Reference no: EM132780755

INV6IAP Investment Appraisal and Portfolio Management - The University College of Estate Management

Learning outcome 1: Demonstrate a systematic understanding of the key aspects of investment and the ability to apply coherent detailed knowledge to real estate markets.

Learning outcome 2: Demonstrate knowledge and critical understanding of property investment markets and deploy established techniques of analysis and enquiry to evaluate assumptions; concepts and data; devise and sustain arguments; make judgements; and identify a range of solutions.

Learning outcome 3: Identify and evaluate investment methods and appraisal techniques to apply modern portfolio theory and diversification in strategic property investment, and to evaluate new market theories, including sustainable investment.

Learning outcome 4: Research and evaluate information to aid investment decision-making; critically evaluate arguments, assumptions, concepts and data; and make reasoned judgements in complex situations.

Learning outcome 5: Communicate information, ideas, problems, options and solutions effectively to specialists and non-specialists.

Scenario

You are an investment surveyor employed by a leading international firm of surveyors and based at their Berlin office in Germany.

You have just been fully retained as a consultant by ‘Uplands Real Estate (RE) Investments', a London based investor, on the acquisition and disposal of commercial property investments.

‘Uplands RE Investments' are long-term investors and generally risk averse regarding their real estate investments. As such, they only invest in Core or Core Plus type investments.

This client has a mixed portfolio of property investments in the United Kingdom held in their ‘Vitamax' portfolio, which is currently valued at £945,000,000.

Your client now wishes to diversify its investments by creating a second portfolio of direct and indirect commercial property investments in Germany, Austria and Hungary called the ‘Danube' portfolio. Like the ‘Vitamax' portfolio the ‘Danube' portfolio will hold Core and Core plus properties. The portfolio will have high ‘Environmental, Social and Governance' (ESG) investment standards therefore only commercial properties with excellent environmental characteristics will be considered suitable for this portfolio.

Task
You have been instructed by your client to prepare a fully referenced client report giving concise recommendations/conclusions both on the performance of your client's existing investment portfolio (‘Vitamax' portfolio) and on the key considerations for the creation of a new specialist investment portfolio to be known as the ‘Danube' portfolio.

For the ‘Vitamax' portfolio you should report on:

a. the possible acquisition of Unit 5 Hunters Chase Distribution Park, Leamington Spa, UK. Prepare a discounted cashflow (DCF) appraisal on this property to determine whether your client should acquire it for the ‘Vitamax' portfolio.

In your appraisal you should use Microsoft Excel (or equivalent) to create a spreadsheet to calculate the Net Present Value (NPV) and Internal Rate of Return (IRR) for this investment opportunity. a.Your appraisal should include sensitivity and probability risk analysis on this investment proposition. (Please refer to Appendices 1 and 2 for further information on this investment property.) You will need to separately upload your spreadsheet calculations to show the formulas you have used in your appraisal of this property.

For the ‘Danube' portfolio you should report on:

b. a property search undertaken by you in the Hungarian commercial property investment markets in which you identify one ‘green' commercial property investment currently ‘For sale' that you believe would be a potentially suitable acquisition for the new portfolio. Prepare a profile (10-15 points) on this property summarising the key characteristics of this investment and provide recommendations to your client on why it might be suitable for this fund. (You are not required to prepare a DCF model as part of your profiling of this investment opportunity).

c. a real estate investment trust (REIT) based in the region identified for the portfolio which would be a suitable investment opportunity for indirect investment purposes. You should summarise the key features of this REITs' strategy on sustainability for its portfolio of properties.

d. Danube Portfolio - Diversification is at the centre of all investment strategies and that the rationale for investing in real estate is largely due to its non-correlation with other assets, particularly bonds and equities. Within real estate itself there are various opportunities for diversification to help mitigate risk and boost returns.

Explain with the use of examples show how diversification may be achieved in the ‘Danube' portfolio under the following headings:

• Economic and geographic concentration

• Property sector diversification

• Lease diversification.

Attachment:- Investment Appraisal and Portfolio Management.rar