Abstract
The Dream Team Approach is a time-tested training and teaching tool for teaching advanced commercial real estate finance and investment analysis. Instructors can implement the Dream Team Approach immediately by applying its included curriculum design. It also offers crucial guidance for incorporating the Dream Team Event, a unique, engaging, and potentially highly visible industry interactive learning experience, as a capstone project. Detailed guidance is provided for organizing, preparing, and delivering the Dream Team Event. The Dream Team Approach has been delivering outstanding student learning outcomes since 2008. It is now offered in the hope that its adoption and use will motivate, encourage, and educate the next generation of commercial real estate professionals.
Focus
The Dream Team Approach offers instructors and students a fun and engaging learning experience in commercial real estate finance and investment analysis. Inspired by the most outstanding men’s basketball team in Olympic history, the USA’s 1992 ‘Dream Team’ counted amongst them eleven of the best professionals in the National Basketball Association and the College Basketball Player of the Year. Their dominance—eight wins by more than 44 points per game and Coach Chuck Daly never called a single time-out—changed the game forever, forcing teams around the globe to push themselves to learn how to compete and achieve at ever-higher levels. All these many years later, the Dream Team’s unprecedented dominance and success serve as a reminder that following the example of those with the highest levels of knowledge, experience, and professionalism will provide the most significant opportunities for motivating, teaching, and learning. Following their enduring lesson that there is much to learn from professionals, the Dream Team Approach is a guide instructors can use as a training and teaching tool to deliver an advanced commercial real estate finance and investment curriculum in the classroom and an intense, industry interactive capstone learning experience. The Dream Team Approach has produced highly effective student learning outcomes for over 15 years.
Setting
Following an introduction to the Dream Team Approach, instructors receive specific instructions on introducing it into their class, developing student teams, and recruiting professional investors for the Dream Team. The Dream Team Event can also be highly visible in the business college, on campus, or in the community, so administratively, organization and execution are critical. Students also understand the significance, and over many weeks, they improve their organization, speaking, and presentation skills by working in randomized teams to teach subject material and lead classroom discussions.
Background
Students learn how to design and apply complex real estate finance and investment analysis concepts and techniques. Learning outcomes include an understanding of components of an investment real estate transaction and the legal interests that are bought and sold; discounting and compounding; debt and equity capital structure; investment rates of return; structure and steps in a financial investment analysis; and discounted cash flow analysis and the estimation of an internal rate of return for property investments with irregular cash flows.
The class sequence includes two parts. During the first ten weeks of a typical 15-week semester, students work in randomly assigned student teams to organize and teach subject material; typically, this section accounts for 60 percent of student grades. Students complete all class exams before beginning the Project.
In the remaining five weeks, students work on the Project, using class time to outline their ideas, discuss their progress with the instructor, question their work and that of their classmates, work with their teammates to develop their analysis and recommendation, and prepare and rehearse various Pitches. The Dream Team Event should occur during the last week of classes; typically, this section accounts for 40 percent of student grades. Experience has shown that because students often underestimate the scope and depth of work required to complete the Project, requiring completion of all class exams before they begin working on it positively affects student learning outcomes.
Project
To complete the Project, students work in teams as investment real estate brokers to persuade a group of active industry experts and professional investors to purchase their recommended real estate investment property. To prepare, students use the foundational commercial real estate finance and investment material presented in the first section of the class, along with material they have studied in other real estate subjects (e.g., brokerage and agency, contracts and law, and appraisal and valuation) to analyze five Investment Property Offering Memorandum Summaries highlighting five distinct property types in five different locations (). They also receive a list of stated Dream Team Investment Parameters (), which provides target ranges for the investors’ equity, debt and return expectations. This information is the principal guide for student analyses and investment recommendations. Students are not told during the semester who the Dream Team members will be, only that they are well-known, successful professionals in real estate and related fields with deep experience in various investments.
Figure 1. Offering Memorandum – Investment Property 1.
Figure 2. Offering Memorandum – Investment Property 2.
Figure 3. Offering Memorandum – Investment Property 3.
Figure 4. Offering Memorandum – Investment Property 4.
Figure 5. Offering Memorandum – Investment Property 5.
Figure 6. Dream team investment parameters.
Dream Team
Each year, the author issues Dream Team invitations based on long-standing relationships with professionals in regional real estate and related industries. Some readers may wonder how to assemble the Dream Team, especially if they need more connections to industry experts. There are many options.
Connect with the college’s alumni relations office and inquire about graduates who work in real estate and related industries. Leaders at the local real estate trade association office will know the big names in development and brokerage. Likewise, local homebuilders or general contractor trade associations will have relationships with many active professionals. Another possibility is the chamber of commerce, whose members will most certainly include many leaders in the region’s banking, investment, accounting, and legal industries. A broad distribution of industry experts and professionals works best.
Experience confirms that once some introductions occur and the business community learns about the Project, building out the rest of the Dream Team will be easier. For additional help, contact the college or university communications team to help spread the word and promote interest in the business community. Likewise, the college or university development office can often assist by introducing key alumni in the area.
