Investment Appraisal and Portfolio Management - The Complete Academic Support Hub

Module name	Investment Appraisal and Portfolio Management
Module code	INV6IAP
Assignment	1
Level	6
Programme start month and year	October 2020
Assignment due time and date	10.00 a.m. (UK time), Tuesday 24 November 2020
Pass mark	40
Word count	2,000

*for further information see the Word count and overwriting section.

Submission details
For this assignment, you are required to submit:
• a report as a Word (or similar) file; and
• one worksheet of calculations as an Excel (or similar) file.
Please upload your work separately (and ensure you submit the
report file first).
Please refer to the assignment guidance in the assignment area of the
module for further guidance on the file types accepted by Turnitin.

Submission of assignments
All assignments must be submitted online in the module area of the VLE. The assignment
submission link opens 21 days before the due date. Please refer to the information provided in the
‘Assessment preparation’ week for submission guidance.
NOTE: Postal submissions will not be accepted.
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Learning outcomes

Code	Description
LO1	Demonstrate a systematic understanding of the key aspects of investment and the ability to apply coherent detailed knowledge to real estate markets.
LO2	Demonstrate knowledge and critical understanding of property investment markets and deploy established techniques of analysis and enquiry to evaluate assumptions; concepts and data; devise and sustain arguments; make judgements; and identify a range of solutions.
LO4	Research and evaluate information to aid investment decision-making; critically evaluate arguments, assumptions, concepts and data; and make reasoned judgements in complex situations.
LO5	Communicate information, ideas, problems, options and solutions effectively to specialists and non-specialists.

Scenario
You are an investment surveyor employed by a leading international firm of surveyors and based at
their Berlin office in Germany.
You have just been fully retained as a consultant by ‘Uplands Real Estate (RE) Investments’, a
London based investor, on the acquisition and disposal of commercial property investments.
‘Uplands RE Investments’ are long-term investors and generally risk averse regarding their real
estate investments. As such, they only invest in Core or Core Plus type investments.
This client has a mixed portfolio of property investments in the United Kingdom held in their
‘Vitamax’ portfolio, which is currently valued at £945,000,000.
Your client now wishes to diversify its investments by creating a separate second portfolio of
German, Austrian and Hungarian commercial property investments called the ‘Danube’ portfolio.
Like the ‘Vitamax’ portfolio, the ‘Danube’ portfolio will hold Core and Core plus properties.
Task
You have been instructed by your client to prepare a fully referenced client report (with concise
recommendations/conclusions), which provides the following:
a. Confirmation of the basis of valuation you have adopted in your appraisal and a
detailed explanation that clarifies the differences between the expressions ‘market
value’ and ‘Investment value (worth)’.
(Approximately 600 words.)
b. A discounted cash flow (DCF) appraisal on whether to proceed with the possible
acquisition of 1–5 Huntley Retail Park, Reading for the ‘Vitamax’ portfolio.
In your appraisal you should use Microsoft Excel (or equivalent) to create a
spreadsheet to calculate the Net Present Value (NPV) and Internal Rate of Return
(IRR) for this investment opportunity. You should incorporate sensitivity and
probability analysis in your appraisal. (Please refer to Appendices 1 and 2 for further
information on this investment property.) You will need to separately upload your
spreadsheet calculations to show the formulas you have used in your appraisal of this
property.
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(Approximately 500 words.)
c. A market update for the ‘Danube’ portfolio on the Hungarian real estate investment
sector.
In your assessment of this market you should report on the headline economic
statistics, typical sale and purchase terms, typical lease terms, any foreign ownership
restrictions, levels of foreign investment in recent years, property taxes, market
strengths and any possible systemic risks which may affect this market over the next
five years.
(Approximately 900 words.)
Reference list and bibliography
You should include a reference list with a minimum of ten separate relevant and appropriate
sources that you have written about and cited within your work.
You should also include a bibliography list with a minimum of five separate relevant and appropriate
sources that have influenced your thinking but are not cited in your work.
Further information to support you with this assignment is available within the study materials for
this module on the UCEM VLE. If you have any questions about this assignment, please contact
your Module Tutor or Module Leader via the VLE.
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Marking guidance for this activity
This guidance is designed to help you to do as well as possible in your assessments by explaining
how the person marking your work will be judging it.
Your work will be assessed in relation to the requirements set out in the assessment criteria
marking guide at the end of this document and the grading guidance section below.
It is recommended that you read both of these sections before starting your assessment to learn
what will help you to achieve the highest marks. Once you have finished you should review the
assessment before submitting it, to check you have done what is required to achieve the highest
marks.
When you receive your feedback from your tutor you should clearly be able to see which categories
you gained marks in and, where relevant, recommendations about how to improve your
performance going forward.
Grading guidance
This grading guidance section explains in more detail what a submission for this assessment
should include in order to achieve a mark at the threshold, good and excellent standards.
Threshold
You will have produced a structured report to a professional standard in which you have
demonstrated your ability to calculate the NPV and IRR in your DCF model and you will have stress
tested some of the key variables and results of your DCF calculations. All assumptions made by you
will have been explicitly made as part of your DCF modelling. As a client report it should be written
in the third person and not have any spelling errors. All statements need to be substantiated using
the UCEM Harvard system of referencing.
Good
In addition to meeting the threshold standard you will have produced a detailed executive summary
which clearly states the purpose of your report, has highlighted the key findings and it clearly states
your recommendations regarding the tasks listed in the assignment brief. Your report will have
clearly explained the differences between ‘market value’ and ‘investment value (worth)’ and include
a minimum of ten separate relevant and appropriate sources in the references section and a
minimum of five separate relevant and appropriate sources in the bibliography. A good report will
contain a mix of graphs, tables, location maps and photos to aid in the presentation of the report.
Excellent
In addition to the achieving the threshold and good standards you will have correctly defined the
investment proposition in terms of type (i.e. core, core plus, value added or opportunistic) and give
recommendations based on your conclusions here. You will also have explicitly recognised any
possible systemic and specific risks associated with each investment proposition.
The market update on the Hungarian real estate investment sector will be thorough, well-structured
and based on a broad mix of sources.
Excellent answers will also display originality in your application of knowledge and have displayed
excellent market knowledge regarding comparable evidence (rents, yields and capital values)
relevant to the investment properties.
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Word count and overwriting
Exceeding 10% of the stated word count may limit the marks allocated for communication (see
assessment criteria marking guide below).
The following table outlines the inclusions and exclusions in the word count of the most common
features of assessed pieces of work.

