PROP 6600 Winter 2012 – Draft 2

Schulich School of Business York University Course Outline PROP 6600: REAL ESTATE PORTFOLIO MANAGEMENT 3.00 WEDNESDAYS, 7:00 – 10:00 PM WINTER TERM 2012 Instructor Andre Kuzmicki 416-736-2100 x20993 W362L Seymour Schulich Building akuzmicki@schulich.yorku.ca Office hours: Drop-in or by appointment Brief Description This course deals with the spectrum of investment styles, structures and strategies employed in the creation and management of institutional real estate investment portfolios in both the private and public markets. It includes a review of portfolio theory in a real estate context; examination of the concepts of risk, return and diversification, and how they influence portfolio planning decisions; consideration of the advantages and disadvantages of various investment vehicles; and the consequences of international diversification on portfolio performance. Prerequisite/ Co-requisite PROP 6100 3.00 or permission of the instructor. Course objectives Real estate is a dynamic and ever evolving asset class. Once a purely local business dominated by entrepreneurs and developers it has grown into a mammoth global industry populated by an array of institutional investors, including: pension plans; sovereign wealth funds; investment advisors; private equity firms; real estate investment trusts; operating companies; and other professionally managed entities. The evolution continues as the Great Financial Crisis and the ensuing economic uncertainty have only served to increase the appetite for hard, cash-flowing assets and acted as a catalyst for a re-evaluation of investment strategies and investor/ manager relationships. Notwithstanding its popularity with institutional investors, real estate remains an esoteric asset class. PROP 6600 is intended to illuminate the industry for students wanting to pursue a career within it and/or the investment industry in general, offering a “Bay Street” perspective on what was formerly a “Main Street” asset class. This course will explore the wide variety of real estate investment strategies adopted by professional market participants. It will deal solely with equity investments, in both private and public markets. Its objectives are to:

1) provide a thorough understanding of the theoretical basis, scope and structure of the industry; 2) encourage students to think creatively about real estate opportunity at both macro and micro levels; and 3) strengthen analytical and critical thinking skills in an investment context.

A key theme explored throughout the course is how people and organizations act on opportunity and manage or, conversely, fail to manage risk. Organization of the Course The course is in seminar form demanding consistent attendance and active participation by all members of the class. There will be some lectures but the majority of class time is dedicated to guest lectures by senior industry participants, student presentations, case analyses, and discussion. I intend our meetings to be highly interactive,

therefore, I expect you to be punctual, well prepared and engaged at all times. If you are not enthusiastic about the subject and/or cannot attend each and every class you should not enrol. The course includes a mandatory stock-picking competition sponsored by Ron Rimer, formerly a co-instructor of the course. Each student will receive an allocation to invest in a portfolio of Canadian publically traded REIT units or company shares. At the end of the course, the student with the highest total return will be presented with the Rimer Cup trophy. Further details will be posted on the CMD. Assigned Reading and Cases Each section of a Schulich-based course has a Course Materials Database (“CMD”) created within Lotus Notes. Every CMD includes some important general information for Schulich students. Certain readings and important notices will be posted to the CMD so consult it regularly. You will be asked to download some of the reading material from the internet or the CMD, while other material may be handed out in class. Readings may also be taken from the second edition of Commercial Real Estate Analysis and Investments by David M. Geltner, Norman G. Miller, Jim Clayton and Piet Eichholtz, 2007 (CREAI) and Real Estate Finance and Investments: Risks and Opportunities by Peter Linneman, PhD, Linneman Associates, Third Edition, 2011 (REFI). Both books are on reserve. You will be granted a temporary license to access The Canadian REIT Handbook by Goodmans LLP on-line. The Handbook was published by the Canadian Institute of Public and Private Real Estate Companies in 2004 and the on-line version is updated as required. You will also be provided access to Canaccord Genuity’s real estate equity research. Details on how to access both these resources will be posted to the CMD. You are responsible for purchasing the coursepack containing three of the case assignments from Harvard Business Publishing. A link to the Harvard website will be posted to the CMD. Evaluation of Student Performance The course grading scheme for Master’s level courses at Schulich uses a 9-value grade-point system. The possible course letter grades for a course (and the corresponding grade points awarded for each grade) are:

A+ = 9 grade points A- = 7 B = 5 C+ = 3 C- = 1 A = 8 B+ = 6 B- = 4 C = 2 F = 0 (Students are reminded that they must maintain a cumulative GPA of at least 4.2 to remain in good standing and continue in the program, and a minimum of 4.4 to qualify for their degree. Schulich grading guidelines mandate a section grade point average (GPA) of between 4.7 and 6.1 for core courses and a section GPA of between 5.2 and 6.2 for electives.) Where instructors use numerical or percentage grades, Schulich grading policy does not require a preset translation of percentages into specific letter grades. In this class, final letter grades will be determined by the following process:

