BALE Investments Canadian Corporation & Analysis of a Prospective Real Estate - Real Estate Assignment Help

Assignment Task

 Analysis of a Prospective Real Estate

Project requires you to find a real-life real estate investment opportunity and analyze it using the concepts  you have learned in this course and using an Excel spreadsheet, similar to what you developed in Project 1. Apart from knowing how to use a spreadsheet, the project requires an in-depth understanding of the course  concepts. 

Learning Objectives 

Although it requires more effort, simulating what real estate practitioners do in practice is a much  more effective learning exercise than just reading about real estate investment analysis. You will not  be expected to get everything right the first time, but you will learn more than just reading about the  subject. Hopefully, you can achieve a rewarding balance by both reading and doing. This project offers a  practical introduction to some of the issues confronted by real estate practitioners. 

Client Expectations 

BALE Investments is a Canadian corporation looking to invest in real estate in your area. The four  principals of the company are professionals looking to diversify the portfolio held within the corporation.  They are interested in acquiring an investment property. As investors with a moderate risk tolerance, they  wish to acquire a property whose operation will “carry” or fund the investment beyond their initial equity  injection. Their preference is for a property likely to enjoy capital appreciation to form part of a longer 

term, growth-oriented portfolio.  

The investors’ hurdle rate for any project selected is an after-tax IRR of 7%. The investors are willing  to take an equity position of up to 40% in a potential property investment. The tax rate applicable to the  corporation is 45%. In accordance with their longer-term investment growth strategy, the investors wish  to hold the property for 10 years. Their risk tolerance and holding period mean that they are concerned  about a potential investment’s sensitivity to inflation, interest rate fluctuations, occupancy levels, and  degree of financial leverage. 

As absentee owners, the principals do not wish to be involved in property management. However, they  believe that availability of professional management is key to the success of any real estate portfolio –  especially if economic conditions deteriorate and occupancy levels suffer.  

They do not know your market area well and have contacted you for your professional advice. They  have commissioned you to identify a property in your local area and prepare a report analyzing its  potential as a real estate investment opportunity in your local area. They have specified that this be either  a residential property with a minimum of 5 units or a commercial property with a minimum size of 4,000  square feet. The property you select should be at its highest and best use; do not select a property where  the improvements are nearing the end of their useful life. 

Project Grading 

Your grade on this project will be based upon: 

1. Summary of the prospective real estate investment 

2. Market analysis 

3. Financing terms and conditions 

4. Pro forma analysis: creation and interpretation of cash flow analysis spreadsheet

5. Sensitivity analysis 

6. Conclusions and recommendations
 

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