Included	Excluded
Introduction	Executive summary/abstract
Main body	Title page/front cover
Footnotes/endnotes	Contents List
In text citations	Calculations
Words in tables	Drawings/Images
Conclusion	List of references
Recommendations	Bibliography
Headings and titles, except for those explicitly excluded	Appendices

The total number of words used must be stated on the first page of your assessment.
Warning
Plagiarising someone else’s work, whether copying from the internet, UCEM study materials, a
textbook, a fellow student or elsewhere, is a serious offence. Before you submit your work for
assessment, you must check it to ensure that you have fully cited within the text all the sources of
information you have used and that all your sources are listed in a reference section at the end of
your submission. Quoted text must not be excessive in length. You will find guidance on correct
citing and referencing in The UCEM Guide to Referencing and Citation in the e-Library on the VLE.
Be aware that your work will be checked using text-matching software. The ‘Turnitin’ software
is as much for your benefit as ours at UCEM. You can use it to check that all your citations have a
matching reference and review any highlighted text that may not be original and requires a
reference.
A high text-matching result could indicate plagiarism. If plagiarism is identified this could result in a
penalty ranging from a loss of marks to exclusion from your programme.
Note: Please use the assignment referencing link to check the originality of your work before
submitting it.
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Appendix 1 – Investment Summary
1–5 Huntley Retail Park, Reading
• A modern retail warehouse development providing 4,542 sq m (48,890 sq ft) occupied by
Iceland Foods, Go Outdoors, Costa and McDonald’s Drive-Thru.
• The property is prominently positioned one mile south of Reading town centre.
• Reading is a large, affluent town in the South East of England.
• Total net income of £807,500 per annum exclusive of service charge, rates, insurance etc.
• WAULT of approximately 13.25 years (ex Breaks) / 7.66 years (inc Breaks).
• Asking Price: £15,500,000 exclusive of VAT reflecting a net initial yield of 4.70%, assuming
purchasing costs at 6.73%.
Assumptions
• For the purposes of your calculations the appraisal date is 1 January 2021.
• Reliable information on the local retail market has shown that there has been an annual
rental growth rate of 1.0% per annum over the last three years for out of town retail parks.
This trend is set to continue for the foreseeable future.
• The client’s hurdle rate of return is 6.00%.
• The holding period for this investment is 10 years for the investment, after which the
investment will be sold.
• The disposal value will be assessed on the basis of the expected rental value at the date of
the disposal and subject to a capitalisation rate, which would reflect the age and
obsolescence of the building. Assume an exit yield of 7.00% for Units 1–5 Huntley Retail
Park.
• Rents are collected annually in arrears. Rent reviews occur at the end of the specified
periods and affect rental levels thereafter. Rent reviews for the retail units are upwards only
and occur every five years.
• All leases in this investments are on an effective ‘Full Repairing and Insuring’ basis.
• An estimate of £100,000 has been forecasted for the vacancy liabilities of service charges,
insurance and local authority rates/taxes on Unit 3 if/when it becomes vacant.
• You should assume a vacancy period of 12 months for the re-letting of Unit 3, which is
currently vacant.
• You will appoint an agent for the day-to-day management of the property under a new
contract. You should therefore make an allowance for an annual management fee in your
DCF model, which will be subject to a 5% increase in management fees in year 5.
• Acquisition fees will be at 6.73%.
• Disposal fees will also be at 2.4%.
• Letting fees will be at 10% of the rent achieved.
• Rent review fees will be at 7.5% of the revised rent.
Clearly state any further assumptions you make, which should be realistic.
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Appendix 2 – Tenancy Schedule
© University College of Estate Management 2020 Page 8 of 11
ASSESSMENT CRITERIA MARKING GUIDE