Although the author has not done so, a community-engaging idea might be to create a contest or competition that area professionals would want to enter to win a seat as a Dream Team member. It would be a great way to elevate the visibility of this unique and valuable tie between the university and the business community. Another potential gain would be an increase in the number of people interested in supporting and participating in future Dream Team Events. With some effort, positive outcomes could include introducing the business community to the college’s real estate program or engaging the business community in ways to partner or lend support.
Student Team Selection and Preparation
Student team composition is crucial. While the number of students per team and the overall number of teams will vary according to the class size, experience shows that teams of 3–4 students work best. More important is the actual team itself, more specifically, its chemistry. Educators know the spectrum of student presentation skills can vary widely, and personality can often have an outsize influence on outcomes. As mentioned earlier, students work in randomly assigned teams during the first section of the class. The randomization is per class, so students typically work with 10–12 student presentation teams. The author uses a simple spreadsheet to randomize team teaching presentation schedules () based on specified topic assignments drawn from the text materials (). Over the years, observations of the student team teaching reveal two persistent outcomes.
Figure 7. Team presentation class materials.
Table 1. Student team teaching assignment grid.
Because of team composition randomization, students must quickly learn to work efficiently with different combinations of people in team settings to complete short-deadline projects. Because all students must contribute to their team’s in-class presentation, they have no choice but to read the assigned material, work with their assigned team to prepare a presentation, show up for class, and fully cover their assignments for the team presentations. Free riders are rare.
The process also provides the instructor valuable insight into each student’s presentation skills and abilities. Equally as important, by observing different student team combinations over many weeks, the instructor will develop a broad sense of which students work best together. This feedback can help guide student team structure.
Instructors know that almost every class will have some students who might feel uneasy ‘on their feet’ presenting and responding to a group of experts they have just met. Instructors also know that for their students genuinely to excel in business, life even, they have to learn how to organize and present their ideas and arguments in a compelling, logical, and persuasive fashion. This is the essence of the Dream Team Approach, giving instructors what they need to help students develop a higher level of personal articulation.
Analysis and Recommendation Development
Using detailed property information and investor parameters, student teams analyze each property using the concepts and skills they have learned during the class. Each student team conducts extensive sensitivity analyses to determine their recommended price point for each investment property. Students may also seek to add value in several ways, such as by redeveloping a property, providing better management to increase rents and reduce expenses, or selling excess property. All changes will affect their output and investor purchase recommendations.
Students use Excel to perform straightforward discounted cash flow and internal rate of return analysis. The instructor provides a class-material-based theoretical framework students use to construct four computational spreadsheets to aid their analysis. The first is an Investment Property Inputs Worksheet () that feeds information to tabulations made throughout the workbook. Each calculation iteration then produces an Investment Cash Flows Analysis (), an Investment Disposition Analysis (), and an Investment Performance Analysis ().
Table 2. Example of investment inputs worksheet.
Table 3. Example of investment cash flows analysis worksheet.
Table 4. Example of investment disposition analysis worksheet.
Table 5. Example of investment performance analysis worksheet.
After finalizing the spreadsheet construction, students conduct a comprehensive financial and investment analysis of each of the five properties, using their findings to inform their investment recommendations. The instructor must emphasize that other variables may also merit consideration and that their inclusion or omission may alter initial investment recommendations. For example, tenant mix or financial strength may be critical to the analysis, especially if the investment opportunity is a triple-net leased property. Locational and topographical factors may also be important, or not. There may be many issues that may have some bearing on an investor’s purchase decision: market trends, political governance, demographics, crime statistics, traffic counts, site design, roads and utilities, and even the weather—think hurricanes in Pensacola, Florida or tornadoes in Wichita, Kansas!
In some cases, the information is easy to find or extrapolate. For example, the instructor should encourage students to consider internet-published regional cap rates as a reasonable proxy for each of the five property’s geographical-based investment discount rates. In other cases, information may not be available, so students must do workarounds to find solutions, such as estimating cap rates based on recent sales. Other factors will invariably come up during class discussions, and the instructor should use such opportunities to remind students to think beyond what the numbers are saying and consider what the intangibles are revealing; although more challenging to quantify, they can often contribute substantially to value. Over the years, as the economy cycles through ups and downs, it has worked well when necessary to adjust Project investment opportunities and parameters to better align with current market conditions. After all, a desired investor mortgage interest rate of 3–4 percent might not make sense during an inflationary, rising environment.
The instructor should consider opportunities to ramp things up as the students work through their analyses and begin preparations for the Dream Team Event. For example, reminding students to consider how an unplanned interest rate hike can alter their analyses helps them to realize the importance of widening their investment horizon. Suggesting that students account for a recent negative story about a tenant occupying one of the properties under consideration helps them better understand how markets and pricing react to information. On one occasion, the author told students there was a glitch in the software and that they had to throw everything out and start over, reinforcing the notion that sometimes things go wrong, so get over it and get on with it.
