REAL ESTATE DEVELOPMENT AND FINANCE (UP219-2) Winter 2008 UCLA Department of Urban Planning 725-114-201 School of Public Affairs Tues, 9-11:50AM Instructor: Robert J. Rodino, Ph.D. Public Affairs Building Room 3343C The objectives of this course are six-fold: 1. To provide you with an understanding of the development process, its phases and issues and basic tools. 2. To provide you with the skills to prepare financial feasibility analyses of development projects. 3. To enable you to put together a reasonable development project plan. 4. To enable you to understand the concepts of risk / reward and how they infuse every aspect of real estate development. 5. To provide you with an understanding of the role that real estate development plays in the larger processes of urban development and revitalization. COURSE OUTLINE The course will focus on the development of market rate in-fill multi-family residential, retail and mixed-use residential/retail projects, but will include discussions of affordable housing, office, light industrial properties, “green” development and new urbanism. One field visit is planned to the instructor’s 22 townhome condo development in San Gabriel and to the City of San Gabriel offices, to highlight real-life development, construction and entitlement issues. 1. Introduction, Phases of Development, Participants in the Development Process and Overview of Feasibility Analysis January 8 2. Site Acquisition, Due Diligence and Preliminary Feasibility Analysis 3. Project Feasibility Analysis – Static and Dynamic 4. Site and Project Design and Feasibility & Speaker 5. Market Research and Feasibility Analysis 6. Review– 1st half of class, Mid-term exam 2nd half 7. Entitlements, Community & Government Relations January 15 January 22 January 29 February 5 February 12 February 19
8. Construction and Feasibility – Site visit to “Mission Gardens at San Gabriel” development project and meeting with officials of San Gabriel February 26 9. Financing: Equity, Construct Debt, Permanent financing 10. Critical Issues in Real Estate Development & Review Final Examination March 4 March 11 March 18
Class Topic Summary (see required and recommended texts at the end) 1. Introduction, Phases of Development, Participants in the Development Process and Overview of Feasibility Analysis January 8 Review of syllabus - Objectives of course What is a developer? Career paths to development Phases of Development - conceptual, time frame. Risk / Reward discussion Participants in development process Summary of feasibility analyses Reading assignments: Professional Real Estate Development (PRED), Forward, Chaps 1&2; Guide to California Planning (GCP), Chaps 1&3.
2. Site Acquisition and Preliminary Feasibility Analysis January 15 What to look for? - Site characteristics for various property types; multifamily housing, retail, office, industrial, mixed-use How to find sites? – Tools for site search and identification Site analysis – tools and methods Zoning and entitlement issues Preliminary feasibility analysis – distribute simplified proforma Residual land value Acquisition – Letters of Intent, Purchase Contracts - examples Preparing a Development Plan Due diligence and closing escrow Reading Assignments: PRED: Chap 3, pgs 59-81 (Overview & Project Feasibility, exclude Financial Feasibility Analysis section), Chap 4, Pgs 129-132, 140147 (Overview & Site Selection), Chap 5 Pgs 213-217, 222-225, Chap 6, Pgs 255-260, 264-267, Chap 7 Pgs 301-305, 312-317 (exclude Financial Feasibility) GCP: Chaps 4&5 3. Project Feasibility Analysis – Static and Dynamic January 22 (See Spreadsheet on “Dynamic Cash Flow Analysis – Complete” Fundamental concepts, risk/reward applications Static cash flow analyses Dynamic cash flow analyses Exercises in feasibility analyses Assignments on feasibility analyses Reading Assignments: PRED: Ch 4, Financial Feasibility Analysis pgs 147-171 (stop at Design) Handout: Mixed-Use Development Handbook: Pgs 87-101 GCP: Chaps 6&7
4. Site and Project Design and Feasibility January 29 Zoning Code Requirements: Parking reqs. both for zoning & market; Architectural reqs. If any? (specific plans, design overlay?) Market implications Infrastructure implications Design decisions Construction implications Business implications: Great Urban Places, Rick Caruso developments Cost and development feasibility implications Guest Speaker: Wade Killefer, AIA, of Killefer Flammang Architects Reading Assignments: City of LA Zoning code summary – go to LA Dept of City Planning web site: http://cityplanning.lacity.org/, Zoning Information, Summary of Zoning Regulations PRED: Chap 4 Pgs 171-181; Chap 5, pgs 225-238; Chap 7, 318336 (ignore “Northfield Commons Financial Analysis) GCP: Chap 8 5. Market Research and Feasibility Analysis February 5 Basic concepts in market research, risk/reward applications Market research for retail, residential and office developments Review market research tools: Data sources, Field surveys, census, other Impacts on feasibility analysis Reading Assignments : PRED: Chap 4, Pgs 132-140, Chap 5, pgs 217-223, Chap 6, pgs 260-268, Chap 7, pgs 305-312 Review previous materials & readings for Mid-Term Exam 6. Review– 1st half of class, Mid-term exam 2nd half Reading Assignments : GCP: Chap 9, 10 &12 February 12
7. Entitlements Negotiations, Govt. & Community Relations February 19 What are entitlements? Negotiating with municipal agencies and political office holders Securing community support; Public-private partnerships Entitlements and feasibility analysis Reading Assignments : PRED: Chap 4, pgs 195-197; Handout on construction tasks, scheduling and management
8. Construction and Feasibility – Site visit to “Mission Gardens at San Gabriel” development project & meeting with City of San Gabriel officials February 26 9. Financing: Equity, Construction Debt, Permanent financing March 4 Equity, investors, risk/reward; Conventional debt and project feasibility Acquisition financing, Construction financing (handout), Permanent financing Reading assignment: PRED: Chap 4, pgs 182-195; Chap 5, pgs 238-242; Chap 7, pgs 336-337 Handout: Mixed-Use Development Handbook: Pgs 101-133 (excluding pgs 102-119) 10. Critical Issues in Real Estate Development & Q&A March 11 1st half of class: Urban In-fill / New Urbanism; Affordable Housing; Green Development Public-Private-Partnerships 2nd half of class: Review, Q&A 11. Final Examination March 18
Course Grading: Final exam 40%, Mid-term 40%, Homework & class 20% Homework Assignments: To be assigned and posted on the class web on a class by class basis the week before they are due. Required Texts: 1. Professional Real Estate Development: The ULI Guide to the Business; 2nd ed., 2003; R. Peiser & A. Frej; The Urban land Institute, Washington D.C. 2. Guide to California Planning; 3rd ed., 2005; W. Fulton & P Shigley; Solano Press, Point Arena, CA. Recommended Texts: 1. Real Estate Development: Principles and Process; 4th ed., 2007; M. Miles, G. Berens, & M. Weiss; ULI, Wash. D.C. 2. Mixed-Use Development handbook, 2nd ed., 2003; ULI, Wash. D.C. 3. The City Builders: Property Development in New York and London, 1980 – 2000; 2nd ed., Susan S. Fainstein; Blackwell, Cambridge, MA. 4. See Urban Land Institute web site – Bookstore – for books on green development, new urbanism, and a wide variety of development topics: www.uli.org