LEVEL 6	Weight ing %
1. COMMUNICATION	15	0–2 Inadequate	3–4 Limited	5 Below threshold	6–7 Threshold	8 Good	9 Very good	10–11 Excellent	12–15 Outstanding
Relevance to task • The relevance of the information provided to the context of the task • The way the needs of the intended audience have been addressed.	Irrelevant and addresses neither the task nor the needs of the intended audience.	Largely irrelevant and does not effectively address the task or the needs of the intended audience.	Partially relevant and attempts to address the task and the needs of the intended audience with significant irrelevance or omissions.	Sufficiently relevant to the task and the needs of the intended audience to meet the learning outcomes.	Mostly relevant to the task and the needs of the intended audience, with some minor irrelevance or omissions.	Consistently relevant to the task and focussed on the requirements of the intended audience.	Highly relevant to the task and precisely focussed on the requirements of the intended audience.	Completely relevant to the task and fully focussed on the requirements of the intended audience.
Structure and presentation • Organisation and presentation of ideas	A lack of structure beyond a loosely connected list of points.	Largely unstructured and does not have a clear logical flow.	Inconsistent structure and logical flow.	Adequate structure and logical flow.	Reasonable structure and logical flow.	Capable structure and logical flow.	Advanced structure and logical flow.	Proficient structure and logical flow.
• Format appropriate to the intended audience and/or industry protocols • How structure and presentation enable communication.	Presentation format is inappropriate. Communication is obstructed.	Presentation format is ineffective. Communication is hindered.	Presentation format is confused. Communication is only partially effective.	Presentation format is satisfactory. Communication is sufficient to meet the learning outcomes.	Presentation format is appropriate. Communication is clear.	Presentation format is effective. Communication is sound.	Presentation format is sophisticated. Communication is articulate.	Presentation format is innovative. Communication is insightful.
Grammar • Selection of words, sentence construction, spelling and punctuation.	Use of grammar is deficient and meaning is obstructed.	Significant grammatical errors and meaning lacks clarity.	Several grammatical errors and meaning conveyed insufficiently clearly.	Notwithstanding some minor errors and oversights, grammar and clarity of meaning are sufficient to meet the learning outcomes.	Grammar usage is fair and conveys meaning clearly.	Grammar usage is capable and conveys meaning effectively.	Grammar usage is advanced and conveys meaning precisely.	Grammar using is exceptional and conveys meaning eloquently.
2. KNOWLEDGE AND UNDERSTANDING	20	0–3 Inadequate	4–5 Limited	6–7 Below threshold	8–9 Threshold	10–11 Good	12–13 Very good	14–15 Excellent	16–20 Outstanding
Knowledge of the key aspects of the field of study	Little significant knowledge of the subject matter.	Incomplete knowledge of the subject matter.	Some knowledge of the subject matter with significant omissions.	General knowledge of key elements of the subject matter.	Reasonable knowledge of the key elements of the subject matter.	Sound knowledge of the subject matter.	Comprehensive knowledge of the subject matter.	Full knowledge of the subject matter.
• Demonstration of understanding of the key aspects of the field of study	Misrepresented or misunderstood understanding of the key aspects of the field of study.	Ineffective understanding of the key aspects of the field of study.	Inconsistent and confused understanding of the key aspects of the field of study.	Basic understanding of the key aspects of the field of study, sufficient to meet the learning outcomes.	Clear understanding of the key aspects of the field of study.	Effective understanding of the key aspects of the field of study.	Sophisticated understanding of the key aspects of the field of study.	Very advanced understanding of the key aspects of the field of study.