All of this is by design, done on purpose because the real point of the exercise is not the analysis per se. Indeed, the students must know how to crunch numbers and understand results. However, experiencing the art of learning how to present persuasive ideas is the main point of the Dream Team Approach. Keeping students guessing keeps them focused. Adding pressure is done to simulate how things work ‘out there in the real investment world’ and to make the case that because anything can happen, students must learn to be agile enough to react when it does. One reviewer asked whether the author had ever experienced any negative student reactions. Fortunately, the answer is no. The question is on point, though, and all instructors are wise to consider it.
Event Setting
In the author’s case, the event takes place in a large, auditorium-style classroom in the business college. The students arrive early, set up, and wait for the arrival of the Dream Team. After the buildup about the Dream Team provided during the semester, the author can affirm that students’ reactions are always the same when they enter the room. Students’ faces reveal a combination of awe and respect accented by intimidation and perhaps a small amount of fear. Everyone always seems a bit nervous.
Even though it may seem trivial, the author enforces a business dress code for students and investors. The men wear suits and ties, and the women wear suits or dresses. Two things drove this decision from the outset. First, the Dream Team must see the best the university offers. For that to happen, the students must exemplify it, so leaving flip-flops, shorts, baseball hats, and chewing gum in the dorm is absolute. There is just a certain something about dressing up in one’s best clothes that inspires self-confidence, and the only way for students to feel that way as they make their Pitches is to dress that way.
Likewise, the Dream Team needs to impress as well. Even though the students knew the Dream Team members would all be professionals, seeing precisely how they dress and carry themselves always seems to have a profound effect. This formal setting aspect adds a strong sense of realism to the whole experience. The gravity of the moment is always apparent.
Pitch
Pitches are limited to 30 minutes. Students are encouraged to be creative and inventive, not just rely on a drab slideshow. At the same time, they must be aware that technology may not always work, so advanced preparation may be necessary. For example, if the students plan a video to illustrate a point, but technical glitches prevent showing it, they must have a backup plan. Otherwise, those awkward ‘glitch moments’ can be presentation killers. The Dream Team members can ask questions throughout the Pitch, catching students off-guard occasionally. Although the instructor routinely furnishes them with a list of potential questions (), experience has shown that the Dream Team members always ask far better questions. All student teams are present for all Pitches. It is always interesting to watch students’ reactions while waiting to present as their classmates react to the Dream Team during their Pitches.
Figure 8. Potential dream team questions.
Debrief
When all Pitches are over, students ask questions and get to know the Dream Team members in a more relaxed atmosphere. There is always a mix of praise and congratulations from the Dream Team. The students invariably express wonder and amazement at their abilities to pull it all together. One year, the author invited a University staff reporter to sit in, observe, and consider writing about the experience. The published article offered tremendous regional exposure for the real estate program.Footnote1 Below are some excerpts illustrating how investors and students reacted positively to the experience.
One investor said, “I wish there had been a similar opportunity when I was in school. The most interesting thing about the presentation was seeing which investment the students gravitated to and why. No two seasoned real estate professionals view deals similarly; the same was true of the students. I enjoyed listening to the justifications for each group’s recommended investment.” Another called the presentation a very encouraging experience, saying, “It was fascinating to see the level of analytical sophistication these students had gained through their studies and their ability to present the information professionally.”
Student comments were also interesting. One said, “It was an experience that was both challenging and rewarding. Our team was forced to become experts on the subject matter to convince the experts that we had done our research.” Another student said, “The most surprising part of this project was my team’s ability to come together in a relatively short and busy period and put together a presentation worthy of convincing this group of professionals to pursue our recommended investment.” Another particularly astute student commented, “It gave me insight into what professionals are looking for when considering a potential investment.”
Epilogue
The Dream Team Approach is a 15-year tested training and teaching tool that instructors can use to teach any high-level commercial real estate finance and investment class. It also includes guidance for incorporating a unique, industry-interactive capstone project. Although the author has only used it at the undergraduate level, adapting the Dream Team Approach to an MBA class would work well, especially for an Executive MBA offering. Students typically get far more out of the experience than expected, and the business community always appreciates the opportunities to engage with the college.
Some students seem naturally adept at speaking and presenting, while others need encouragement and practice. Experience has shown that some students may be initially shy or reluctant. Working through the Dream Team Approach, they improve and learn to organize and present their ideas confidently in public. The Dream Team Approach student team-based strategy for learning and teaching class material produces incredibly positive student learning outcomes.
Finally, keeping the stress applied firmly throughout the process is critical to pulling it off. Pressure has a way of sharpening the mind. Students do not realize it then, but one of the essential things the Dream Team Event does for them is that it teaches them how to perform and react under fire. That is something no textbook on the planet can offer.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 The complete press release is available at: https://www.southalabama.edu/departments/publicrelations/pressreleases/010417realestatepitch.html.