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Real Estate Development BA/UP 565: Cool Cities II, How to Create Lively Downtowns and Livable Neighborhoods
Finance 565, Finance Dept, Bus Ad, Winter, 2006 Rev: Jan 3, 2006 Prior Permission: This class should be listed as Permission of Instructor only. I do this to insure that the class enrollment comes from many different graduate programs, to make teams truly interdisciplinary. 1/3 of class will be Ross School of Business, 1/3 will be Taubman College architects, urban planners and master of urban design, and balance will be law, engineering, public policy and natural resources. Important Note: You must be available for both Sunday afternoon bus tours, 2-4:30, on Jan 22 & Jan 29 to take the course. Peter Allen, Adjunct Faculty, Ross & Taubman College BusAd: Room 3270C at U of M Business School Downtown: 944 N. Main St., just north of Depot St. Office: 996-8821; Email: ptallen@umich.edu Class Room: W2760, Wyly Hall is in the Executive Education wing, Corner of Hill and East University Class Hours: Wednesday nights, 6:30-9:30 PM Office Hours: After class at Pizza House or call for an appointment. Course Pack: In class distribution of 12 prior best term projects for your write-ups https://ctools.umich.edu/porta but I will also use mass email Ctools: and reserves at the Bus Ad and Media Union libraries Mixed Use Development Handbook, ULI, 2nd Edition, 2003, Text: Key Web Sites: www.uli.org; www.cnu.org; www.pps.org Instructor: Offices:
Course Objectives and Requirements: I teach Real Estate Development using a variety of resources and techniques: 1) Readings from ULI text and heavy usage of 3 websites: www.uli.org; www.pps.org and www.cnu.org. This gives us a national and international perspective on development. 2) Two MANDATORY Sunday afternoon bus tours of Ann Arbor, an excellent laboratory of mostly good local development, plus an optional tour of Detroit, loaded with opportunity. 3) 2 active professionals come each night to speak to you about best practices; 4) You will evaluate the best term projects from prior semesters to better understand development feasibility for mixed use development 5) You and your team will help educate the class with a 15-minute presentation on a real estate market issue important to you, using Urban Land Institute directories and research. 6) You and your team will complete a very professional 30 page term project with your team on an actual opportunistic site of your choosing in and around Ann Arbor. Doing an excellent job on this report, I am told by many former students, really assures you a job opportunity in this field. This course is very hands on, realistic, and practical.
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The course workload consists of 14 classroom sessions of 3 hours per session, with preparation of about 6 hours per session. Written work to be submitted includes 2 individual and 2 team-oriented analyses of selected cases (25% of grade). Active participation in class discussion and attendance on the two Sunday mobile workshop tours of Ann Arbor and vicinity (and written bus trip observations) is very important and therefore MANDATORY. Furthermore, each team will be asked to make a 15-minute presentation to the class based upon real estate markets and opportunities in other cities. Up to 25% of the course grade will be based upon the bus tour observations and your individual presentation. The most meaningful part of the class will be the term long, feasibility project. (50% of grade.) You will work all semester with 2-3 fellow class members as a team to make a local property redevelopment of your choice as "feasible" as possible. Critical to selecting your group's term project is a multi-track analysis: 1) Finding a well-located site with an owner eager for a “higher and better use;” and 2) Identifying an emerging need or use calling out for a site; and 3) Explaining how to make your redevelopment an attractive people place. In short, a good term project will be an ideal use located on a 110% location that is a magnate for people to use and enjoy. Critical to a good term project is a willing property owner or sponsor/developer. A sponsor/property owner will be eager to cooperate with a team full of energy, enthusiasm and brains to expand on the potential of the site. For your write-ups and presentations, I encourage each of you to strive for the following: 1) Quality, not quantity, comments in class and in write-ups. 2) "Bravery Points" or unconventional, bold insights/recommendations in your comments and individual presentation. 