RES 9950 International Real Estate Spring 2015 Monday/Wednesday 7:30 8:45 pm Instructor: Michael H. Krupa (Michael.Krupa@baruch.cuny.edu) This course focuses on the increasingly global nature of the real estate asset class. Specifically, this course will cover the practical issues encountered when conducting real estate investment in various global markets by way of assigned textbook readings, group projects and illustrative case studies underscoring how to identify opportunities and execute real estate strategies around the world. Topics covered include risks and returns of international real estate investment; international real estate development; global REITs; global mortgage products and mortgage-backed securities (MBS); and international taxation of real estate. Course Prerequisite: FIN9770, IBS9760 or RES9776 Course Learning Objectives: The course will expose students to broad macro-economic and geopolitical considerations of global real estate investment, as well as illustrative real world case studies of individual projects and strategy execution. Moreover, carefully selected cases will focus on the idiosyncrasies of region-specific investment and development. This course addresses the following Zicklin MBA/MS program learning goals through various means: Oral and written communications Quantitative analysis Knowledge integration Teamwork and leadership Global awareness Ethical awareness Technology literacy Information literacy Course Materials: The required text is Global Property Investment, Strategies, Structures, Decisions by Andrew Baum and David Hartzell, Wiley-Blackwell (A John Wiley & Sons, Ltd. Publication), 2012
The companion site for the required text can be found at: http://www.wiley.com/legacy/wileychi/baum/ Supplementary Material for each assigned chapter is accessible through this http://www.wiley.com/legacy/wileychi/baum/ link (on the upper left) and is highly recommended reading for it contains various related papers and Powerpoint presentations which reinforce materials covered in each respective text chapter. Additionally, this http://www.wiley.com/legacy/wileychi/baum/ link also details how to order the required text (link on the upper right) Assigned case studies are to be purchased from http://hbsp.harvard.edu (see Appendix A). International Project: Working in groups, students will be required to identify an international project for either development or acquisition. In the final sessions of the class, students will present the project to a panel which will openly debate, challenge, and critique their work. Grading: Grades will be based on classroom and case study discussion participation, two case study report submittals and an international field study project written report and presentation. There will be no exams for the course. While the two specified case study report write-ups are to be completed individually and independently, students are encouraged to complete assigned in-class case study discussions and develop project reports based on a groups of 4-5 students. Students can form voluntary groups. Alternatively, the course instructor will assign students without a group based on backgrounds and interests. Your final grade will be weighted as follows: Two individually prepared case write-up submittals (see Appendix B) 50% (25% for each case study report) Individual class participation and attendance (see Appendix C) 15% International project (Appendix D) 35% Course Structure and Classroom Procedures: Students are expected to prepare for, attend and actively participate in discussions of all class assignments during class meetings. You can only participate if you attend class. Attendance is also required whenever there is an outside speaker. Unexcused absences will severely impact your class participation grade. Students are expected to prepare for class and meaningfully contribute to class discussions.
