COURSE NUMBER: MBA283.1

This course is dual listed with the Evening-Weekend MBA Program

COURSE TITLE: Real Estate Finance and Securitization

UNITS OF CREDIT: 3 units

INSTRUCTOR: Carles Vergara-Alert

E-MAIL ADDRESS: cvergara@iese.edu

PREREQUISITE(S): None

CAREER FIELD: Most companies need real estate assets and most investors and individuals allocate part of their wealth in real estate. This course offers the advanced knowledge that any general manager should know about real estate finance. Therefore, this course is useful for anyone who is willing to become a manager. The course is most relevant for those in (or hoping to get into) real estate, finance, and related fields. 

CLASS FORMAT: The course is case-based (i.e., 13 cases discussed in 8 sessions, 4 sessions are based on lectures and discussions, and 1 final session about the final project). There are cases, book/article readings and technical notes assigned for each session. Students are expected to prepare for each class in advance, attend each session, and participate constructively in class discussions.

REQUIRED READINGS: The readings of the course will be available through bCourses and study.net. Lecture notes and presentations will be available on the class bCourses webpage. The basic textbooks of the course are:

• An Introduction to Real Estate Finance, by Edward Glickman, 1st edition.
• Bond Markets, Analysis and Strategies, by Frank Fabozzi, 9th edition.

Optional textbooks:

• Real Estate Finance and Investments, by William Brueggeman and Jeffrey Fisher, 7th edition.
• Commercial Real Estate Analysis & Investments, by David Geltner, Norman Miller, Jim Clayton and Piet Eichholtz, 2nd edition.
• Real Estate Principles: A Value Approach, by David Ling and Wayne Archer, 4th edition.

BASIS FOR FINAL GRADE:
The evaluation will be based on:

• Participation (10% of the grade). It includes all constructive and timely class and off-class interaction
• Assignments (20% of the grade)
• Midterm exam (20% of the grade)
• Final exam (30% of the grade)
• Final project (20% of the grade)

ABSTRACT OF COURSE'S CONTENT AND OBJECTIVES:
Real estate is one of the largest asset classes in the economy. This course provides the knowledge on real estate that every investor and manager should have. The main objective of this course is that students are able to critically analyze and value decisions related to real estate. After the course, you should be able to:

• Understand the specific characteristics and the language of the real estate markets.
• Analyze the main types of real estate investments: residential and commercial (office, hotel, retail, industrial, logistics, etc.)
• Be able to use the basics of fixed-income income mathematics and mortgage analytics.
• Apply the real estate valuation methods that professionals use in the industry.
• Evaluate different real estate projects and choose the best alternative using quantitative models.
• Identify, quantify, and manage the risks of real estate investments.
• Analyze alternative ways of financing real estate investments, including REITs, private equity financing.
• Determine the effects of leverage on real estate investments and management.
• Understand the economics of real estate securitization and analyze mortgage-backed securities.
• Evaluate the real estate strategies of corporations in different sectors.

We will cover the main topics of real estate finance and capital markets. The course is structured in 4 parts:

• The course starts with an introduction to the real estate industry and provides a general framework to analyze real estate investments that we will use through the course. This first part also focuses on the fundamentals of market analysis and provides an overview of the fundamentals of residential and commercial real estate mortgage contracts. It analyzes methods to design these contracts to manage risk.
• Second, the course provides the quantitative and analytics tools to value real estate assets, including the comparable transaction method, the direct capitalization method, the DCF method, and the residual method.
• Third, the course analyzes financing structures in commercial real estate, including Real Estate Investment Trusts (REITs), Private Equity, and crowdfunding. It also studies how to finance high-risk investments such as real estate developments.
• The final part of the course considers the main trends in the real estate markets by analyzing the past, present and future of: (i) securitization, including the multi-trillion-dollar mortgage and asset-backed bond markets; (ii) corporate real estate management, sale & leasebacks, and aligning business and real estate strategies; (iii) talent attraction, and the workplace; and (iv) retail and the e-commerce.

The course will offer all the participants an opportunity to develop and apply their business skills through a final project and a presentation.
PART 1. Fundamentals of Real Estate Market Analysis

1	Introduction to Real Estate (Lecture and discussion)
2	Real Estate Finance Framework (Case) Case: AC Hotels. Investment in New Hotels
3	Market Analysis and Debt Mathematics (Lecture and discussion)
4	Mortgage Design and Mortgage Valuation (Case and discussion) Case: FictionStar Studios

PART 2. Real Estate Valuation Methods

5	Valuation, Cash Flows and Modeling (1) (Cases) Case: Apartment in Munich, Germany Case: Retail unit in Oxford Street London, UK
6	Valuation, Cash Flows and Modeling (2) (Cases) Case: Hotel BCN in Barcelona, Spain Case: UBS building in New York, USA

PART 3. Financing Structures in Commercial Real Estate

7	Real Estate Investment Trusts, REITs (Lecture and discussion)
8	Midterm Exam (in Class)
9	Real Estate Development: High Risk Investments and Strategy (Cases) Case: Mara Tower in Nairobi, Kenya Case: Neinor Homes. The Creation of a Home Builder Leader in Spain
10	Private Equity Financing (Case & Guest Speaker) Case: Equity International: The Second Act

PART 4. Trends in Real Estate

11	Securitization and the Future of Financing (Lecture and discussion)
12	Corporate Real Estate and the Future of the Workplace (Cases) Case: Verizon. Corporate Real Estate and the Future of the Workplace Case: Luxa Gold Building. WeWork vs. Traditional Leases
13	Corporate Real Estate Strategy and the Future of Retail (Case) Case: Carrefour Group: Growth Management Case: Amazon 2019
14	Final Project. Review and Conclusions (Presentations, discussion & Guest Speaker)
15	Final Exam (in Class)

BIOGRAPHICAL SKETCH:
Carles Vergara-Alert is a Professor of Finance and Real Estate at IESE Business School, University of Navarra (Spain) and Visiting Professor of Real Estate at Haas School of Business, University of California, Berkeley. He teaches Corporate Finance in the MBA, EMBA, and Open ExecEd Programs as well as in-company custom programs at IESE. He is the Academic Director of the IESE's program on International Real Estate.
He earned his PhD in Business Administration (Finance and Real Estate) from the University of California, Berkeley, Haas School of Business. He holds an M.S. in Finance (Business Administration) and a Master of Financial Engineering (MFE) both from the University of California, Berkeley. He has also earned a B.A. and an M.S. in Civil Engineering from the Universitat Politècnica de Catalunya. He has worked at Allianz Hedge Fund Partners, Allianz Group, the Center for Transport Innovation, and the European Investment Bank. He has consulting experience in the finance, real estate, engineering, pharmaceutical, retail, and public sectors.
His research focuses on how frictions in the real estate markets affect the decisions of investors, managers, banks, and households. His research has been published in leading academic journals, such as The Review of Financial Studies, the Journal of Financial and Quantitative Analysis, and Real Estate Economics and presented in conferences including the AFA, EFA, WFA, and AREUEA annual meetings.