MMP 212 Property Investment 2020
Assignment Two
Undertake property valuation and investment analysis
25% of unit assessment (approximately 2,500 words)
Due Date: The due date for this assignment is 11.30pm Friday 22 May 2020 (end week 10). Documents should be submitted via CloudDeakin under your group. You need to submit two documents (one Word file and one Excel file). In the assignment file name include the Unit Code, Year, Trimester, Assignment Number, and Your Names and IDs.
Length: A report with approximately 2,500 words (excluding appendices and the reference list) plus an Excel file showing the calculation process.
Format: Use main headings suggested above, develop subheadings accordingly.
Note: Cite all assumptions, references and sources using the Harvard referencing system. Marks will be lost for improper or incorrect referencing.
Brief
This is a group assignment completed within the group of maximum three students, please read the instructions carefully.
This is the second part of a two-stage assignment process. This assignment builds on the information gathered for assignment one (market and property report) and consists of (a) a basic valuation using the direct capitalisation method, (b) the Discounted Cash Flow (DCF) valuation, and (c) investment feasibility and financing strategy analysis. The property to be valued and analysed is 18-20 Prospect Street, BOX HILL, VIC 3128. The process behind undertaking of these valuation and analysis approaches for this assignment will be discussed during the lectures and seminars and reference should also be made to the required readings and in particular the prescribed text.
Task
Following the submission of your first assignment that investigated and provided information about the subject property and the market, your client has now decided to invest in the office building under consideration and would like you to advise them on the current market value of the property and the feasibility of this investment. This investment can be financed up to 80%. The investment term is 10 years.
Your task is to prepare a valuation and investment analysis report for the property 18-20 Prospect Street, BOX HILL, VIC 3128. The research data required to undertake this analysis will be sourced from (a) your first assignment (b) from materials provided on CloudDeakin and (c) other related materials you found online.
Suggested sections and headings within this part of the report
The following headings are provided for guidance only. Changes, additions and deletions from this list may be necessary as you see fit. Within these categories you should also provide a definition of the method you are applying to demonstrate your understanding.
- Rental rationale– Here you need to analyse the market rents provided as benchmark, excluding any aberrations, and compare these to existing rents with the aim of determining and validating rents for use in the analysis process.
- Direct Capitalisation Method – In this section market value of the property should be determined using direct capitalization method. In order to do that you should analyse the sales and rental comparability and provide justification of data used etc.(the section of “Sales evidence”) and include discussion and application of outgoings. Clear conclusions on the adopted rental levels are needed as well as clear discussion of sales to explain your valuation approach. You must provide detailed step-by-step annotated calculations explaining all assumptions, capitalisation rate derivation and final valuation.
- Discounted Cash Flow (DCF) Valuation – In this section market value of the property should be determined using DCF method. You must provide all the information to explain all assumptions and interim findings, showing how cash flow estimations and discount rates have been arrived at etc. DCF model has numerous assumptions throughout which must all be discussed and justified. The DCF must be calculated over a TEN (10) YEAR PERIOD and on a properly working excel spreadsheet.
- Reconciliation of valuation – Here you must discuss the merits and weaknesses of each method (DCM and DCF) you have used in this valuation and reconcile the valuation outcome that you believe is most appropriate with pertinent justifications.
- Investment and financing analysis-The feasibility of this investment should be tested by criteria related to DCF method such as IRR, NPV and Payback period etc. You also need to analyze and discuss the other issues related to the profitability of the investment, especially the financing choice. DCF model has numerous assumptions throughout which must all be discussed and justified.
- Final conclusion – Here you must provide your final comments for the property value, valuation limitations, investment feasibility, and financing recommendations for your client.
Please note: The spreadsheet must show all headings, formulas (inserted in relevant cells) and be able to “test” by the marker by inserting new values to determine correct performance. You will need to individually discuss variables, projections and assumptions in the report, not just make small annotations in the spreadsheet.
Learning outcomes
This assignment has been designed to develop core professional knowledge and skills as part of your PRE course at Deakin. By completing this assignment responsibly you will be able to:
- Critically analyse and summarise sales and leasing information to determine subject property value (links to ULO2)
- Perform valuation of subject property using appropriate valuation methodologies and application of variables (links to ULO2 and ULO3)
- Justify and explain valuation determination in a manner that clearly demonstrates understanding of applied valuation methodologies’ strengths and weaknesses and applications (links to ULO2 and ULO3)
- Communicate findings accurately and professionally in accordance with industry practice standards (links to ULO3)
The skills and knowledge noted above are highly regarded by property professionals and employers.
These specifically relate to the Unit Learning Outcomes:
ULO2- Analyse the investment viability of property assets utilising contemporary industry methodologies and data
ULO3- Apply discipline knowledge and investment analysis methodologies to make informed judgements
Submission instructions
The due date for this assignment is 11.30 pm Friday 22 May 2020 (end of week 10). Documents should be submitted via CloudDeakin under your group. You need to submit two documents (one Word file and one Excel file). In the assignment file name include the Unit Code, Year, Trimester, Assignment Number, and Your Names and IDs. You must keep a backup copy of every assignment you submit, until the marked assignment has been returned to you. In the unlikely event that one of your assignments is misplaced, you will need to submit your backup copy.
Any work you submit may be checked by electronic or other means for the purposes of detecting collusion and/or plagiarism.
When you are required to submit an assignment through your CloudDeakin unit site, you will receive an email to your Deakin email address confirming that it has been submitted. You should check that you can see your assignment in the Submissions view of the Assignment dropbox folder after upload, and check for, and keep, the email receipt for the submission.
Notes
- Penalties for late submission: The following marking penalties will apply if you submit an assessment task after the due date without an approved extension: 5% will be deducted from available marks for each day up to five days, and work that is submitted more than five days after the due date will not be marked. You will receive 0% for the task. ‘Day’ means working day for paper submissions and calendar day for electronic submissions. The Unit Chair may refuse to accept a late submission where it is unreasonable or impracticable to assess the task after the due date.
- For more information about academic misconduct, special consideration, extensions, and assessment feedback, please refer to the document Your rights and responsibilities as a student in this Unit in the first folder next to the Unit Guide of the Resources area in the CloudDeakin unit site.
- Building evidence of your experiences, skills and knowledge (Portfolio) – Building a portfolio that evidences your skills, knowledge and experience will provide you with a valuable tool to help you prepare for interviews and to showcase to potential employers. There are a number of tools that you can use to build a portfolio. You are provided with cloud space through OneDrive, or through the Portfolio tool in the Cloud Unit Site, but you can use any storage repository system that you like. Remember that a Portfolio is YOUR tool. You should be able to store your assessment work, reflections, achievements and artefacts in YOUR Portfolio. Once you have completed this assessment piece, add it to your personal Portfolio to use and showcase your learning later, when applying for jobs, or further studies. Curate your work by adding meaningful tags to your artefacts that describe what the artefact represents.
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