Course outline Code: PED220 Title: Property Investment Valuation and Market Analysis Faculty of Arts, Business and Law USC Business School Teaching Session: Semester 2 Year: 2018 Course Coordinator: Dr Steven Boyd Office: K1.07A Telephone: +61 7 5456 5129 Email: sboyd@usc.edu.au Consultation Times: By appointment 1. What is this course about? 1.1 Course description Building on knowledge from earlier property and business foundation courses, this course examines the valuation of complex income producing property assets through an in-depth evaluation of contemporary Capitalisation of Net income and Discounted Cash Flow methodologies. Integral to the valuation process is the collection, analysis and application of property market data. The course identifies the primary sources of data, looks at contemporary techniques of analysis and how data may be appropriately applied to the valuation process. 1.2 Course content 2. Unit value 12 units Review and Course Overview Market Analysis Capitalisation of Net Income Discounted Cash Flow A review of proprietary commercial property valuation and analysis software. Property data analysis commercial providers Future valuation issues 3. How does this course contribute to my learning?
Page 2 Specific Learning Outcomes On successful completion of this course you should be able to: Assessment Tasks You will be assessed on the learning outcome in task/s: Graduate Qualities Completing these tasks successfully will contribute to you becoming: Apply Discounted Cash Flow (DCF) analysis to an income producing property. Plan, design and communicate the valuation of an income producing property in a full market Valuation Report. Apply scholarly practice through disciplinary and interdisciplinary knowledge to formulate innovative solutions to property issues of varying complexity. Analyse the ethical implications of property investment decision making. 2 Empowered. 2 Engaged. 1, 2 and 3 Engaged. 1 and 2 Ethical. 4. Am I eligible to enrol in this course? Refer to the Coursework Programs and Awards - Academic Policy for definitions of pre-requisites, corequisites and anti-requisites 4.1 Enrolment restrictions Nil 4.2 Pre-requisites PED210 4.3 Co-requisites Nil 4.4 Anti-requisites PAM312 4.5 Specific assumed prior knowledge and skills N/A 5. How am I going to be assessed? 5.1 Grading scale Standard High Distinction (HD), Distinction (DN), Credit (CR), Pass (PS), Fail (FL) 5.2 Assessment tasks
Page 3 Task No. Assessment Tasks Individual or Group Weighting % What is the duration / length? When should I submit? 1 Essay Individual 10% 1000 words Friday, Week 5, 5pm AEST 2a DCF Model Development Individual 10% N/A Friday, Week 12, 5pm AEST 2b Case Study Valuation and Individual 30% 3000 words Friday, Week Professional Report 12, 5pm AEST 3 Final Examination Individual 50% 2 hours Central examination period 100% Where should I submit it? SafeAssign SafeAssign SafeAssign In exam venue Assessment Task 1: Essay Goal: To reinforce and expand your understanding of a market derived, evidence based capitalisation rate and its use in the estimation of the market value of an income producing property asset. Essay Question The Capitalisation of Net Income approach to the valuation of income producing property assets takes a snapshot of the subject property at the date of valuation and estimates open market value based upon that snapshot. For this reason, the method has been described as a static method. Explain why this description might be justified and how the method accommodates the dynamic nature of property assets going forward. Product: Essay Format: This is an individual assessment. Criteria Apply scholarly practice through disciplinary and interdisciplinary knowledge to formulate innovative solutions to property issues of varying complexity. Demonstrate an awareness of primary data resource options available to commercial property valuers, a comprehensive and effective understanding of appropriate analysis methodologies, and demonstrate an understanding of the application of that analysis process in support of the valuation of investment grade property assets. Demonstrate a sound understanding of how market derived data can be applied to the task of valuation income producing properties. Demonstrate a sound ability to sustain an argument using appropriate industry based examples and an awareness of the social, moral, and ethical responsibilities of the valuer to their client, the profession and the broader community in the analysis, valuation and reporting process. Communication and Presentation Generic skill assessed Skill assessment level Problem solving Communication