Course Policies and Expectations of Student Performance: 1. Every student is expected to prepare every case and reading assignment and be ready to discuss or present them in class. 2. SOLUTIONS TO CASES WILL NOT BE HANDED OUT. Your responsibility is to be involved in the case-solving process and to understand why and how the analysis was done. 3. Please pay attention to the university's policy on academic dishonesty (see below). 4. I will allow a student to drop this class as long as the procedure conforms to the university withdrawal policy. Academic Honesty I fully support Baruch College's policy on Academic Honesty which states, in part: "Academic dishonesty is unacceptable and will not be tolerated. Cheating, forgery, plagiarism and collusion in dishonest acts undermine the college's educational mission and the students' personal and intellectual growth. Baruch students are expected to bear individual responsibility for their work, to learn the rules and definitions that underlie the practice of academic integrity, and to uphold its ideals. Ignorance of the rules is not an acceptable excuse for disobeying them. Any student who attempts to compromise or devalue the academic process will be sanctioned." Academic sanctions in this class will range from an F on the assignment to an F in this course. A report of suspected academic dishonesty will be sent to the Office of the Dean of Students. Additional information and definitions can be found at http://www.baruch.cuny.edu/academic/academic_honesty.html A Definition of Plagiarism Plagiarism means passing off the work of others as your own. The "work of others" means other people's words and/or ideas. "Passing off...as your own" means including that work in your assignment without adequate citation. Therefore, a slightly longer definition would be "Plagiarism means including in your assignment other people's words and/or ideas without citing them correctly." Here are some hints about citation: When you include the actual words of others, be they from a printed source, from the web, or from a live presentation, they must appear within quotation marks and you must indicate from where and from whom the words came. Otherwise you are plagiarizing. When you include another person's ideas, you must indicate where you found those ideas, even when you are paraphrasing them. Following someone else's sequence of ideas, even if you paraphrase them, also is plagiarism. (An example would be paraphrasing a paragraph from someone else's work, sentence by sentence, even if you include a citation of that author.) If you have any questions about these definitions, please discuss them with me. You can also refer to Baruch's online plagiarism tutorial
http://newman.baruch.cuny.edu/help/plagiarism/default.htm or to Ann Raimes, Keys for Writers pp. 116-128 (4th ed.), 104-112 (3rd ed.), or Fowler and Aaron, The Little, Brown Handbook, pp. 629-38, where you can also read about correct styles of citation. About the Instructor: Michael H. Krupa is President of Gemdale USA Corporation, a unit of Gemdale Corporation, one of Asia's largest and leading real estate companies. Prior to joining Gemdale in February 2013, Mr. Krupa served as Managing Director at The Milestone Group from March 2009 to February 2013, where he also served on Milestone's Investment Committee. From 2001 to 2009 he was an Executive Director in two divisions within UBS, including the UBS Investment Bank Real Estate, Lodging & Leisure Group, as part of the group s Real Estate Private Equity Fundraising team, and at UBS Global Asset Management Real Estate, one of the largest global real estate fund managers. Mr. Krupa also served on the Board of Directors of Mitsubishi Corp.-UBS Realty Inc., the externally advised asset manager to two Tokyo Stock Exchange listed J- REITs, Japan Retail Fund as well as Industrial and Infrastructure Fund. Prior to joining UBS, Mr. Krupa served as Managing Director at McDonald Investments. He also served in various real estate investment banking capacities at Salomon Smith Barney and one of its predecessors, Salomon Brothers, Inc., as well as at Kidder, Peabody and Company where he was involved in transactions exceeding $6 billion. He is the author of numerous articles for leading real estate trade publications including, "Wall Street's Perspectives on the Self-Storage Industry", "Wall Street's Infatuation with the Assisted Living Industry", "Multifamily REIT M&A: When Will the Wave Begin" and "Marina Industry Consolidation: When Will the Wave Begin" and has spoken at numerous leading real estate industry conferences on such topics as Global Real Estate Capital Flows, REITs around the world, the Self-Storage Industry and the Senior Housing Industry. Mr. Krupa received his BS from Northeastern University and his MBA from Harvard Business School. He is a Certified Public Accountant.