3) Excellence when "cold called." 4) Enthusiasm for and edification of others. The course, now in its 25th year, is taught by Peter Allen, Adjunct Lecturer, U of M MBA ’73, who is also founder of Peter Allen & Associates in 1975, a commercial real estate development, brokerage and consulting firm. Peter, also on the faculty of Taubman College of Architecture and Urban Planning, teaches a companion “micro” course, Real Estate Essentials BA/UP 517, in the fall term. RE 565 is more “macro” in nature. The course will be challenging and will require quantitative skills. Some prior preparation in real estate fundamentals is essential, ideally the companion fall course. Interdisciplinary learning from other schools is encouraged, with many of the class enrolled in urban planning, architecture, engineering, public policy, Rackham, and law programs. Those requiring acceptance should apply by emailing the instructor explaining your background/resume and need for the course. (www.ptallen@umich.edu)
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13 Week Class Outline
Week 1 Sunday, Jan 8, class social gathering at Blue Nile, 221 East Washington, 6-7 pm. Refreshments provided, except alcohol is on you. Wed 1/11
1. Immediate hand-in assignment, with robust discussion to follow:
Define a “Place for People” by picking five very appealing “Places for People” in Ann Arbor or surrounding area and explain and illustrate why they are so attractive. Two pages max. David Sucher’s website, 37 MB presentation on downtown sidewalk vitality rules, is very helpful:
http://citycomfortsblog.typepad.com/cities/files/three_rules_web.pdf http://www.citycomforts.com/Three_Rules_Presentation.ppt
2. Review: David Sucher’s rules.
3. Roll call and sign up sheet, additional registrations & overrides. 4. Peter Allen’s welcome and opening comments. Why this will be a valuable course: • Launch a career in real estate, become a “community” developer • Lease or buy office space as head of your company. • Make real estate investments to diversify your portfolio. • Make an impact on the quality of life of the community you live in by being on the Neighborhood Association, Planning Commission or City Council. • Respond to the need for creating more livable neighborhoods, downtowns, and creating “people places.” • Give your team class presentations: influence your classmates. • Have fun after class and at semester-end party. 4. Pass around original best prior term projects used for write ups, explain individual presentations, tours, speakers, team projects, etc. 5. Students briefly introduce themselves. Please mention ideal career, destination and type of term project. 6. 10 minute break 7. Discuss text book and next week’s assignment, Chapter 1. 8. Discuss significance of term project sites • Students should always be sure to visit site and surrounding area more than once. • Discuss assignment for next week. See term project on c tools. Questions to answer will be emailed Sun am. 9. Review and discuss Calthorpe report on city website. 10. Real Estate Development Feasibility Template from c tools 11. Visit 3 key websites. 12. Let’s all go to Pizza House to get to know each other
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Week 2 W 1/18 1. Hand in Individual assignment on Old YMCA site site. MAX 2 PAGES! Answer the following questions: (To be emailed to you all by Sunday noon.) 2. Review Frank Fontana Excel Financial Spreadsheets and “Smart Napkin” for Returns on Investment. (Download from C Tools.) 3. Discuss key points in ULI Text: Chapters 1, Intro to MXD. 4. Lecture and class discussion on "Economic Cycle Risk" and emerging trends according to ULI. 5. Invited speakers: David Kwan, Ed Shaffran 5. Preview Sunday’s bus tour. 6. Explain next week’s assignment, 415 W. Washington,the city yard, another individual case study and write up. Sunday 1/22 1. 2. 3.
4. 5.
Three to four person teams revised as necessary. 2-4:30 p.m. Mandatory Edge-City Bus Tour, including Liberty Lofts, http://www.libertyloftsannarbor.com/ 415 W. Washington city yard, Kingsley Lane, www.kingsleylane.com North Main city yard, Elks, Lowertown, and Jackson Road and Dexter or South State and Saline. Assemble 2 p.m. sharp at 1st & William parking lot. Help on bus tour: Tom Fitzsimmons, Tracy Wick Bring a camera! Start your 1 page of observations explaining what forces are necessary to create livable neighborhoods, downtowns and people places and bring to class after next bus tour.