Page 4 Assessment Task 2a and 2b: DCF Model Development, and Case Study Valuation and Professional Report Goal: To allow you the opportunity to develop a simple but effective DCF model to enhance your understanding of how DCF modelling can be applied to assess value and facilitate industry standard value reporting. Product: A) DCF Valuation Model Development B) Valuation Case Study Format: This is an individual assessment. Criteria A) DCF Valuation Model Development (10%) Understanding of the theory and practical application of the DCF valuation process as demonstrated by the in operation capabilities of their DCF model. B) Valuation Case Study (30%) Plan, design and communicate of the valuation of an income producing property in a full market Valuation Report. Apply scholarly practice through disciplinary and interdisciplinary knowledge to formulate innovative solutions to property issues of varying complexity. Analyse the ethical implications of property investment decision making. You should demonstrate within the body of your report: A sound understanding of the strengths and weaknesses of the Discounted Cash Flow methodology in the estimation of market value; in particular its treatment of net cash flows, the discount and terminal cap rates. The evaluation and application of appropriate market analysis techniques to derive a suite of market based assumptions applicable to the estimation of the market valuation of the case study property. A full understanding of the professional standards required in report writing in the property context, an awareness of the social, moral and ethical issues arising from the analysis and reporting of high value financial property assets, and a sense of responsibility to the client, the property profession and wider community, throughout the process. Generic skill assessed Skill assessment level Problem solving Information Literacy Assessment Task 3: Final Examination Goal: To assess your individual understanding of the knowledge and skills taught through the lecture and tutorial series. The final 2-hour examination will test the student s knowledge of the theoretical and applied material covered within the course and developed over the tutorial sessions. It will consist of questions that require short essay type answers which will show your suitable level of professional maturity, good analytical and communication skills, and the ability to develop and carry an argument through to appropriate conclusions. Product: Examination 2 hours Format: This is an individual assessment. Criteria Apply scholarly practice through disciplinary and interdisciplinary knowledge to formulate innovative solutions to property issues of varying complexity. Show an appropriate level of critical analysis, clarity of expression, and an awareness of professional ethical standards and social responsibility applicable to the property industry. Demonstrate a full understanding of the question and develop a logical and sustainable discussion, critic, and evaluation, as appropriate to the question being answered.
Page 5 Display evidence of reflection upon, and an awareness of, industry best practice that demonstrates social, moral and ethical responsibilities of valuers to the profession when answering questions. Apply knowledge to the valuation of investment grade property assets of varying complexity Evaluate the fundamental drivers that affect asset price fixing in the property investment community. Analyse and prioritise a range of complex financial and non-financial data to assist in the development of robust, justifiable decisions. Generic skill assessed Skill assessment level Problem solving Communication 5.3 Additional assessment requirements 1. s commencing Week 2 and throughout the course, will support and guide you through the assessment processes. Tasks will be set to provide opportunities for you to develop a comprehensive understanding of the assessment issues and criteria, and provide a continuous stream of feedback on how to develop and sustain their assignment discussion/answer/argument. 2. In addition, during the tutorials in weeks 5 and 11 (ie the week prior to assignment hand-in dates), you will be asked to make a maximum 3-minute presentation on the assignment work. Staff and peer group formative feedback will be provided to guide you through to completion of the assessment task. Plagiarism In order to minimise incidents of plagiarism and collusion, this course may require that some of its assessment tasks, when submitted to Blackboard, are electronically checked through SafeAssign. This software allows for text comparisons to be made between your submitted assessment item and all other work that SafeAssign has access to. Eligibility for Supplementary Assessment Your eligibility for supplementary assessment in a course is dependent of the following conditions applying: a) The final mark is in the percentage range 47% to 49.4% b) The course is graded using the Standard Grading scale c) You have not failed an assessment task in the course due to academic misconduct 5.4 Submission penalties Late submission of assessment tasks will be penalised at the following maximum rate: 5% (of the assessment task s identified value) per day for the first two days from the date identified as the due date for the assessment task. 10% (of the assessment task s identified value) for the third day 20% (of the assessment task s identified value) for the fourth day and subsequent days up to and including seven days from the date identified as the due date for the assessment task. A result of zero is awarded for an assessment task submitted after seven days from the date identified as the due date for the assessment task. Weekdays and weekends are included in the calculation of days late. To request an extension you must contact your course coordinator to negotiate an outcome.
