Corporate Finance for HAs

Our corporate finance for HAs courses are grounded in accepted finance theory but the emphasis is on practical application, embracing the latest market data and relating to the current economic environment and social housing sector.

We believe that combining theory and practice encourages rigorous analysis and robust solutions.

Below is the outline content of a typical course programme in corporate finance. Our courses, however, are tailored to a customer’s specific needs, balancing educational effectiveness, logistical constraints and cost.

Course programmes are tailor-made in terms of structure, and content.

The structure of courses will differ in terms of the overall length, varying from a few days to a longer integrated modular programme with or without pre-course or post-course work.

The content and sequencing of topics will reflect the level of participants’ experience and seniority and will typically incorporate in-house material and case studies.

Corporate Finance for HAs – Typical Course Content

Click on the buttons to find out more

Introduction

Introduction
  • Overview of course and content
  • Current “corporate finance” issues in the social housing sector

Corporate Finance Quiz

Corporate Finance Quiz
  • To raise issues and terminology

Risk, Return and Cost of Capital

Risk, Return and Cost of Capital
  • Risk and return in social housing
    • equity risk measures, Beta
    • understanding housing and property sector risk
    • calculation and estimation of Betas
  • Cost of capital in social housing
    • expected equity returns and cost of risk capital
    • cost of debt (tax sheltered or not)
    • WACC
    • impact of gearing on cost of debt, risk capital and WACC
    • use of WACC in valuations and project appraisal
  • Capital structure – Theory and Practice
    • Modigliani and Miller
      • effect of high and low gearing
      • tax shield and financial distress
      • optimal capital structure
    • financial risk and business risk
    • debt, cash flow and asset quality
    • impact on WACC and project values
    • geared and ungeared Betas

*exercises

Use of DCF in Valuation

Use of DCF in Valuation
  • Relevance to asset valuation and project appraisal
  • Discounting techniques and Issues; NPV, IRR
    • operating cash flow versus operating profit
    • terminal values
    • perpetuity cash flow
    • growth and risk
    • “geared” and “ungeared” valuation
    • valuation of projects versus valuation of own funds investment
    • common mistakes and errors

*exercises

Corporate Finance Quiz

Corporate Finance Quiz
  • To raise issues and terminology

Cash Flow Forecasting

Cash Flow Forecasting
  • Cash flow summaries for analysis
    • the starting point for forecasting
    • trends in surplus and cash flow
  • “Free cash flow” for valuation (“FCFP v. FCFA”)
  • Sustainable cash flow

*exercises

Use of DCF in Project Appraisal

Use of DCF in Project Appraisal
  • Definition of “FCFP v. FCFA”
  • Matching discount rates to cash flows
  • Discount rates / target rates of return
  • Required return on “own funds”
  • Life of projects, forecast period
  • IRR vs. NPV
  • Other project metrics e.g. discounted payback life, capital spend
  • Typical spread-sheet errors
  • Risk identification and mitigation
  • Sensitivities and scenarios

Rent Multiples and Yields

Rent Multiples and Yields
  • Methodology
  • Growth and risk – again!
  • Peer group analysis
  • Non-financial multiples (units)

*exercises

Funding Issues in social housing

Funding Issues in Social Housing
  • Deciding capital structure in social housing – growth versus gearing
  • Implications of new rent regime for target ROA
  • Alternatives to bank debt e.g. bonds, private placements
  • Implications of shorter-term debt e.g. refinancing risk
  • “Leveraging the balance sheet” and “spending the reserves”
  • “Asset-stripping” – EUV (SH) vs. market value vs. alternative use value

Corporate Finance Case Study

“Maximising the Development Programme”

Corporate Finance Case Study
  • Choose a target return on own funds, given the level of risk
  • Estimate a medium-term cost of debt
  • Calculate WACC based on latest B/S
  • Estimate a current value of B/S assets
  • Decide a policy level of gearing / interest cover
  • Re-calculate WACC for new gearing and level of risk
  • Evaluate the IRR and risk rating on a given portfolio of development projects
  • Blend new projects with existing forecast
  • Check that this financial strategy “works”