1) assignments and participation will be graded using percentages; 2) weighted average percentage grades will be converted to a letter grade using the following matrix:

90 - 100 = A+ 80 - 84 = A- 70 - 74 = B 60 - 64 =C+ 50 - 54 = C-85 - 89 = A 75 - 79 = B+ 65 - 69 = B- 55 - 59 = C 0 - 49 = F

The overall grade for the course will be based on the following items weighted as indicated:

class participation 20% four cases @ 20% 80%

PROP 6600 Winter 2012 – Draft 2

PROP 6600 Winter 2012 – Draft 2

Participation grades will be based on: overall contribution to a positive classroom environment; quality and consistency of contributions to class discussions; presentation of cases; being aware of issues raised in the readings; and attendance and punctuality. Case grades will be based on written submissions. In the case of team assignments grades will normally be awarded equally to each member of the team. Two cases are to be prepared and submitted individually. The other two assignments must be completed in teams of two or three students. It is up to students to form teams, however, each assignment requires a completely different team – in other words, you may only be on the same team as any other student once. I reserve the option of re-assigning teams. I expect team members to collaborate closely on each aspect of the assignment and I expect each team member to be able to explain and defend his/ her team’s work. You are to observe the general Case Preparation Guidelines, which will be posted on the CMD, as well as specific guidelines for each case. These guidelines include length maximums, which must not be exceeded. Due dates are noted in the course schedule. We will discuss each case in class on the due date. You are expected to have a copy of you submissions and/ or working papers available for reference during the discussion. To begin the discussion I will ask several students or groups, as the case may be, to summarize their analysis and recommendations in very brief (two minute maximum) presentations to the class. To assist with these, each student, in the case of the individual assignments, and each group, in the case of the team assignments, must prepare one to four PowerPoint slides summarizing their findings and recommendations. These are to be appended to the written submissions and brought to class ready for presentation. Each student must present at least once during the term. The submission deadline is the start of class on the respective due date. Fax or email submissions will not be accepted except under exceptional circumstances. Late submission will be accepted without penalty up to 7:20 pm and with a 5 percent penalty until the class resumes following the break. Assignments submitted at any time after the break will not be accepted under any circumstances. If you cannot attend class on the day an assignment is due, you may deliver it to me in Room W362L or to the Program Administrator, Helen Hundert, in Room W362P before 4 pm of the due date or you may arrange to have the assignment handed in by a classmate. Academic Honesty Academic honesty is fundamental to the integrity of university education and degree programs. The Schulich School will investigate and will act to enforce academic honesty policies where apparent violations occur. Students should familiarize themselves with York University’s policy on academic honesty. It is printed in full in your student handbook and can also be viewed on-line on the Schulich website, clicking through as indicated: Schulich website ‘School’ ‘Academic Honesty’ ‘Schulich Academic Honesty Policy’ While academic dishonesty can take many forms, there are several forms of which students should be highly aware because they are the ones that are most likely to occur in the context of a specific course. (1) Plagiarism. Plagiarism is the presentation of information, ideas, or analysis generated by other people as being your own. It includes direct quotations as well a substantive paraphrases where the source of that information or idea is not clearly identified to the reader. Students should be careful to present their written work in a way that makes it completely clear in each and every case where a quotation, a paraphrase, or an analysis is based on the work of other people. (This includes information from all sources, including websites.) (2) Cheating. Cheating is an attempt to gain an unfair advantage in an evaluation. Examples of such violations include (but are not limited to) consulting prohibited materials during an examination or copying from another student.

PROP 6600 Winter 2012 – Draft 2

(3) Failure to follow limitations on collaborative work with other students in preparing academic assignments. Each class differs in the mix of assignments and group-versus-individual preparation that is allowed. The instructor will make clear the extent of collaboration among students that is acceptable among students on various pieces of assigned work. Students should abide by those limitations and, if they are unsure about whether a certain level or form of collaboration would be acceptable, to clarify that question with the instructor in advance. (4) Aiding and abetting. A student is guilty of violating academic honesty expectations if he/she acts in a way that enables another student to engage in academic dishonesty. If a student knows (or should reasonably expect) that an action would enable another student to cheat or plagiarize, that student’s action constitutes an academic honesty violation. Illustrative examples include making your exam paper easily visible to others in the same exam or providing your own working or finished documents for an ‘individual assignment’ to another student (even if that other student said that he/she just wanted to ‘get an idea of how to approach the assignment’ or ‘to check whether they had done theirs correctly’). (5) Use of academic work in more than one course. Generally, academic work done for every course is ‘new’ work, done for that course only. If a student wishes to use some or all of the academic work done for an assigned task in one course in another course, the student must get explicit, prior permission from both instructors so that they agree that the scope and nature of the overlapping use of that work is such that it can fairly be counted toward both courses. Schedule of Topics, Readings and Due Dates The list of lecture topics and readings on the following pages indicate the material to be read, reviewed and/or prepared for the various class sessions. If any changes in this schedule become necessary, notifications will be posted in the course CMD, and where such changes need to be announced between class sessions, an email will be sent to students’ Lotus Notes email accounts, notifying them of the change.

