USB245 : Property Investment Analysis Assessment

Introduction

The role of a property investment analyst requires in-depth market knowledge, the ability to forecast with precision, operate and interpret a discounted cashflow model, and effectively communicate your findings and recommendations to your superiors. This assignment builds on the theoretical knowledge developed during lectures and consolidates the learning task by applying that theory to a real-world example.
This assignment is designed to develop your knowledge of the Australian property investment sector in relation to making a purchase decision. This assignment is focussed on the Brisbane office market sector; however, the decision-making principles also apply to other property sectors and investment opportunities, and you should extend your thinking accordingly. Specifically, this assignment is designed to develop and assess the following learning outcomes for this unit:

1. Identify the investment goals and strategies of property investors.
2. Calculate and interpret the key performance measures of income producing properties, incorporating risk analysis
3. Construct, quantify and justify discounted cash flow models to measure the expected performance of a property investment taking account of finance and taxation.
4. Present solutions through written communication.
5. Collaborate to solve problems and achieve shared goals.

This assignment comprises 40% of your marks for this unit. It is recommended that you read this brief carefully and raise any questions during tutorial time. Additional details on the report format, content and presentation may be given during lectures/tutorials and placed on Canvas. If you miss a lecture or tutorial, it is your responsibility to chase up any assessment information that may have been provided. For further details on Assessment for this unit, please refer to the Introduction to assessments USB245 Property Investment Analysis on Canvas.
Acting as property analyst for an investor who want to purchase an income producing property, you will need to simulate a real world project, requiring your group to build a discounted cash flow model in MS Excel and provide an associated analytical report based on a provided property investment scenario. Each group member will be required to demonstrate your contribution to building the discounted cash flow model. As a group, you need to show your understanding of the full discounted cash flow modelling together with investment goals and objectives, analysis of key performance measures and risks, taking into account finance and taxation considerations as they relate to property investments.

USB245 Assignment Brief,Semester 2

Assignment Information

As property analyst you will need to create your own assessment content. The use of generative artificial intelligence (GenAI) tools is not permitted in this assessment task as you must demonstrate your own skills and knowledge. Ensure that all submitted work is your own and maintains academic integrity standards. You may be asked to demonstrate authorship of your assessment. Find out more on keeping good records to authenticate authorship. The Academic Integrity Policy describes penalties related to the unauthorised use of GenAI.
Assignment Details

Task

You are an investment analyst with a small publicly listed real estate investment trust. Your AREIT has investment objectives that include:
• CBD or inner-fringe location • Minimal capex required
• Loan to Value Ratio (LVR) 65% • Target total return exceeding 7.0% • 7-10 year holding period
The property at 339 Coronation Drive, Milton has recently been listed on the market, and you have identified it as potentially fitting your investment objectives. The agent advises the owners are looking for offers over $85 million.
In order to make a recommendation to your supervisor on whether the AREIT should bid for this property, you are required to:
(a) build and analyse a discounted cashflow model using monthly cashflows to assess the expected performance of this building against the AREIT’s investment objectives; and (b) prepare a report which provides evidence and justification for all your DCF assumptions, together with a market analysis to support your recommendations.
A copy of the latest information memorandum, financials and Brisbane Cityscope (via Cotality) for this property is on Canvas. This provides all the property specific information you require for this exercise, as at the date it was prepared. Students are NOT to contact the agent, owners or tenants of the property. Students will be required to carry out their own market and other research to assess and justify the necessary assumptions (inputs) and forecasts that will comprise the DCF. Students are not to use any proprietary or off-the-shelf DCF software. You are required to demonstrate your skills in MS Excel and develop your own DCF model. You are required to update all information so that it is in line with your assessment date.

USB245 Assignment Brief, Semester 

Assignment Information
NOTE: This is NOT a valuation exercise. Your output is NOT a valuation report. The required output is a report that will comprise your analysis and recommendations of this investment opportunity, together with your supporting DCF. Your report should present as an investigative report.
Part A comprises your draft report and monthly DCF completed to the property cashflow stage (excluding finance and tax). Each member will need to identify their contribution to building the cashflow by adding your name next to your contribution. The report should include an introduction, brief investment objectives, brief property overview, market overview and forecast, key assumptions with justification, and financial analysis of your DCF findings for the property cashflow (before finance and tax). You are required to submit both a MS Word report and the supporting MS Excel DCF (do not paste as values or include links to external files).
A maximum of 1,500 words for Part A is recommended, excluding the DCF workbook (consisting of multiple worksheets) or appendices.
Part B comprises your final report updated with feedback from Part A and will also include your Executive Summary, financial analysis of your after finance and equity after tax cashflows, and recommendations. You are required to submit both a MS Word report and the supporting MS Excel DCF (do not paste as values or include links to external files).

The word limit is 2,500 words excluding the DCF workbook (consisting of multiple worksheets) and appendices.