Page 6 6. How is the course offered? 6.1 Directed study hours On campus : 2 hours On campus : 1 hour Please refer to the Course Activities table for further details. 6.2 Teaching semester/session(s) offered Semester 2 6.3 Course activities Teaching What key concepts/content will I learn? Week / Module 1 Course overview & Assignment 1 Briefing - Valuation of Income Producing Properties Revision of the Capitalisation of Net Income Method including green buildings and sustainability 2 Market Analysis and Investment Grade Property Assets sources of data, reliability, elementary analysis methods, and principles of risk adjustment. 3 Market Analysis and Investment Grade Property Assets estimating Market Rental, Initial Yield, Reversionary Yield and Equivalent Yield Analysis 4 Capitalisation of Net Income Method Estimating Net Operating Income (NOI) Treatment of Gross & Net Leases gross rental income and outgoings analysis, benchmarking outgoings, other rental incomes. Treatment of varying and periodic incomes, vacancies and rent reviews. 5 Capitalisation of Net Income Method Capitalisation Rate Analysis Risk & Implicit Growth assumptions estimating implied growth Treatment of term and reversionary incomes 6 Introduction to Discounted Cash Flow Method Concepts and structure of the DCF process. Use as a valuation tool. Comparison with the Capitalisation approach 7 Discounted Cash Flow - Method 1 Discount rate selection; holding period selection, coping with Gross and Net leases - net income analysis, explicit rental and outgoings growth assumptions. Reversions, What activities will I engage in to learn the concepts/content? Directed Study Independent Activities Study Activities
Page 7 immediate and perpetual vacancies, incentives, rental reviews. Terminal value - estimating terminal capitalisation rates and sensitivity analysis methods. 8 Case Study Site Visit 9 Discounted Cash Flow - Method 2 Discount rate selection; holding period selection, coping with Gross and Net leases - net income analysis, explicit rental and outgoings growth assumptions. Reversions, immediate and perpetual vacancies, incentives, rental reviews. Terminal value - estimating terminal capitalisation rates and sensitivity analysis methods. Mid Semester Break 10 Discounted Cash Flow - Method 3 Discount rate selection; holding period selection, coping with Gross and Net leases - net income analysis, explicit rental and outgoings growth assumptions. Reversions, immediate and perpetual vacancies, incentives, rental reviews. Terminal value - terminal capitalisation rates estimates and sensitivity analysis methods. 11 Commercial Computer Based Capitalisation and Discounted Cash Flow Valuation packages Guest r 12 Property Markets and their Analysis the professional s perspective Guest r Texts and handouts 13 Course Review valuation where to now? Study Period Central Examination Period End of Semester Break Please note that the course activities may be subject to variation. *Public Holiday(s) Queen s Birthday - Monday 1 st Oct 2018 (Week 10) 7. What resources do I need to undertake this course? 7.1 Prescribed text(s) Please note that you need to have regular access to the resource(s) listed below: Author Year Title Publisher Rowland. P 2010 Australian Property Investment and Financing Lawbook Co, Australia 7.2 Required and recommended readings Lists of required and recommended readings may be found for this course on its Blackboard site. These materials/readings will assist you in preparing for tutorials and assignments, and will provide further information regarding particular aspects of your course.
Page 8 7.3 Specific requirements N/A 7.4 Risk management Health and safety risks have been assessed as low. It is your responsibility to research and understand risks of specific courses and to review the USC s health and safety principles by viewing the online induction training for students. 8. How can I obtain help with my studies? In the first instance you should contact your tutor, then the Course Coordinator. Additional assistance is provided to all students through Peer Advisors and Academic Skills Advisors. You can drop in or book an appointment. To book: Tel: +61 7 5430 2890 or Email: studentcentral@usc.edu.au 9. Links to relevant University policies and procedures For more information on Academic Learning & Teaching categories including: Assessment: Courses and Coursework Programs Review of Assessment and Final Grades Supplementary Assessment Administration of Central Examinations Deferred Examinations Student Academic Misconduct Students with a Disability http://www.usc.edu.au/university/governance-and-executive/policies-and-procedures#academic-learningand-teaching 10. General enquiries In person: USC Sunshine Coast - Student Central, Ground Floor, Building C, 90 Sippy Downs Drive, Sippy Downs USC SouthBank - Student Central, Building A4 (SW1), 52 Merivale Street, South Brisbane USC Gympie - Student Central, 71 Cartwright Road, Gympie USC Fraser Coast - Student Central, Student Central, Building A, 161 Old Maryborough Rd, Hervey Bay USC Caboolture - Student Central, Level 1 Building J, Cnr Manley and Tallon Street, Caboolture Tel: +61 7 5430 2890 Email: studentcentral@usc.edu.au