Course Outline and Schedule: Class/Date Topic Assigned Reading Note 1 1/28/15 Introduction and Overview Real Estate as a Global Investment Class/Global Real Estate Going Mainstream 2 2/2/15 Global Real Estate within a Diversified Asset Allocation Mix 3 2/4/15 Global Property Cycles Chapter 1 Real Estate, the Global Asset Class Chapter 2 Global Property Markets Chapter 3 Market Fundamentals and the Global Property Cycle 4 2/9/15 Real Estate Returns Chapter 4 Asset Pricing, Portfolio Theory and Real Estate 5 2/11/15 Evaluation of New Global Markets 6 2/18/15 Valuation in a Global Real Estate Context 7 2/23/15 Leasing and Lease Characteristics in Global Settings 8 2/25/14 Mixed-Use Development in a Global Context 9 3/2/15 Valuation Considerations in Global Real Estate Pioneers in Columbia Equity International s Entrance into Columbia, South America Chapter 5 Basic Valuation and Investment Analysis Chapter 6 Leasing The Time Warner Center: Mixed-Use Development Chapter 7 Valuing Commercial Real First Written Case Study Assignment Due School Case Study New Market Evaluation, JV Strategies and Emerging Market Considerations School Case Study Mixed-Use Development
10 3/4/15 Fixed Income Considerations 11 3/9/15 Real Estate Debt in Global Markets 12 3/11/15 International Private Equity Funds 13 3/16/15 International Real Estate Project Selection 14 3/18/15 Growth and Characteristics of Unlisted Real Estate Funds 15 3/23/15 Growth and Characteristics of Public Real Estate Markets around the World 16 3/25/15 Strategy Execution within Public Real Estate Companies 17 3/30/15 Global Real Estate Debt Markets and their Evolution 18 4/1/15 Real Estate Derivatives and their Evolution 19 4/13/15 Tax, Structuring and other Considerations in Global Real Estate 20 4/15/15 Challenges in International Development Estate Chapter 8 Mortgages Chapter 9 Commercial Mortgage Underwriting Chapter 10 Valuing the Private Real Estate Entity New Songdo City Korea Chapter 11 Unlisted Real Estate Funds Chapter 12 Public Equity Real Estate China s Sino- Ocean Land: Responding to Change Chapter 13 Real Estate Debt Markets Chapter 14 Real estate derivatives Chapter 15 International Real Estate Investment Issues Dharavi: Developing Asia s Largest Slum, Parts A and B School Case Study International Large- Scale Project Development Second Written Case Study Assignment Due School Case Study Operating a Public Real Estate Company and Developing/Evolving Appropriate Real Estate Strategies School Case Study International Project Development in
21 4/20/15 Country Macro Analysis and Selection 22 4/22/15 Constructing a Global Real Estate Portfolio and Navigating Portfolio Considerations 23 4/27/15 Performance Measurement 24 4/29/15 Best Global Practices in Investment Management 25 and 26 5/4/15 and 5/6/15 27 and /28 5/11/15 and 5/13/15 Final Project Presentations Final Project Presentations Spain: Can the House Resist the Storm? Chapter 16 - Building the Global Real Estate Portfolio Chapter 17 Performance Measurement and Attribution Chapter 18 Why Property and Conclusions First and Second Groups Present International Project Reports Third and Fourth Groups Present International Project Reports Emerging, Public/Private Partnerships/Assessing Political Risks School Case Study - Navigating Macroeconomic Considerations/Condo Project Developments Appendix A: Student Instructions to Access Case Materials from http://hbsp.harvard.edu If you have any questions regarding the use of Publishing for Educators, please contact: e-mail.. techhelp@hbsp.harvard.edu Telephone (6:00 am 8:00 pm EST Monday - Friday) (800) 810-8858
Telephone (9:00 am 5:00 pm weekends)...(800) 810-8858 To access your course materials, please follow the steps below: It is recommended that Chrome or Firefox be utilized as your browser. Copy and paste the following coursepack link into a browser (Please DO NOT click on the link, clicking on the link will generate an error message. Also, DO NOT create an account before accessing the link) Coursepack link: https://cb.hbsp.harvard.edu/cbmp/access/27846347 You will now see a page which says 'Authorized Student Access Required' Login Now or Register Now Click on Register Now Fill in all the details and follow the steps This will create a student account with the coursepack in it. To purchase the coursepack click on the Purchase Coursepack button Once you purchase the coursepack, you will be prompted to go back to the coursepack and now you will see View Document link against each case. By click on the View Document link against each case that particular case will open in PDF and you can save it on your computer or print it. Once you purchase the coursepack if you would like to order a printed version of the entire coursepack you will see an option of Order Printed Coursepack. You can order the Printed version for an additional cost. Appendix B: Instructions for Preparing a Case Analysis Case Analysis 1. Read the first few paragraphs, then go through the case quickly, asking yourself, "What broadly is the case about and what types of information am I being given to analyze?" 2. Read the case very carefully underlining key facts as you go. Try to put yourself in the position of the decision-maker in the case. Identify the perspectives involved, including that from which the decision will be made. Analyze the data presented and evaluate it in light of other information included in the case. Try to understand the present situation, as well as its historical origin and development. Use the exhibits to help you understand and/or interpret the text.