PROP 6600 Winter 2012 – Draft 2

COURSE SCHEDULE Session Topic

Part One: the Real Estate Investment Industry Session One January 11

Historical perspective of real estate as an asset class. Course themes, objectives and approach.

Readings: Conner, Philip and Liang, Youguo, “Institutional Real Estate Investment: Evolution and Innovation”, Real Estate Finance, October 2003 (search eResource at www.library.yorku.ca) Clayton, Jim, et al, “Real Estate’s Evolution as an Asset Class”, Journal of Portfolio Management, September 2009 (search eResource at www.library.yorku.ca)

Part Two: the Tax-exempt Sector

Session Two January 18

The macroeconomic environment. Portfolio theory and the case for real estate.

Readings: CREAI, Chapters 21 and 22 MacKinnon, Greg, “Private Real Estate Allocations in Multi-Asset Investment Portfolios”, PREA Research Report, November 2011 (download from CMD) Melbourne Mercer Global Pension Index, Australian Centre for Financial Studies, November 2011 (download from GlobalPensionIndex)

Guest Speaker: Maureen Farrow, President, Economap Inc. Session Three January 25

Cadillac Fairview case study. Real estate portfolio strategy issues.

Readings: Pill, Juri, “Platform Companies: The Canadian Institutional Real Estate Approach”, PREA Quarterly, Winter 2009 (download from CMD) Riddiough, Timothy J., “Commercial Real Estate in the Institutional Investment Portfolio: A Great Idea Fraught with Hard Realities”, Real Estate Finance, October 2002 (search eResource at www.library.yorku.ca)

Guest Speaker: Louie DiNunzio, Senior Vice President, Investments, The Cadillac Fairview Corporation Limited (Cadillac Fairview)

PROP 6600 Winter 2012 – Draft 2

Part Three: REITs Session Four February 1

The Canadian REIT market and the Initial Public Offering (IPO) process. Rimer Cup launch. IBET case discussion.

Readings: The Canadian REIT Handbook, Chapters 1 through 5 MacKinnon, Greg, “REITs and Real Estate: Is There Room for Both in a Portfolio?”, PREA Research Report, October 2010

Guest Speaker: Andrew Phillips, Managing Director and Team Head, TD Securities Real Estate Group

First Assignment Due (Individual): The IBET Pension Fund

Session Five February 8

The sell side perspective. Performance measurement and valuation.

Readings: The Canadian REIT Handbook, Chapters 11 and 12

Guest Speaker: Shant Poladian, Analyst, Canaccord Genuity

Session Six February 15

REITs as an investment product – the buy side perspective.

Readings: The Canadian REIT Handbook, Chapters 6 through 10

Guest Speaker: Dennis Mitchell, Chief Investment Officer, Sentry Select Capital Inc. Reading Week February 22

No Class

Session Seven February 29

An examination of Chartwell Seniors Housing REIT including the case study assignment and its history/ performance since its IPO in 2003.

Guest Speaker: W. Brent Binions, President and CEO, Chartwell Seniors Housing REIT

Second Assignment Due (Team): The Chartwell Seniors Housing REIT IPO

Part Four: Investor/Manager Relationships Session Eight March 7

The real estate investment management business.

Readings: CREAI, Chapter 26, Secs 26.1 and 26.2

Guest Speaker: TBA

PROP 6600 Winter 2012 – Draft 2

Session Nine March 14

Private equity real estate funds.

Readings: Linneman, Peter and Moy, Deborah C., ”Understanding the Return Profiles of Real Estate Investment Vehicles”, Wharton Real Estate Review, Fall 2003 (download from CMD) Kuzmicki, Andre and Simunac, Dan, “Private Equity Real Estate Funds: An Institutional Perspective”, Real Property Association of Canada, January 15, 2008 (download from REALpac)

Guest Speaker: TBA

Session Ten March 21

TBA

Guest Speaker: TBA

Third Assignment Due (Individual): TBA

Part Five: International Investing Session Eleven March 28

An emerging markets investment case study - the Canada China Property Investment Fund. The case for international investing

Readings: TBA

Guest Speaker: Chris Lawrence, Executive VP, Investment Management, Bentall Kennedy Canada (Bentall Kennedy)

Session Twelve April 4

Case discussion. Rimer Cup trophy presentation. Course Wrap-up.

Guest Speaker: TBA

Fourth Assignment Due (Team): TBA