greener Development

    SLIDE 8 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28

    28.2 Basic Information: Enumerating Project


    Costs and Benefits

    SLIDE 9 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28

    28.3 Construction Budget Mechanics

    SLIDE 10 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28

    28.4 Simple Financial Feasibility Analysis in


    Current Practice

    SLIDE 11 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28

    28.4.1 Simple Feasibility Analysis Explained

    SLIDE 12 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28

    EXHIBIT 28-4 SFFA Front-Door Procedure

    SLIDE 13 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28

    28.4.2 Problems with the Simple Approach

    SLIDE 14 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28

    EXHIBIT 28-5 SFFA Back-Door Procedure

    SLIDE 15 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28

    28.5 Chapter Summary

    SLIDE 16 ©2014 OnCourse Learning. All Rights Reserved.


    CHAPTER
    28

    KEY TERMS

     site-looking-for-a-use  draw-down (of loan commitment)


     use-looking-for-a-site  draw
     lease-up risk  permanent loan
     development project phases  certification of occupancy
     construction and absorption budget  take-out loan
     operating budget  accrued interest
     stabilized (year or cash flows)  financing costs (construction loan
     hard costs interest)
     soft costs  simple financial feasibility analysis
    (SFFA)
     sustainable development
     front-door feasibility analysis
     absorption or lease-up phase
     back-door feasibility analysis
     on spec (speculative development)
     gross leaseable area (GLA)
     tenant build-outs
     efficiency ratio
     construction loan
     net rentable area (NRA)
     future advances
     financial feasibility
     financial economic desirability
    SLIDE 17 ©2014 OnCourse Learning. All Rights Reserved.

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