Suggested Structure of Report
• Executive Summary Part B only; written in a narrative/academic style
• Table of Contents
• Introduction Outlines the structure of your report
• Investment objectives Reiterate the AREIT’s investment objectives • Property overview Up to 1 page to provide context for the potential investor • Market overview/outlook Including subheadings to justify key DCF inputs e.g. supply and vacancy rates, rents and incentives, and yields

Discuss how these are forecast to change over your holding period (expand beyond current market conditions)

• Key assumptions Tabulate and include references where required
Finance and tax assumptions to be provided in Part B • Financial analysis NPV/IRR outputs and sensitivity of key variables
Part A: discussion regarding property cashflow only
Part B: discussion of property, after finance, and after finance and after tax cashflows (including comparisons between)
• Recommendations: Part B only. Link to your investment objectives • References: Use QUT APA style (https://www.citewrite.qut.edu.au/) • Appendices Include a high-level annual summary of your DCF

USB245 Assignment Brief, Semester 

Assignment Information
Suggested Structure of DCF workbook (minimum 7 year holding period)
The team of three students will be using Excel workbook which includes separate worksheets to build the monthly DCF cashflows and make recommendation. • 1 Tenancy Schedule Update data as at your proposed acquisition date
• 2 Outgoings Schedule Update data as at your proposed acquisition date
• 3 Assumptions Refer to tutorial templates for examples • 4 Monthly lease cashflows Individual contributions modelling cashflows for each tenant • 5 Monthly DCF cashflows Remainder of monthly DCF developed as a group Part A: property cashflow
Part B: property, equity and after-tax equity cashflows
• 6 Annual DCF summary Rolled-up summary of your monthly DCF cashflows • 7 Tax calculations Part B: depreciation and capital gains tax calculations • Sensitivity analysis Set up on the same worksheet as your assumptions
Part A: at least one sensitivity table on property DCF inputs Part B: additional sensitivity table on equity (Finance) inputs
Please state clearly any other assumptions you make in this regard, including depreciation assumptions for future capital upgrades (if any).
Important Notice
The initial details of the assignment are contained herein. However, students should note that additional information and instructions may be given out during lectures/tutorials. Attendance at all lectures and tutorials will ensure that the best assignment preparation is achieved.
An important aspect of working in the property sector is the ability to source information, think through and analyse a property problem and use initiative to resolve problems and issues. It is important that these skills are developed during the degree program and as your approach the half way mark of your degree, development of initiative, self-direction and market research skill is now expected.
Students are encouraged to use any other resources available to them, however students need to ensure the work submitted is their own work, and not subject to copyright from other sources such as commercial real estate agencies.

Brief summary of the assessment requirements

Purpose. You act as a property investment analyst for a small AREIT and must assess whether the AREIT should bid on 339 Coronation Drive, Milton (offers over $85m). The exercise tests your ability to build a monthly discounted cash flow (DCF) model in Excel, justify every assumption with market evidence, analyse finance and tax impacts, perform sensitivity testing, and present a written investment recommendation.

What must be submitted

• Part A (draft): MS Word report (max ~1,500 words recommended) plus your monthly DCF workbook (property cashflows only; finance & tax excluded). Part A must show each group member’s contribution to the cashflow worksheets.

• Part B (final): Revised MS Word report (max 2,500 words) with Executive Summary, full analysis including after-finance and after-tax equity cashflows, updated DCF Excel workbook (including finance and tax worksheets), sensitivity analysis, and formal recommendation.

Key content to cover (must-haves).

• AREIT investment objectives (CBD/inner-fringe, minimal capex, LVR 65%, target total return >7%, 710 year hold) and how your analysis ties to them.

• Concise property overview (location, tenancy schedule, key leases).

• Market overview and outlook for Brisbane office sector with evidence to support rent, vacancy and yield assumptions over the holding period.

• Detailed assumptions and justifications (rents, incentives, growth rates, vacancy, outgoings recovery, capex, lease expiries, market yields).

• Monthly DCF model structure: tenancy schedule, outgoings schedule, per-tenant monthly cashflows, aggregated monthly DCF, annual roll-up, and sensitivity tables.

• Finance & tax modelling (Part B): borrowing structure, LVR, loan terms, interest and principal schedule, tax depreciation, CGT treatment, and after-tax equity returns.

• Financial outputs: NPV/IRR (property and equity), break-even, cashflow profiles, and sensitivity to key drivers (rents, yield movement, vacancy, capex).

• Clear recommendations linked to AREIT objectives and funding request rationale.

• Appendices: assumptions log, data sources, annual summaries, and Excel workbook.

Formal requirements & compliance.

• Use your own Excel DCF (no off-the-shelf DCF software).

• Keep all submission files self-authored (GenAI use prohibited).

• Demonstrate individual contribution in the workbook.

• Use QUT APA style for references.

How the Academic Mentor guided the student

Below is a practical stepwise account of the mentoring process used to support teams from project inception to submission.

