17704: Property Development Finance - Developing Finance Strategies - Accounting and Finance Assignment Help

Assignment Task:

Assessment Task 1: Financing option analysis using DCF - Individual Report 

This assessment is designed for students to understand the effects of leverage and the use of discounted cash flow (DCF) modelling, sensitivity and scenario analysis skills to make financing decisions. This is an individual assignment – no collaboration or group work is involved. 

1.0 The Background A free-standing Torrents Titles house, located a quiet street 31 Coxs Road, North Ryde NSW 2113, with 4 bedrooms, 2 bathroom and 1 car garage, sits on a 575 square meters corner block. The site is going to auctioned on 22 Feb 2020 with a guide price of $1,155,000. Details can be found from the link: https://www.domain.com.au/31-coxs-road-north-ryde-nsw-2113-2016034467. The house can be demolished and has a potential to be developed into a duplex with 4 bedrooms, three bathrooms and one car garage. It is assumed that the development approval will be granted and the development will take two years. The discount rate is assumed to be 15 percent. 

Based on the information provided above, you are required to: 

1) research on the information (or variables) needed for estimating the development feasibility using discounted cash flow modelling technique. References and justifications of the variables should be demonstrated. You are allowed to make appropriate assumptions on the costs involving with the development. Please note that additional $50,000 should be budgeted for power supply upgrade.

2) Develop a feasible model by determine how many the developed properties should be sold or lease; and for how long.

3) develop three financing options using the discounted cash flow model and recommend one of the best financing options, and then discuss the risks using sensitivity and scenario analysis for the selected the financing option. The three options are:

i) using 100 percent equity to purchase this site and for development;

ii) borrowing 80 percent of the total costs to purchase the site and the development; and

iii) borrowing 80 percent of funds to purchase the site and 60 percent of funds for the development. 

2.0 Assessment Criteria This is an individual assessment, worth 40 percent of the total marks for the subject, assessed against the Assessment Criteria (Refer to Assessment task 1: Criteria Linkages in the Subject Outline). 

Hints for the contents in the report can be:

a) justification of variables and assumptions included in your investigation;

b) a procedure of developing DCF models and interpreting and analysing the DCF results;

c) comparison and discussion the benefits and drawbacks/risks of three financing options. 

3.0 Submission Requirements A report and an Excel file that contains three DCF models are required for the assignment. The report must be submitted in Word or in an unlocked PDF file to UTSOnline under the name ‘Assessment_1: Investigation of Financing Options’. A report format and appropriate references are required. Use your judgment, e.g., the length of the report may have less than half an hour of reading time (approximately 10 pages or less). The DCF excel file must be submitted to UTSOnline under the name ‘Assessment_1_Excel’. 

Assessment task 2: Developing Finance Strategies – Group and Individually Assessed 

This assignment intends to assist students in developing critical analysis skills by assessing property development financing options that meet a client’s key performance indicators (KPIs). Knowledge of ratios, discounted cash flow (DCF), sensitivity and risk analysis skills are involved in the assignment. This assignment includes two parts, Assessment 2a & 2b as described below. 

Assessment 2a: Research on Australian Financing Markets This is a first part of the assignment. Students are required to study an A-REIT to understand finance strategies and risk mitigation methods used in industry. This is an individual assignment – no collaboration or group work is involved. 

You are required to research the traditional and innovative property development financing options for the property development sector in Australia, by selecting one of the A-REITs from ASX and downloading the financial statements for at least last five years. Your tasks include: 

a) conducting financial ratio analysis for the selected A-REIT;

b) researching and documenting the A-REIT’s financing leverage capital structure including sources of debt and equity finance; and

c) making critical assessment and discussing about theoretical and practical application for financing property development. 

Annual reports from A-REIT, articles, or case studies can be used to analyse these issues. 

You are required to submit a maximum 1,000-word essay. The essay is worth 20 percent of the total of marks for the assignment, assessed against to the Assessment Criteria (Refer to Subject Outline – Assessment task 2: Criteria linkages). The essay in word or an unlocked PDF file must be submitted to UTSOnline under the name ‘Assessment_2a’. An essay format and appropriate references are required. 

Assignment 2b: Financing Strategy for Development of the Moorebank Quarry Land This is a second part of the assignment, which involves the analysis, presentation and documentation of financing strategies for a specific development, and a recommended strategy to meet the Client’s KPIs. DCF, sensitivity and risks analysis should support the recommended financing strategy and address how it meets the Client’s KPIs for the development. This is a group assessment. 

1.0 Assignment Objectives The objectives of this assignment is to assist your critical thinking about property development financing options, the development of your innovative financial strategies to meet a client’s key business KPIs, to demonstrate your knowledge of DCF with sensitivity & risk analysis, and finally, to demonstrate your ability to be part of a property development financial team able to present and communicate your ideas on a real project to a real Client. 

The assignment is to be completed by teams, minimum 3 & maximum 5 students, working as a professional property financial strategy team. Your team must advise the Moorebank Quarry owner (your Client) on the best financial strategy to meet their key business KPI objectives for a parcel of degraded quarry land. 

2.0 Background Your Client is Boral Limited, the owner of the ~100 hectare Moorebank Quarry at Moorebank, NSW. 

2.1 Boral Limited Boral Limited, a large Australian listed public building & construction materials supply company, is the owner of the Moorebank Quarry that has come to the end of its economic life. Boral’s key business KPIs in dealing with the Moorebank Quarry land is to maximising shareholders wealth, while minimise the business financial risk, and maximising Boral’s core business of supplying building and construction materials to the Australian market and expand its core business into the Asian and North American markets. 

2.2 The Moorebank Quarry By 2002, after ~80 years of operation, the quarry had come to the end of its economic life. It was a highly degraded site with: 

• Safety issues given waterlogged deep pits 

• Considerable land contamination 

• Large water logged & contaminated clay pits 

• A ~50mt deep shale pit with ~10mt water in the bottom 

• Asbestos in the brick making sheds & equipment

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