Week 3 W 1/25 1. Hand in case assignment: Individual 1-2 page write up due on 415 W. Washington. MAX 2 PAGES! (See prior instructions about these briefs.) 2. Review bus trip. Hand in thoughts on forces that make downtowns and people places successful after next bus trip. 3. Optional Detroit tour 2/14? How many want to go? 4. Lecture and class discussion on Chapter 2 in text, Evaluating Markets and Development Potential. 5. Invited Speakers: Strosberg & Beal Sunday 1/29 Mandatory Downtown Bus Tour. Meet promptly at 1st & Washington parking deck at Washington & 1st St., 2 p.m., which is part of upcoming assignment. Site visits include: • Liberty Lofts: invite Ron Mucha for tour • Allen Creek from North Main to U of M Golf Course Yards— • Ann Arbor YMCA: demo or remodel? • City parking lots • Old West Side, Burns Park emphasizing walkable neighborhoods, downtown and people places.
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Week 4 W 2/1 1. Hand in 1 page Bus Tour Observations, again explaining what forces are necessary to create livable neighborhoods and people places. 2. Continue working on 1st & Washington cases analyses due next week. 3. Teams begin work on Term Project Site Selection. 4. ULI Text: Finish Chapter 2, Evaluating Markets... See ULI websites 5. Review financial recommendations & assumptions for term project. 6. Invited speakers: Bill Watch of First Commercial, Rob Cory of Ford Land, and/or Doug Hamborski, architect and creator of Smart Napkin. 7. Assign questions for Team write up due next week. Week 5 W 2/8 1. 2. 3. Hand in Team write up on 1st & Washington. ULI text: Chapter 3, Feasibility Analysis & Financing. Invited speakers: Jeff Kahan, Lorne Z, Geoff Baker
Sat/ 2/11 Optional Tour of Detroit. Leave Ann Arbor at 8 am and return by 2 pm. Tour guides: Tylitha Stewart, Henry Hagood, Week 6 W 2/15 1. Team write up due on city parking lots at Kline’s/Gratzie. 2. Finish Chapter 3. 3. Invited Speakers: Lorne or Geoff B; Matt Wilk Week 7 W 2/22 1. TERM PROJECT: Each team present Term Project sites and uses to class. Email summary to Peter, who is out of town. Assign roles of each team member, including Team Chair. 2. Text, start chapter 4, Public Sector Involvement in MXD. 3. Tour Hobbs & Black with Kristina Glusac. David Esau and Peter Pollack 4. Midterms for MBA’s 5. Invited speakers: Jessica Eisenman and Patricia Denig re Brownfield TIF financing and redevelopment. (Peter will be out of town) W 3/1 Spring Break—No class.
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Week 8 W 3/8 1. 2.
3. 4.
Finish chapter 4, text. Review highlights as time permits. Preliminary feasibility analysis to rest of class. HAND IN CONCEPTS indicating uses, approximate massing, and Back of the Envelope “Rent Justified Costs,” which is in C tools. Speaker: Jeff Blau, Sign Up for team 15 minute PowerPoint presentations. 15-minute presentation to the class based upon subject of your choice. Examples are ULI case studies of real estate markets and opportunities in other cities to begin next week, World Cities Forum issues, some aspect of your term project, etc. Play to your team’s interests and strengths. Grades based upon the following: a. How difficult your subject matter b. Use of resources & illustrations c. Learning value to you and class (Pass out evaluation sheet) d. Handout for other students
Week 9 W 3/15 1. TERM PROJECT: Economic cycle and market research preliminary analysis for term project. Revise key assumptions. 2. Text, start chapter 5, Planning & Design. 3. Invited Speakers: Damion Farrell; Peter Pollack 4. Start individual presentations. Week 10 W 3/22 1. Planning & design. 2. Text, finish chapter 5. 3. Continue 15-minute student presentations. 4. TERM PROJECT: Arch & Const Prelims Due. See PPS & CNU websites 5. Invited Speaker: Robt Gibbs(c) Jennifer Santi Hall Planning Director, City of Ann Arbor; conan smith; Susan Pollay Week 11 W 3/29 1. Continue 15 minute presentations. 2. Invited speakers: Robert Gibbs 3. TERM PROJECT: Financial Prelims Due. 4. Revise key assumptions. 5. Text, start chapter 6, Marketing & Promotion. Week 12 W 4/5 1. Complete individual student presentations. 2. Please email me a single, combined version of your tabulated scores for the group presentations. There should be one file per group--please use the file in CTOOLS under Group Presentations. Please do this by this Wed--I've only received a couple. (from Ken) 3. TERM PROJECT: Revise key assumptions & start incremental/sensitivity analysis. 4. Finish text, chapter 6. Light overview of chapter 7.