• Knowledge and understanding of key theories/techniques.	Key theories / techniques are explained incorrectly or omitted.	Key theories / techniques are explained unsatisfactorily.	Key theories / techniques are explained inaccurately and partially with significant omissions.	Key theories / techniques are explained adequately.	Key theories / techniques are explained competently.	Key theories / techniques are explained capably.	Key theories / techniques are explained accurately.	Key theories / techniques are explained to an exceptionally high standard.
3. USE AND APPLICATION OF SOURCE MATERIAL	20	0–3 Inadequate	4–5 Limited	6–7 Below threshold	8–9 Threshold	10–11 Good	12–13 Very good	14–15 Excellent	16–20 Outstanding
Application of UCEM Harvard referencing style	A minimal number of sources have been referenced. The referencing system is applied incoherently.	Referencing is unsatisfactory due to significant omissions, inaccuracies or inconsistencies in the application of the referencing system.	Referencing is insufficient due to several omissions, inaccuracies or inconsistencies in the application of the referencing system.	Referencing is sufficiently complete, accurate and consistent in the application of the referencing system to meet the learning outcomes.	Referencing is competent with mostly complete, accurate and consistent application of the referencing system.	Referencing is effective with complete, accurate and consistent application of the referencing system with few errors.	Referencing is comprehensive with complete, accurate and consistent application of the referencing system with minimal errors.	Referencing is comprehensive and applied faultlessly.
Source Materials
• Selection of course materials	Minimal and incoherent selection of course materials.	Ineffective selection of course materials with significant omissions.	Inconsistent and inaccurate selection of course materials.	Adequate selection of course materials.	Competent selection of course materials.	Capable selection of course materials.	Sophisticated selection of course materials.	Innovative selection of course materials.
• Independent research	Knowledge has not been informed by any contemporary scholarship. Independent research is minimal.	Knowledge has not been informed by any notable contemporary scholarship Independent research is incomplete and unsatisfactory.	Knowledge has partially been informed by appropriate contemporary scholarship. Independent research is insufficient.	Knowledge has been at least partially informed by appropriate contemporary scholarship, sufficient to meet the learning outcomes. Independent research is basic.	Independent research is competent and has been informed by a reasonable amount of appropriate scholarship at the forefront of the academic discipline.	Knowledge has been informed by a wide range of appropriate contemporary scholarship. Independent research is sound.	Detailed knowledge has been informed by a comprehensive range of authoritative contemporary scholarship Independent research is advanced.	An outstanding level of knowledge has been informed by the full range of authoritative contemporary scholarship Independent research is proficient.
• Use of industry practice and personal experience.	Industry practice and personal experience omitted or irrelevant.	Limited and incomplete reference to industry practice and personal experience.	Simple reference to industry practice and personal experience.	Satisfactory reference to industry practice and personal experience.	Clear reference to industry practice and personal experience.	Effective reference to industry practice and personal experience.	Perceptive reference to industry practice and personal experience.	Insightful reference to industry practice and personal experience.
Application of source materials to task	Source materials are used inadequately and applied incoherently. The assessed work is not informed or improved by the source materials.	Source materials are used ineffectively and applied unsatisfactorily. The assessed work is informed and improved in a limited manner by the source materials.	Source materials are used inconsistently and applied partially. The assessed work is informed and improved in a simple manner by the source materials.	Source materials are used satisfactorily and applied adequately. The assessed work is informed and improved in a basic manner by the source materials, sufficient to meet the learning outcomes.	Source materials are used competently and applied clearly. The assessed work is informed and improved in a reasonable manner by the source materials.	Source materials are used capably and applied consistently. The assessed work is informed and improved in a consistent manner by the source materials.	Source materials are used perceptively and applied accurately. The assessed work is informed and improved in a comprehensive manner by the source materials.	Source materials are used innovatively and applied insightfully. The assessed work is informed and improved in an exceptional manner by the source materials.

