Fr3202 Real Estate Finance & Funding Coursework 023 Please work in groups of to answer one

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FR3202 Real Estate Finance & Funding Coursework 2023
Please work in groups of 4 to answer one question from the two provided below. You are encouraged to self-select within 2 weeks, otherwise you can be allocated to a group. The coursework is designed to assess your quantitative skills or qualitative skills so ensure members in your group can demonstrate these skills. All calculations must be in Excel showing the formula or functions for each output. Do not use hard coded calculations or Goal Seek or Solver, otherwise you will lose marks. All written work including explanations and justification of your assumptions must be in
PDF format. For Question 2, answers should be restricted to 2,000 words so ensure your solutions are clearly targeted to the question. Here, less is more as it would be in a professional report. You will be expected to apply theoretical concepts to practical outcomes, so ensure your work is well referenced. Marks will be awarded for clarity, succinctness and presentation of your solutions, supporting explanations and references to relevant texts, papers or articles. Please use logical, well referenced solutions. All work must be uploaded electronically to Moodle. In your submission, state the name of each group member and their contribution to the coursework. Name your PDF / Excel file REFF2023_Group X where Xis your allocated Group reference. Please note it is not necessary to label files to differentiate Excel and PDF e.g., REFF2023_Group X_Excel. To avoid duplication and to ensure everyone has the same information, please raise any questions about this coursework in the Coursework Forum, not via email, any question raised via email will not be answered. Students are also encouraged to be collaborative in the QA Forum and answer each other’s question where possible. All coursework files will be downloaded at the Cutoff date and time. Late submissions will be penalised asset out in the University’s coursework guidelines.
Cut Off date 20
th
March 2023

Question 1
The Bayes Retail Outlet Park is for sale with an asking price of £28,939,650. It contains 50 units, 35 large units that rent for £5,150 per month and the remainder are smaller units which rent for £3,525 per month. The recent pandemic has put pressure on destination retail parks and consequently current vacancy rates are 10%. The Operating Expense Ratio, based on all operating expenses being fixed, for this property is 15%. a) Construct the year 1 Net Operating Income for this property and calculate its initial yield. If comparable retail outlet parks are currently selling at a 7.50% initial yield, does this property appear to be overpriced, underpriced, or about right
(10 Marks) b) You can obtain a loan for 55% of the purchase price with an interest rate including credit margin of 4.25%, full amortisation period of 20 years and interest payments made monthly.

Page 2 of Using this information, together with any further assumptions you deem necessary, calculate the following for this property and briefly discuss the implications of your solutions
• Annual Debt Service
• Mortgage Constant
•
Cash-on Cash return
• Debt Service Cover Ratio
•
Breakeven Ratio.
(20 Marks) c) If the lender requires a Debt Service Cover Ratio of 2.00 to approve the loan, will this property qualify
(5 Marks) d) Does this property exhibit positive, negative, or neutral gearing (leverage Which ratios and information would you use to confirm this

(5 Marks) e) Explain the difference between the Break-Even Ratio and the Debt Service Cover Ratio. Who might be interested in each and why Comment on the relative attractions and risks to the parties involved indicated by the combination of these ratios.
(10 Marks) Clearly set out all your calculations, avoid the use of Goal Seek or Solver and cite all references you have relied on in producing your solution.

Question 2
‘Since the global financial crisis senior debt leverage limits have reduced, due to increasing regulation on banks, there has also been an emergence of alternative lenders and an increase in debt funds, which has fuelled increased interest in the use of mezzanine finance Critically discuss and examine this statement in the context of what you understand by the range and types of mezzanine finance available, with reference to examples in real estate, new providers of capital, typical terms and set out the advantages and disadvantages from both the provider’s and user’s point of view for different styles of real estate investment and development.
(50 Marks) Cite all references you have relied on in producing your solution.