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Week 13 W 4/12 Rough draft complete. Brief oral & visual presentations to class. Here's the Ken Gurney plan: We will keep this simple so your team can stay focused on the final report. Nominate 1 presenter from your team, 5 mins, 5 slides, max 2 mins Q&A. Include what you think makes your report/approach unique and viable--don't feel obliged to cover ALL topics (finance, design, envt, etc.) For example, if your design is innovate, focus on that. If your financing is creative, focus on that. If your community values orientation is strong and compelling, focus on that. But, provide enough context that a fellow student with no familiarity with your site can still make sense of what you're doing.
F 4/14
Final written Projects Due 5 p.m. to Faculty Box, my office (B3270C) or 944 N Main St. IMPORTANT: 1) Please use correct sized spiral binders with plastic covers, 30 pages max; 2) If necessary include confidential team member critiques of who was great and whom you would replace. 3) Sign each section and make clear your individual responsibility and the areas of the report for which you were responsible. 4) Add your individual credentials or resumes to report. 6) Place names and schools on cover. 7) Maximum of 30 pages, not including resumes but including any appendices!! 8) No Slick Paper; 9) Do not address them to Peter Allen at 944 N Main, use Peter Allen, The University of Michigan; and 10) Very importantly, intelligently integrate your illustrations and exhibits in with supporting text. Do not just put them in appendix! W 4/19 Best Presentations to Key Stakeholders
Week 14
Week 15 Sunday 4/23 Sunday Blue Nile.
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05/23/06 10:53 AM Page 8 of 9 Class Party for students and sponsors; 6-8 PM at Blue Nile, 5th & Washington
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05/23/06 10:53 AM Page 9 of 9 GUIDELINES FOR INDIVIDUAL/GROUP WRITE-UP’S Real Estate Development565 PURPOSE: The purpose of the write-ups is to have you critically evaluate risks as illustrated by local developments as well as look at the feasibility studies done in previous years. Dramatic changes are occurring with each passing week. These economic risks and market changes considerably affect the feasibility of real estate. By addressing these issues in a case method, you will learn various methods of analyzing the complex real estate market. When your final projects come due, you should be able to use the thought process learned in the case write-ups to present logical and relevant arguments for your final project. PROCESS: Each week a difference aspect of the Circle of Risks is addressed in class. For that week, you are to critically review the case/s and make recommendations that will improve or update the case/s. For example, when assessing the Economic Cycle, you need to determine the relevance of the government's latest public policy, tax and legislative proposals on the development and buying/selling of real estate. Further, how will this legislation affect the feasibility of the project? What is the environment for certain niches of new construction, for raising equity and debt, for making a profit? Each stop in the circle of risks gives you an opportunity to ask probing questions of your group. Take the time to brainstorm your ideas and make sound recommendations and observations. Even though some of your assignments are individual write-ups, you should meet with your group members to formulate your ideas. The synergies gained by group work can be tremendous. Use the risk outlines provided in the back of each week's module. They explain many different facets that comprise the particular risk in question. However, use them at your discretion; they are not a blueprint for your write-up. Only discuss the most critical issues, those that will make or break feasibility. You can determine this through your discussion with your group members. FORMAT: Each paper, whether group or individual, must be: Approximately 1-2 pages but no longer than 2 pages total. 12 font Double spaced Laser printed Contain 1" margins at the top, bottom, and sides.
GRADING: The reports should contain your analysis of the risks as they pertain to the case. Further, a necessary conclusion should state the changes needed to update or improve the case. Finally, original insights will be rewarded. The Briefs will count for 25% of your grade.