PLAN A6377.001 FUND MANAGEMENT & CAPITAL FORMATION； FALL 2024Matlab

Java Python PLAN A6377.001 FUND MANAGEMENT & CAPITAL FORMATION; FALL 2024

Overview

This course will expose students to the fundamentals of real estate fund management, capital raising, investment  philosophy, the basic  terms and language, major players in the industry, and an introduction to legal and financial aspects of the private equity real estate market. The professors will give students a broad base of understanding in the concepts, terms and fundamentals that govern the real estate private fund markets today. The course will be taught from the perspective of the General Partner raising and managing funds and investments and the Limited Partner investing in such investments.

The class will focus in particular on alignment of interest, decision making process, current fundraising issues as well as on the structuring of private funds and transactions. The course should be of particular interest to students who want exposure to real estate private funds in the future, either as a General Partner, Limited Partner or Local Operating Partner domestically or internationally.

Core curriculum will cover the lessons below in five sessions of 2 hours, plus final presentations.

Schedule:

All classes take place Tuesday 4-6PM in  Wood, with the exception of the last class Friday October 11th 2:00 to 5:00PM.

Class 1; September 10th, 2024: Introduction to the Private Equity RE Market

Class 2; September 17th, 2024: Life as an LP

Class 3; September 24th, 2024: Life as a GP

Class 4; October 1st, 2024: Fund/Capital Formation

Class 5; October 8th, 2024: Putting it all Together

Class 6; October 11th, 2024: Final Presentations (2:00-5:00PM)

***In order to be eligible for a grade of HP, students must attend all five lectures as well as the final presentations. ***

Although no prerequisite is required, the class is intended to move at a fast pace and students are expected to come to each class prepared to discuss assigned reading material.

Lecture 1:  Introduction to Fund Management Definition, background, size, key players, intermediaries, types of funds, scope, and overall foundation for the balance of the class.

New Assignments Issued:

o Individual assignment HW1 (Due by September 17th at 4 PM): Berkshire PPM. Read the term sheet and answer the questions below based on the fund offering as though you are an LP considering an investment in this fund (for the purposes of this assignment, assume you are making the investment pre-pandemic).  In particular, focus on term sheet, strategy, track record and team.

Is the fee structure aligned with the GP & LP?

Does the duration match the life cycle of assets?

Most compelling/least compelling aspect of this strategy?

Control - can you get out?

Satisfied as an LP?

•    What satisfies you?  If not, what changes would you make?

o Individual assignment HW2 (Due by September 17th at 4 PM): Read Greycourt paper on selecting best in class managers. Discuss your observations and reactions to it.

Must evaluate:

•    Placement agent

•    Structure - story/track record/competitive advantage

•    How do you goto market?

•    The business plan

Lecture 2: Life as an LP:

Decision making process, alignment of interest, who are the Institutional players, open end vs, closed end, sovereign funds, HNW, family offices, how LPs select GPs.

Assignments Due:

o HW1

o HW2

New Assignments Issued:

o Individual Assignment HW3 (Due by September 24th at 4 PM): Read 3 Howard Marks Memos and Zell article. Respond to the following:

Write your overall reaction to the Marks and Zell papers

Identify the aspects you agree with and disagree with

What do you think could be improved with the Real Estate Private Equity model

o Group Assignment GA1 (Due by September 24h at 4 PM): Form. groups of eight. As a GP, what is your best idea for a real estate fund or investment strategy?  The  two critical components of this assignment are:

Explain your idea in an executive summary (include the following):

•    1) What is the market opportunity?

•    2) What is your strategy for tapping into this opportunity?

Lecture 3: Life as a GP:

Investment philosophy, raising capital for a specific deal and drafting a term Sheet: Waterfalls, J- curve vs. Cash Flow, preferred returns, IRRs, multiples, clawback and negotiation between LPs   and GPs and Operators

Assignments Due:

o HW3:  Reaction to Marks/Zell Papers.

o GA1: Executive Summary of Investment idea.

New Assignments Issued:

o Group Assignment GA2 (Due by October 1st at 4 PM): Provide an analysis of market data supporting your group’s investment thesis for your proposed fund idea (2 pages maximum).  Utilize market data and research to support your investment  strategy.

o GP/LP Term Sheet Negotiation (Due by October 1st at 4 PM - Prior to Class)

Lecture 4: Fund Formation:

Fund structuring, Term Sheet, due diligence and negotiations Assignments Due:

o GA2

New Assignment Issued:

o Revised Executive Summary of Fund/Investment Idea (Due by October 8th at 4 PM):

Lecture 5:  Putting it all Together:

Fund formation, RFPs, due diligence and negotiation. Recap and conclusion – putting it all together.

Assignments Due:

o Case Study GP/LP Term Sheet negotiation – all groups to have negotiated this prior to class and come with final terms for an in-class exercise

o Group Assignment GA4: Revise Fund/Investment Idea for special review class

Class 6: Final presentations:

Students will pitch their fund offering and investment strategy to the professors, who will act as limited partners looking to invest.

Assignments Due:

o Group Assignment GA4: final pitches for funds, investment ideas, companies and

any related presentations. Presentations to be emailed by 10pm the night before the presentation. All presentations submitted after this deadline will not be included. Revisions will not be accepted after this deadline.

Materials and Grading

1.   Students will be handed various relevant reading materials (articles and fund documents), and prepared reading composite to review before each class on the topic for that class.

2.   Each class, students will be asked to turn in a paper or assignment on a topic assigned in the prior class.

3.   Grades will be determined through class participation, assignments and the final presentations.

4.   Please submit individual papers as a  PDF document uploaded to Courseworks with the following file naming format:

Lastname_Firstname_HW1

5.   Please submit group papers as a PDF document uploaded to Courseworks with the following file naming format:

Groupname_GA1

Grading Associates

•    Nolan Schmitz

Conclusion:

At the end of the classes, students should have a good understanding of the fund marketplace and process to enable them to understand concepts that will be introduced to them throughout the balance of the program.  The goal will be to teach them how and why money flows to real estate through private equity funds so that they can better access it, understand which side of the table they want to represent and incorporate the concepts from this class to better understand how to utilize the private equity structure to invest in real estate investment strategies