Real Estate Finance and Economics

1
Real Estate Finance and Economics

• Piet Eichholtz
• Nils Kok

2
Teaching philosophy

• Make it fun and keep it new
• Get to know students well in an efficient way
• Lots of attention to broader skills beside course
  content
• Presentation skills
• Debating skills
• Further (broad) reading
• Career counseling
• Help students find internships and jobs

3
Introduction to the course

• Two lectures plus three guest lectures
• Mostly literature tutorials and case groups
• Lots of cases and presentations to prepare
• The famous property field trip
• This year Paris (before London, Amsterdam,
  Antwerp, Dusseldorf, Brussels, )
• Lecture on property valuation
• Guided property tour by AXA Real Estate (before
  ING, City Development Corporation, Oppenheim, )
• Mind the complicated schedule!

4
Course outline (1)

• Opening lecture
• Principles of real estate investment
• Current issues in global real estate markets
• Real estate and inflation
• Case Does real estate protect against inflation?
• International real estate investment
• Tutorial discussion of 3 papers
• Case Rodamco
• Data, REITs and portfolio issues
• Tutorial discussion 4 papers

5
Course outline (2)

• Mortgages and mortgage-backed securities
• Tutorial discussion 6 papers
• Lecture mortgage securitization and derivatives
• Case Rockefeller Center
• The housing market
• Tutorial discussion 4 papers
• Property valuation and development
• Field trip London
• Guest lecture on individual property valuation
• Case real life property project valuation
• Tutorial real estate valuation and real options
• Debates (two sessions)

6
Debating as an efficient teaching tool (1)

• Two teams of two students debate a proposition
• Example The German housing market is about to
  collapse
• Teams get proposition two weeks in advance, as
  well as some basic literature leads
• Position in debate (pro or contra) decided at
  coin toss just before debate
• Debate is structured very strictly, in 15 minutes
  
• Twice three minutes initial argument
• Twice three minutes reaction
• Three minutes cross fire

7
Debating as an efficient teaching tool (2)

• Students get instant feedback on three issues
• Fluency of speech
• Strategy in debate
• Strength of argument
• from a three-member jury
• All fellow students in audience
• Nils Kok or guest lecturer
• Piet Eichholtz
• Students get grade for debate, plus 0.5 point
  overall bonus for the winner
• Instructor sees 12 students present in very
  interactive session of 1 1.5 hour

8
Grading

• 40 of final grade
• 5.5 minimum score required
• 10 of final grade
• At least 1 presentation required
• Review and discussion, 10 final grade
• 5.5 minimum average required
• 4 papers, each 8 final grade
• 5.5 minimum average required
• 8 of final grade
• 0.5 point overall bonus
• One bottle of champagne for the best valuation
  result

• The test
• The presentation
• The literature reviews
• The papers
• The debate
• The valuation case

9
Reading suggestions (each week)

• Hernando de Soto
• The Mystery of Capital
• Bantam Press, 2000
• Richard Florida
• The Flight of the Creative Class
• Harper Business, 2005
• Tim Ferris
• The 4-hour workweek
• Crown Publishers, 2007