Introduction to Real Estate Development and Finance

Richard Levy, M.Arch, PhD, was formerly Professor of Planning at the University of Calgary, Canada, where he taught courses in urban planning and real estate development for 26 years. He currently teaches in the College of Business at the University of Rhode Island.

Table of Contents Preface Organization of this Book Chapter 1: Introduction to Real Estate Development and Finance What is Real Estate? What Determines Value? Learning from History Boom Bust Economies When Communities are in Decline The Road to Recovery Too Much of a Good Thing The Two Big Questions in Real Estate Development Supply Side of the Equation Supply Constraints Geographical Constraints on Supply Zoning, Bylaws and other Planning Controls The Case of the Unreasonable Seller The Case for Climate Change The Demand Side of the Equation The Demographics of Urban Development Demand and Supply in a Changing Technological Landscape Financial Factors Lending Measuring Demand Competitiveness Building the Team Chapter 2: An Introduction to Financial Analysis Risk and Reward Risk Free Rate Measuring Return Sharpe Ratio After Tax Rates of Return Proforma Cash Flow, Profit and Loss. Income Expenses Rates of Return Debt Borrower and Lender Loan Mechanics Debt, Depreciation and Cash flow Statement Leverage Balance Sheets Assets and Liabilities Cautions Chapter 3: Model Building and Real Estate Development Models and Decision Making What is a Model? Issues in Model Building: The Practice of Model Building Model Building and Statistics Data and Curve fitting: When relationships are Non-linear Appraisal Models Dynamic Models Two Big Questions in Real Estate Development Spatial Modeling of Land Values Gravity Models and Retail Transportation Modeling Urban Land Use Models Building Models and the Need for Data, A Practical Approach Conclusions Chapter 4: Financial Modeling Introduction Cap Rates Time Value of Money Net Present Value and Internal Rate of Return Applying Theory to Practice Sensitivity Analysis Case Study - Multi-Family Development: The Value of Forecasting Scenario1: Business as Usual Scenario 2: Optimistic Projection Scenario 3: Level property values. Scenario 4: Sudden Decline in Property Values Scenario 5: Sudden Decline in Property Values with no Recovery Scenario 6: Reinvestment in the Property from Excess Cash Flow Scenario 7: Negative Return Scenario 8: Negative return, accompanied by a reduction of mortgage rates Summary and Conclusions Chapter 5: Marketing Analysis Market Analysis: Supply, Demand, and Geography Market Study and the Real Estate Development Process Concept development Design and Marketing Marketing Studies, Planners and Government officials Investors and Lenders Buyers and Tenants Role of Consultants Market Research: Basic Principles and Techniques Market Area: Drawing the Boundaries Residual Demand Population Projection and Cohort Models Demand, Affordability and Residential Development Case Study: Condo Apartment Development Introduction Site and Location Demographics Competition Residual Demand Estimates Creating a Marketing Program Retail Commercial Office Space Clients and Landlords Summary and Conclusion Chapter 6: The Planning Process The Planning Process Introduction Getting Started Land Use Control, A Brief History Zoning Defined Zoning is Never Perfect What is Wrong with Zoning? Architectural Guidelines and Historic districts Americans with Disabilities Act Subdivisions Planning Process: Getting to a Successful Conclusion Hiring a Consultant Enlisting the Media Case Study: Inner City Development Project Background Site Development Options Scenario Evaluation: Design Review Step 1: First Meeting with Planners Step 2: Second Meeting, Bringing the Architect into the Process Step 3: Review of the Development Application Step 4: Review of the Revised Proposal Step 5: Meeting the Community Step 6: Seco