investment in real estate investment

REE6305 (Dr. Beracha) – Project 1: Recommendation for an
investment in real estate investment trust (REIT) using @Risk
In this project you will provide a recommendation with respect to an investment in a publicly
traded real estate investment trust (REIT). You will select one equity REIT and then determine its
value and its current expected return. You will also determine the probability that an investor will
reach certain rates of return given different entry price levels. You are expected to utilize Excel
and @Risk in your analysis.
After you successfully complete this project you will be tooled to perform sophisticated equity
REIT valuation. Also, you will be ready to use @Risk and Monte Carlo Simulation technique in
order to model different investment-risk scenarios.
You will be working on this assignment in a group of five students (+/- one). A project submitted
by a group that doesn’t include 4-6 students will incur a grade penalty of 10%. The assignment is
due on or before June 24
th at 5:30 p.m. EST. By that time you should submit an electronic copy
(via email) of your assignment. If you turn your assignment late, 10% will be deducted from your
grade for every calendar-day delay.
Note – You are required to utilize the REIT Excel spreadsheet template (5 year holding period)
and the data from the “TrendsReport” dataset that are attached to this project description in order
to perform your analysis. You may use any other additional sources, as needed.
Your complete assignment should read and look like a professional report and include the
following sections:
1. Short introduction (1-2 paragraphs) – Briefly tell the reader which REIT you selected and
what is included in the report. You don’t need to explain why you selected this particular
REIT.
2. REIT description (1-1.5 pages) – A short description of the REIT you selected. Your
description should only include background information and statistics that you believe is
relevant and interesting/important to be acknowledged by potential investors. It is
important that you present the key statistics of your selected REIT within the context of
other competing REITs. Your description may also include graphed or tabulated
information, where appropriate.
3. Assumptions, distributions and correlations settings – Make reasonable assumptions about
each of the input variables you include in your analysis. For each input variable you must
report the most likely value of your distribution, the type of the distribution, its standard
deviation and the reasoning behind each assumption. A graphical representation
(Excel/@Risk snapshot) of each input variable distribution is also required. Additionally,
if/when appropriate, correlation between some of the input variables should be defined. 4. Investment at current market price – Select and justify a reasonable required rate of return
for the REIT you analyzed. Then, given the current REIT market price and the distribution
inputs you defined, answer the following questions:
– What is the probability that investors will earn a rate of return that is at least as high as
their required rate of return?
– What is the probability that investors will earn a rate of return that is at least as high as
their required rate of return minus 2%?
– What is the probability that investors will earn a rate of return that is at least as high as
the current yield on 10-year treasuries?
– What is the probability that investors will recognize an investment loss greater than 5%
per year?
5. Valuation – Given the distribution inputs you defined, calculate the value of your REIT per
share and explain your approach. Then, using the REIT’s value as an entry point for
potential investors, answer the following questions:
– What is the probability that investors will earn a rate of return that is at least as high as
their required rate of return?
– What is the probability that investors will earn a rate of return of at least 8% per year?
– What is the probability that investors will recognize an investment loss greater than 2%
per year?
6. Conclusion (2-3 paragraphs) – Briefly summarize your findings and provide an investment
recommendation.
Deliverables:

ONE Excel/@Risk file including your calculations and analysis in different tabs as you
see fit and ONE Word file that should be organized as a complete and well flowing report.
The total length of the report must not exceed 9 pages (Single space, font size 12 and
default size margins).
Each group will also submit ONE PowerPoint file and present the slides in class or virtually
on June 24
th, 2021. The presentation should take no longer than 10 minutes and followed
by a brief Q&A session. All members of the group must participate in the presentation or
the Q&A session.
Your assignment files should be named: “THE SENDER’S NAME –
REE6305_Proj1_Excel”, “THE SENDER’S NAME – REE6305_Proj1_Word” and “THE
SENDER’S NAME – REE6305_Proj1_PPT”Grading criteria:
Following the project guidance: 5%
Please make sure that your report follows the description provided above, including the
name of file submitted, submission via Blackboard and the material included in each
section.
Professionalism, clarity and conciseness: 5%
Margins, spacing, and fonts have been chosen to make the document attractive and easy to
read. Tables, figures and graphs have been used to summarize data and effectively illustrate
points. Headings are used judiciously to help reader find key sections in longer reports. It
should look like a professional report. Contains few typographical errors and is wellprinted. Snapshots of all relevant Excel/@Risk inputs and outputs used to derive your result
should be included in your report.
Be brief and clear! The total length of the report must not exceed 9 pages (including cover
page/table of contents).
Section 1: 6%
Section 2: 14%
Section 3: 18%
Section 4: 13%
Section 5: 13%
Section 6: 6%
Power Point & Presentation 20