3. Decide what the major problems are and, if appropriate, prioritize them. Determine whether the problems stated by individuals in the case are the real problems or whether they are also symptoms of some larger issues that need to be solved. Identify any unstated, hidden problems. Then go through the case again, sorting out the relevant considerations for each problem area. 4. With the problems in mind, identify the feasible alternative courses of action. Determine what additional information is necessary to evaluate the alternative courses of action. Obtain that additional information. 5. Evaluate the alternatives to determine their attractiveness and decide what your specific recommendation is to be. In doing so, use your understanding of the alternatives to frame a solution to the problem(s), and predict and evaluate the probable consequences of your solution. 6. Decide how you will organize the presentation of your solution to the case. Document Organization for Written Analysis of Case Executive summary (1 page) The case write-up begins with a single-page executive summary which must be able to stand alone, and provide a busy top-level decision-maker with a complete briefing of the problem, what course of action to follow and a succint description of why. Identify the problem(s) concisely, using whatever case facts are necessary to show significance and/or priority. Analysis Give a short list of the key assumptions you make in your analysis, the logic of your argument leading to your conclusion and the proposed solution. Assumptions should be justified if possible, and the sensitivity of your recommendation to your assumptions should be assessed. Note that key assumptions are not numerical estimates --- defer numerical estimation assumptions to the tables. Avoid generalities in your analysis. Be as specific as possible. Express your ideas clearly, supporting them adequately with evidence, explanation, and references to appropriate exhibits. The strengths and weaknesses of alternative courses of action should be developed. The analysis should build to support your recommendation. Reasons for accepting or rejecting alternatives should be stated and, if necessary, defended. State your recommendation clearly and in detail sufficient to guide implementation. Make specific recommendations and while your recommendations will rest on assumptions, your job as a consultant to the decision-maker is not to give a list of contingent recommendations. Discuss both the positive and negative results of following your recommendation. Explain why your recommendation should be followed. Make sure that the recommendation follows logically from your analysis. Exhibits, tables, charts, spreadsheets, or any other supporting materials may be attached as exhibits. Be reasonable on the number of exhibits. Include only those exhibits that are needed to support your arguments and tell the reader in the text of the paper what exhibits to look at and why. All exhibits should be clearly labelled so that readers know what they should learn from them. Also any assumptions and formulas you use to derive figures in the exhibits should be obvious to the reader. Care in preparing your tables is important. A rule of thumb is that the tables should be able to stand alone: i.e., they could be read by
someone without reading the text and the reader could discern exactly what they should learn from the table. The full case report shall not exceed 8 pages (including exhibits). You should take the perspective of an external consultant and write the case solution as a report to the decision maker(s) such as the CEO, CFO, or Board of Directors. The document is to be typed with one-inch margins and double spaced. Use a 10 point font or larger to type the document. Appendix C: Class Participation The following general guidelines will be used to grade your participation performance: 1. Quality of ideas, analysis, and action recommendations This is the core demonstration of mastery. The student talks knowledgeably about ideas and any analysis she/he did, the logic underlying them, and limitations or follow-up actions if any. 2. Frequency of contribution The student participates regularly in discussions and contributes to the learning of the whole classroom community. 3. Quality of process and argument The student directs comments to the whole classroom community (rather than to just the instructor) and informs other students about ideas and analysis in a clear and intelligent manner. She/he listens to others and understands what they have said, responds appropriately, asks clear, constructive questions, avoids rambling discourses or class domination, uses proper vocabulary pertinent to discussion, builds on the ideas of others, etc. She/he synthesizes other students points and makes useful connections between this and other material. 4. Intellectual leadership/self-confidence The student is there at important inflection points in the discussion, helping to deal with confusion, reframing the issues and explain. Appendix D: International Real Estate Project The International Real Estate Project will consist of a group final written report as well as a group presentation during the final classes. Each written International Real Estate Project as well as group presentation to the class will require a clear evaluation of the proposed risks and returns of the project, including cash flow projections, projected returns, capital structure, debt service coverage, and any financing arrangements, as well as appropriate evaluative metrics. An analysis and
rationale for achieving planned returns as well as an appropriate exit strategy for the project will be critical components.