1. Clarify brief & align on objectives

• Mentor walked the team through the brief, emphasising this is analysis and recommendation, not valuation, and reiterated the AREIT’s explicit investment criteria (LVR, target return, capex constraints, hold period).

• Agreed deadlines, deliverables and the Part A → Part B workflow.

2. Team roles & collaboration plan

• Mentor recommended role allocation to match strengths: Lead modeller (Excel), Market researcher, Finance & tax analyst, Report & presentation lead.

• Introduced a simple Team Charter, version control (file naming), and a shared folder for evidence and sources.

3. Data collection & market analysis

• Guided students to credible data sources (Brisbane Cityscope, CoreLogic, ABS, RBA, industry reports) and coached on extracting tenancy and comparable market data from the provided information memorandum.

• Advised on how to structure the market overview: supply pipeline, historic vacancy and rent trends, yield compression/expansion drivers.

4. DCF model design (structure & transparency)

• Demonstrated a robust Excel workbook layout (separate sheets for Tenancy Schedule, Outgoings, Assumptions, Per-Tenant Monthly Cashflows, Consolidated Monthly DCF, Annual Roll-Up, Sensitivity).

• Stressed best practice: label inputs clearly, keep assumptions grouped on one sheet, use cell references (no pasted values), and keep an assumptions log with justifications and sources.

5. Build tenancy and outgoings schedules

• Mentor reviewed how to update tenant lease terms to assessment date, incorporate rent reviews, market renewals, incentives and estimate vacancy downtime.

• Helped the team allocate recoverable vs non-recoverable outgoings and model monthly timing.

6. Monthly tenant cashflows and roll-up

• Coached the team through monthly phasing: rent invoicing cycles, incentives amortisation, step rents, and timing of fit-out allowances.

• Showed how to aggregate to monthly DCF and then roll up to annual summaries for reporting.

7. Finance and tax modelling (Part B)

• Explained debt structuring consistent with LVR 65%: loan schedule, interest vs principal, and incorporating financing costs.

• Walked through tax treatments: tax depreciation schedules, taxable income calculations, CGT implications on disposal, and calculation of after-tax equity cashflows.

8. Sensitivity analysis & scenario testing

• Required at least one sensitivity table in Part A (property cashflow inputs) and additional finance sensitivities in Part B.

• Mentor helped set up tornado tables (rent, yield, vacancy) and scenario runs (base, upside, downside) to show outcome ranges.

9. Interpretation & linking to AREIT objectives

• Reviewed draft outputs to ensure clarity: does NPV/IRR and target total return exceed 7%? How does required equity return compare to risk?

• Asked the team to explicitly map model results against the AREIT’s criteria and provide a clear recommendation (bid, negotiate, or pass) with mitigating actions.

10. Report writing & presentation

• Advised on a concise report structure: Executive Summary (Part B), Introduction, Objectives, Property & Market Overview, Key Assumptions, Financial Analysis, Sensitivity, Recommendations, References, Appendices.

• Reviewed draft narratives to ensure technical content was communicated in clear, non-ambiguous terms for senior management.

11. Quality checks & academic integrity

• Performed final checks for formula integrity, consistent assumptions across sheets, referenced data, and that each student’s contributions were documented.

• Reminded team of GenAI policy and evidence-of-authorship requirements.

How the outcome was achieved 

The team delivered the required Part A and Part B packages:

Files submitted

• Part A: short MS Word draft report + Excel workbook containing tenancy schedule, outgoings, assumptions and monthly property cashflows (pre-finance, pre-tax). Each member’s contribution is recorded next to specific worksheets.

• Part B: final MS Word report with Executive Summary, after-finance & after-tax analysis, sensitivity tables, and professional recommendation; updated Excel workbook including loan schedules, tax calculations, annual summaries, and sensitivity analysis.

Analytical outputs

• Monthly DCF cashflow model rolled to annual summaries; NPV & IRR on property cashflows and on equity cashflows post-finance and post-tax.

• Sensitivity analysis demonstrating how the investment metrics change with ± movement in key drivers (rents, yields, vacancy, capex).

• Funding request rationale aligned to projected working capital, capex buffer and liquidity runway.

Recommendation

• A clear recommendation (bid/hold/decline) presented in Part B tied directly to:

  • Whether the target total return > 7% is achievable under realistic base case assumptions.

  • LVR and financing constraints.

  • Risk profile revealed by sensitivity testing and mitigation measures.

Learning objectives covered

1. Identify investor goals & strategies. Students restated AREIT objectives and used them as gates for decision-making.

2. Calculate & interpret performance measures. Built monthly DCFs, calculated NPV, IRR, and equity returns; interpreted risk via sensitivities.

3. Construct & justify DCF models including finance & tax. Demonstrated Excel modelling skills, loan amortisation schedules, tax depreciation and after-tax outcomes.

4. Present solutions through written communication. Produced concise Part A draft and professional Part B final report with Executive Summary and appendices.

5. Collaborate to solve problems & achieve shared goals. Worked in a team, documented contributions, applied version control and peer-reviewed outputs.

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