Market Analysis - Retail Solution

Solution:
1. Total income = 11,000 x $35,000 = $385,000,000
2. Retail sales potential = $385,000,000 x (1 - 25% - 45%) = $115,500,000
3. Retail sales by subject type = $115,500,000 x 20% = $23,100,000
4. Sales retention = $23,100,000 x 80% = $18,480,000
5. Primary sales sf required = $18,480,000 / $250 psf = 73,920 sf
6. Plus: Secondary sales = 73,920 x 1.15 = 85,008 sf
7. Plus: Frictional vacancy = 85,008 / (1 – 5%) = 89,482 sf
8. Less: Existing, U.C., propose = 250,000x20% + 50,000x25% + 40,000x15% = 68,500 sf
9. Shortage of space (next 5 years) = 89,482 sf – 68,500 = 20,982 sf

Market Analysis Problem - Industrial

Solutions:
1. Total employment growth = 20,000 / 1.75 = 11,429
2. Total occupying office = 11,429 x 20% = 2,286 persons
3. Office demand = 2,286 persons x 225 sf per person = 514,350 sf
4. Capture in subject market = 514,350 x 25% = 128,588 sf
5. Total demand for Class B in market = 128,588 sf x 50% / (1-5%) = 67,678 sf
6. Less: Existing, UC, proposed = (50,000 sf x 20% vacant) + 25,000 sf = 35,000 sf
7. Residual demand = 67,678 – 35,000 = 32,678 sf needed

Variations:
1. There may not be a frictional vacancy given. Compute demand without making up a vacancy.

Audio/video clips on appraisal posted to 5311 homepage

Four audio/video clips (totaling about 2 hours) have been posted to the REAE 5311 homepage. If you have not viewed this clip already (REAE 5334 students have already), please include these clips with you chapter 8and 9 reading assignments. Please view the clips using MS Explorer (Firefox will not work) and make sure you audio is adjusted to a comfortable level.

Investment Problem Exam grades

Investment Problem Exam scores have been posted to WebCT along with grade distribution statistics. Sorry guys, this one is very time consuming to grade. We will review on Tuesday.

Just a reminder, anyone from REAE 5311 is invited to the Dprofiler session tomorrow. See

http://realestateprogram.blogspot.com/2008/09/dprofiler-at-reaeuta-saturday-october.html

for details and hope to see you there!

New Urbansim Event on Campus (free to students)

The Congress on New Urbanism

New Directions: A traditional green future for north Texas
a one day symposium and discussion

Friday October 24

School of Architecture
The University of Texas at Arlington

8:30am -- 5:30 pm

Free and open to students, faculty and staff

No prior registration required

Speakers include:

Jon Hockenyos
expert in economics and public policy

Peter Swift
dynamic leader in the area of walk-able communities

John Norquist
former mayor of Milwaukee, author, and expert in urban issues

Steve Mouzon
author, architect, and President of the New Urban Guild and Original Green.

"Intro to Argus" computer lab session invitation

REAE 5311 students are welcome to join the REAE 5334 class on Saturday, November 8th from 11 AM to 1:50 PM in the third floor REAE@UTA computer lab. During this class, we will do an introduction to discounted cash flow analysis using Argus. This session should give you a general feel for Argus and the program's capabilities.

Student Question - General

Alex,

Remember, the IRR is the discount rate that makes the NPV equal to zero. You don't specify a discount rate in IRR because you are calculating the discount rate that makes NPV=0. jah


On Fri, Oct 17, 2008 at 11:55 AM, Alex Papavasiliou wrote:

OK, got the correct IRR. One last question, why are the cash flow entries different for NPV and IRR? I thought they were the same. What I am I missing? FYI, I was stuck in traffic yesterday and missed your office hours.

Student Question - General

Alex, Remember, if you are doing Re after taxes then you need to use all after tax cash flows. ATCF then the ATER at the end of the holding period. jah


On Fri, Oct 17, 2008 at 11:39 AM, Alex Papavasiliou wrote:

Ok will do. What is enter for the final cash flow in addition to the pre-discounted cash flow? BTER, Net proceeds, etc. I also had a question on this. Thanks!