4. EVIDENCE BASED CRITICAL ANALYSIS	25	0–4 Inadequate	5–6 Limited	7–9 Below threshold	10–12 Threshold	13–14 Good	15–16 Very good	17–19 Excellent	20–25 Outstanding
Critical analysis • Analysis of Source Materials	Analysis of the source materials is superficial, deficient or minimal	Analysis of the source materials is shallow ineffective or incomplete.	Analysis of the source materials is insubstantial, inaccurate or inconsistent.	Analysis of the source materials is adequate and of sufficient depth to meet the learning outcomes.	Analysis of the source materials is substantial clear and competent.	Analysis of the source materials is thorough, effective and consistent.	Analysis of the source materials is rigorous, accurate and comprehensive.	Analysis of the source materials is profound, proficient and very advanced.
• Application of analysis to the demands of the task.	Analysis is not applied to the demands of the task.	Analysis is applied unsatisfactorily to the demands of the task.	Analysis is partially applied to the demands of the task.	Analysis is satisfactorily applied to the demands of the task.	Analysis is reasonably applied to the demands of the task.	Analysis is effectively applied to the demands of the task.	Analysis is perceptively applied to the demands of the task.	Analysis is innovatively applied to the demands of the task.
Development of arguments • Use of analysis to develop and sustain arguments and justifications.	Arguments and justifications are incoherent and deficient. There is minimal evidence of an attempt to develop or sustain an argument.	Arguments and justifications are unsatisfactory and ineffective. The development of arguments is incomplete and not sustained.	Arguments and justifications are confused and inaccurate. The development of arguments is inconsistent and partially sustained with significant omissions.	Arguments and justifications are satisfactory and sufficient to meet the learning outcomes. The development of arguments is basic and sustained adequately.	Arguments and justifications are clear and reasonable. The development of arguments is fair and sustained competently.	Arguments and justifications are consistent and effective. The development of arguments is capable and sustained throughout.	Arguments and justifications are advanced and sophisticated. The development of arguments is sophisticated and sustained comprehensively.	Arguments and justifications are ambitious and exceptional. The development of arguments is insightful and fully sustained.
Technical ability (where appropriate) •Quality of drawings	Drawings are incorrect or omitted.	Drawings are incomplete or with significant omissions.	Drawings are inaccurate and only partially completed.	Drawings are completed at a basic level sufficient to meet the learning outcomes.	Drawings are completed at a competent level.	Drawings are completed capably.	Drawings are completed accurately.	Drawings are completed to an exceptionally high standard.
•Accuracy of calculations	Calculations are incorrect or omitted.	Calculations are incomplete with significant omissions.	Calculations are inaccurate and only partially completed.	Calculations are completed at a basic level sufficient to meet the learning outcomes.	Calculations are completed at a competent level.	Calculations are completed capably.	Calculations are completed accurately.	Calculations are completed to an exceptionally high standard.
•Appropriate selection and application of information.	Selection of information is incorrect or minimal. Information is applied inadequately or incoherently to the task.	Selection of information is incomplete with significant omissions. Information is applied ineffectively or unsatisfactorily to the task.	Selection of information is inconsistent and partial. Information is applied inaccurately to the task.	Selection of information is satisfactory and sufficient to meet the learning outcomes. Information is applied adequately to the task.	Selection of information is clear and reasonable. Information is applied competently to the task.	Selection of information is consistent and effective. Information is applied capably to the task.	Selection of information is accurate and comprehensive. Information is applied perceptively to the task.	Selection of information is proficient and insightful. Information is applied innovatively to the task.

5. INSIGHT, INTERPRETATION AND EVALUATION	20	0–3 Inadequate	4–5 Limited	6–7 Below threshold	8–9 Threshold	10–11 Good	12–13 Very good	14–15 Excellent	16–20 Outstanding
Thinking beyond interpretations in core sources	Insight is minimal. Only interpretations from core sources are offered.	Insight is limited and unsatisfactory. Interpretations are largely taken from core sources.	Insight is inconsistent and insufficient. Some simple interpretation beyond the core sources is offered.	Insight is satisfactory with basic interpretation beyond the core sources is offered sufficient to meet the learning outcomes.	Insight is clear with reasonable interpretation beyond the core sources.	Insight is effective with sound interpretation beyond the core sources.	Insight is advanced with sophisticated interpretation beyond the core sources.	Insight is exceptional with original interpretation beyond the core sources.
Evaluation of evidence and rationale for choices made	Any evaluation is unsubstantiated and unstructured leading to deficient judgements or conclusions.	Evaluation is unsatisfactory in its reasoning leading to incomplete judgements or conclusions.	Evaluation is simple in its reasoning leading to inaccurate or confused judgements or conclusions.	Evaluation is adequate in its reasoning leading to satisfactory judgements or conclusions sufficient to meet the learning outcomes.	Evaluation is competent in its reasoning leading to reasonable judgements or conclusions.	Evaluation is effective in its reasoning leading to sound judgements or conclusions.	Evaluation is sophisticated in its reasoning leading to perceptive judgements or conclusions.	Evaluation is ambitious and convincing in its reasoning leading to insightful judgements or conclusions.