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The REAP course focuses on how the real estate professional preserves and enhances value through increasing the net operating income of a commercial property, and decreasing risk: physical, market, and financial.
This theme will introduce and close every class, and each Unit will be taught to relate back to that theme, and to the basic formula:
Value = Net Operating Income / Capitalization Rate
Value = NOI / Cap Rate
Value = NOI / Risk
The theme is explored through several disciplines:
- Management – Shopping Centers
- Management – Office Buildings
- Office Brokerage/Investment Sales
- Development
- Market Analysis and Retailing
- Financial Analysis, Valuation, and Budgeting
- Leasing and Lease Analysis
The basic texts are:
- Shopping Center Management – Brief Notes (ICSC)
- Professional Real Estate Development (ULI)
Instructors from Sponsoring companies are senior practitioners in their firms and have at least 10 years experience in management, leasing, development, and related fields. They are also paired with alumni, mentors, and veteran industry professionals who provide a responsive ear, on a regular basis, on how to deal with the challenges of working in corporate real estate, and how to formulate and reach realistic career goals.
The following is a summary description of the Units. As with any introductory course, there are no bright lines between them.
COURSE UNITS
Introduction
Shopping Center Management
• The expense side of the operating statement
• How the manager reduces controllable expenses (e.g., CAM) and minimizes on-site risks (e.g., loss of key tenants) that cannot be shifted to third parties
Office Building Management
• The expense side of the operating statement
• How the manager reduces controllable expenses (e.g., security) and minimizes on-site risks (e.g., loss of electric service) that cannot be shifted to third parties
Market Analysis and Retailing
• Increasing revenues with the same tenant mix, through understanding how the competition affects that mix, then promoting it aggressively to a broader and deeper customer base, with a plan that includes tenants in publicity, on-site events, and community affairs.
• Repositioning a center (or working with vacant ground) by analyzing its strengths and weaknesses, then working with the development and leasing team to create a new approach
Asset Management
• Analysis of property cash flow and understanding property potential from the owners and/or investors standpoint.
• Analysis of rental income and expenses factoring in debt load obligations and financing options to determine property's true value as it relates to long term viability.
Investment Sales / Brokerage
• Representation of both seller and buyer interests to determine fair market value for property.
• Determining true property values based on capitalization rates and market dynamics to properly position assets.
Leasing / Lease Analysis
• The revenue side of the operating statement
• How market analysis and leasing strategy for a well-positioned shopping center result in a strong rent roll
• How the broker earns a commission by understanding the market, client needs, and costs before even showing a space.
Development
• The need to keep up the appearance of the property, and to stay current with changes in the market that may require re-tenanting, renovation, expansion, or reconfiguration.
• How market research prompts capital expenditures that recast both sides of the operating statement.
• How a property is developed with future management concerns and renovation in mind.
• How the property manager can minimize disruptions to existing tenants, protect building users and visitors against unnecessary risks, and maintain a stable cash flow during renovation.
Developers buy land, determine the target market, develop the building program and design, obtain the necessary public approvals (entitlement) and financing, build the structure, and lease, manage, and eventually sell it.
Financial Analysis and Budgets
• Ties all the Units together and back to Value = NOI / Risk, using a hypothetical property to take the students through preparation of operating statements, variance analysis, budgets, and valuation
• Introduction to Time Value of Money…Net Present Value…Discounted Cash Flow…Projecting long-term performance with 10-Year pro forma…Variance Analysis…Capitalization of Income…Value = NOI / Cap Rate
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