Student Question - IRR calculation

Alex,

Look carefully at the cash flows that you are entering into your CF menu for the IRR calculation. Make sure that you enter the pre-discounted cash flows. This is typically the problem for what you describe. Get back to me if this is not the problem. jah

PS Also, you can look at the IP spreadsheet to check the cell references for the =IRR function. The IRR is calculated right below the NPV calculation.

On Fri, Oct 17, 2008 at 11:06 AM, Alex Papavasiliou wrote:

Dr. Hansz -

I am having trouble calculating the correct IRR on investment problem 1 on my calculator using the cash flow menu. I have gone through several scenarios; I can calculate the NPV correctly but get a negative IRR. What are the correct inputs? Thanks.

--
Alex Papavasiliou

OK, blog post project, part II

I have been getting some nice feedback (on and off campus) regarding the student blog posts. I realize that we have had only two posts so far (with many more to come) but I am anticipating the the quality of these posts will persist.

I have noticed that several of you are struggling with a decision between two or more topics and a couple of you have asked me if it was possible to do a second blog post for a grade. So far my response has been 'no.' However, due to the initial success of this project, I will treat a second blog post as a single quiz grade, if you choose to do a second blog post (entirely your option and definitely not a requirement).

As with the first blog post, you will post directly to the REAE@UTA main blog, realestateprogram.blogspot.com. Also, I will ask you to make the second blog post shorter in length, as compared to the first.

The first blog post should be between 1,500 to 2,500 words. For reference, Richard's post was 1,800 words and Ramya's was right at 2,500 words (the max). This second blog post should be between 800 and 1,500 words. I am trying to keep the posts at lengths that people will be willing to read on computer screens. Also, remember that we are more interested in quality than quantity (and yes, spelling and grammar still count!). As with the first blog post, please provide references/citations and links.

Student Question

Dr. Hansz,
I have been practicing the investment problem and was wandering where the solutions to the other two problems are. I found the solutions to the first example but can't seem to find the other 2. Thank you.
Will Swan

RESPONSE

Will,

Download the IP spreadsheet and plug in the assumptions. Use this spreadsheet to create additional practice problems. jah

Investment Problem Exam: October 21st

The investment problem exam is one week from tonight. This exam will cover "The Investment Problem" (all steps with no notes), Chapters 19 and 20, and also the Review Materials for Real Estate Analysis (all section except for the Duration topic).


This exam will be in two or three sections. The first section definitely will be...."The Investment Problem" with the second section consisting of 25+/- multiple choice style questions (primarily from chapters 19 and 20). A third section may consist of an essay question or an additional problem section.

Study hard!

No Office Hours this Afternoon

I will be attending the Financial Management Association (FMA) conference today and will not make my office hours from 2 to 4 PM today. I will be checking e-mail and my phone.

Exam 2 Info

Exam 2 (on October 21st) will cover Chapters 19 and 20 and include "The Investment Problem." Normally, exams are not cumulative but let's also include the "Review Materials for Real Estate" packet (everything from the packet is fair game except for the material on Duration) on Exam 2.

Exam 1 grades posted on WebCT

Exam 1 grades have been posted to WebCT this afternoon. The scores reported on WebCT are percentage scores (out of 100%).

The exams statistics were as follows:

mean 80.83%
median 81.82%
St. dev. 9.32%
Max 96.97%
Min 66.67%

We had 4 As, 8 Bs, 5 Cs, and 3 Ds. There was a 4 point curve (I allocate this to multiple choice section). Your grade was calculated by adding the number of correct answers from the multiple choice section (plus 4 point curve) with the points from sections 2 and 3 (16 points total and someone did get 16 out of 16) and dividing by 66 total points.

If you scored less than the mean, you really need to take advantage of the Investment Problem exam coming up in a couple weeks!