Semester Project Assignment

Semester project instructions
Project overview reports
Market analysis reports
Project design reports
Financial analysis reports
Final proposals and presentations

You will work with two or three other students to select a site and prepare a development plan for a project in the Wichita metropolitan area.  One way of beginning is to select a parcel of land that interests you, determine the best possible use for that land, and propose development/redevelopment based on your analysis.  Alternatively, you may start with a particular use in mind and seek the location best suited for that use.  If you need suggestions, I am happy to provide some for you. 

The only restriction on the project you choose is that it must be sufficiently large to reasonably require outside investors to finance.  Your proposal should be prepared with the goal of enticing such outside investors to participate in your project.  I reserve the right to veto any site/land use choices that I deem to be infeasible or incompatible with the project’s objectives.

Your group will give several presentations/updates on your project throughout the semester.  Although you will work on these reports as a team, only one person will present each report (the Project Overview Report is an exception).  Each member of your team must make at least one presentation during the semester (not including the Project Overview Report). 

1)      Preliminary Project Overview Reports - February 23

            This is an informal 15 minute presentation to the class outlining the parameters of your project.  The purpose of this presentation is to help you begin thinking in a structured way about your project.  Your report should include as much of the following information as possible (or applicable): 

·        Physical and market description of your chosen or potential sites.  How big is the site?  Where is it located?  What is its current use?  Zoning?  Does the site have any distinguishing physical, legal, or market characteristics?  

·        Description of the proposed use.

·        Special constraints associated with the project.

·        Questions or problems you’ve encountered so far. 

            This is the one presentation that may include any or all group members.  Although this will be an informal presentation, you should plan on having visual aids including maps or aerial photos of your site (or potential sites). 

2)      Market Analysis Reports – March 23

            Your group should prepare a preliminary written market analysis report for your project.  A revised version of this report will ultimately be included as the market analysis section of your final semester project.  Thus, your focus should be on providing enough information to convince a prospective investor that a market does exist for your proposed project. 

            The report itself should contain the following information: 

·        A description of the community and the economic drivers in the general market area you are analyzing;

·        An overview of the current area real estate market with primary emphasis on your particular use and the general area of town in which your site is located;

·        A description of your site (or prospective sites) and the key demographic and economic characteristics of the area around your site;

·        Detailed analysis of those characteristics that bear most directly on your proposed use, culminating with some estimate/suggestion of the level of demand in the area for your particular use;

·        An analysis of existing and prospective supply of your use in the area; and

·        Correlation between your projected demand and existing/prospective supply with conclusions about the market potential for your use on your site. 

            Your report should be as long as you feel necessary to adequately cover all of this information.  As a starting guide, I suggest between 3 to 5 pages, but it may be longer.  Remember, however, that adding bulk without content does not necessarily help.  In addition to the body of the report, you should include any supporting documents (e.g., demographic profile reports, maps, etc.) that you feel are appropriate. 

3)      Project Design Reports – April 6

            The primary goal of these reports to provide a description of the physical layout and key design elements of your development.  This will be the first report a general contractor might use to provide a preliminary cost estimate.  It should include the following information: 

·        A preliminary site plan, including the boundaries of the site and the footprint of any improvements on the site, as well as the layout of any streets, parking, landscaping, etc.  Although I do not expect professional renderings, you should shoot for something similar to the architects site plan renderings we’ve seen in class.  Along with your site plan you should include a written description of any special features of your site (e.g., will your driveways be asphalt or concrete, etc.).  This should also include information on the current zoning, size, and other key features of the site. 

·        Building floor plan diagrams, including the size of the gross building area, the size and intended use of each floor and major spaces, and the size of any common area.  In your written description your should estimate the total gross leasable area for the building as a whole and for each floor. 

·        Construction specifications.  I do not want anything too detailed here.  But you should indicate the general design specifications that will be required to get construction estimates.  What type of structure will you use?  What type of flooring and interior finish?  HVAC systems?  You will likely need to get some professional advice in determining what to include here. 

            I anticipate that your written reports will be fairly short.  Just include the required diagrams and any descriptive text (which may just be bulleted lists). 

4)      Financial Analysis Reports – April 20

            Your financial analysis should include the following elements: 

·        A proposed budget for the development construction, including a draw schedule. 

·        Details of loan terms and other financing costs. 

·        A pro forma cash flow statement, indicating your estimate of projected NOI and before-tax cash flow once the project is completed and fully-leased.  Clearly identify and justify your assumed rents and other revenues, vacancy rates, operating expenses and other inputs.  Some of this information will come from your market analysis and the rest may come from publications like IREM’s Income Expense Analysis publications and the ULI’s Dollars and Cents of Shopping Centers.

·        Cash flow projections for the property, incorporating up-front financing costs and revenues during construction and lease-up, anticipated cash flows from operations, and proceeds from a well-defined exit strategy.  You should plan to use a five- or ten-year holding period.  For this analysis, work with before-tax cash flows, as you cannot know the tax situation of your prospective investors.  However, if there are significant tax credits that you are intending to take advantage of, you may include these in your analysis. 

·        Estimates of the project’s net present value and internal rate of return, as well as the sensitivity of these projections to the various assumptions you make. 

            One of your primary goals should be to make this analysis as easy to read as possible.  Make sure that your information is presented clearly and is easy to interpret.  Part of this may include a one- or two-paragraph narrative of your project’s financial prospects.

5)      Final Proposals and Presentations – May 11

            You should treat your proposal as a document that you could use to convince outside investors to join in your project.  It may also be used to obtain bank or permanent mortgage funding.  As such, your finished document should have a professional, polished appearance.

            The proposal itself should contain the following:

·        A cover letter.

·        An executive summary of the plan.

·        A detailed description of the project to be undertaken, including an analysis of the site selected; the proposed use and anticipated tenants/clients; the size of the site and square footage of any improvements; and a description of the development itself.  Supporting diagrams and figures are strongly encouraged. 

·        A market analysis of the metropolitan area and the site in question with respect to the proposed use. 

·        A proposed budget for the development construction, including a draw schedule.

·        Financial analysis of the expected cash flows from the property, including a well-defined exit strategy. 

            I will place sample development plans on reserve at the library to give you an example of the level of detail I expect in your proposals.  I will also place several other resources that you may find useful on reserve in the library.  Your best resource, however, will be your assigned developer. 

            You will give a 20-minute presentation on your proposal during the final class period.  The content of this presentation should be roughly the same as your written proposal.  Because of the limited time you will be given, however, you will be able to include much less detail.  For example, instead of displaying a full spreadsheet of the cash flows your project will generate, you may want to only include the pro forma, the internal rate of return and key financial ratios in your presentation. 

            You should also be prepared to answer questions and respond to challenges about your project, perhaps even during the course of your presentation.  These may come from me, other members of the class, or from area developers and investors that I will invite to the class that night. 

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