Real Estate Financial Model
I recently applied for a financial analyst position at a Real Estate Firm. and I received an assignment to complete within 2 days to qualify for the next process. Model Assignment:
Ridge Business Center
Ridge Business Center is a warehouse/office property in Charlotte. The property includes a well-maintained building totalling 50,000 sq ft in leasable area.
The property has been offered for sale by the current owner at asking price of $5 Million. As a Financial Analyst of XYZ Investors, you are expected to identify if the property will
be a good acquisition for the company. An investment must generate a minimum of 15% IRR for XYZ Investors.
Please build a financial model using the assumptions below to provide an answer to the Management. Required sheets have been provided.
Investment Assumptions
Acquisition Date 01-Jan-21
Holding Period : 5 yearstime for which the property is owned)
Sale Date: last day of 60th month
Terminal Cap Rate : 7.5% ( This rate is used to determine Sale Price by the following formula: Sale Price= 5th Year NOI/Terminal Cap Rate)
Cost of Sale: 2% ( 2% of Sale Earnings go to broker/lawyer)
Loan Assumptions
Loan Start Date01-Jan-21
Term of Loan5 years
LTV : 75%* of Price
Interest Rate4.0%
Loan Fees1%
Amortization Period25 years* Calculate monthly loan payments, you will need an amortization schedule
Rent Assumptions
1) Assume rents increase every year on first day of the calendar year
2) Rents shown are Annual rents on a per square feet basis. Convert them to monthly rents and actual $ as and when required.
3) NNN leases are triple net leases, tenant has to pay their proportionate share of CAM, taxes and insurance over and above the rent
4) Consider Suite 1006 as vacant for the entire duration of 5 years
Rent Roll ( As of 31 July, 2020)
SuiteLeased AreaStatusLease Start DateLease End DateAnnual Rent PSFRent Increase DateRent IncreaseLease Type
(sq. ft) (mm/dd/yy)(mm/dd/yy)(as of 31 July, 20)(mm/dd/yy)Annual (%)
100110,000Occupied03-01-1803-31-28$12.1501-01-213%NNN
100210,000Occupied06-01-1906-30-29$11.5001-01-213%NNN
100315,000Occupied01-01-2001-31-30$10.7501-01-213%NNN
10045,000Occupied03-01-1803-31-28$1201-01-215%NNN
100510,000Occupied06-01-1906-30-29$1201-01-215%NNN
10066,000Vacant
Total56,000 $10.32
Expense Assumptions
1) All expenses are paid by landlord
2) All expenses grow 2% annually
Expense Assumptions
Expense TypeAnnual Expense ($)
CAM $25,000
Taxes$75,000
Insurance$25,000
Utilities$20,000
Repairs$45,000
Total$1,90,000
Capital Expenditure
YearAnnual Amount
($ psf)
2021$2.00
2022$1.25
2023$1.00
2024$1.00
2025$1.00
Please refer to the excel sheet for the case study – Ridge Business Center. Use functions of Excel wherever necessary, no macros should be used for the case study. Calculate Levered IRR on the investment using the data provided.
Based on the highest ranked content on WSO and the insights from the WSO Courses and Academy, here's a structured approach to tackle your financial model assignment for the Ridge Business Center:
1. Set Up Your Excel Workbook
2. Input Assumptions
3. Calculate NOI
4. Loan Amortization Schedule
5. Cash Flow Analysis
6. Calculate Levered IRR
7. Decision Making
Remember, accuracy and attention to detail are crucial in financial modeling. Ensure all calculations are correct and that you've accounted for all assumptions. Good luck with your assignment!
Sources: Q&A: Real Estate Acquisitions Analyst. Uni -> BO -> Mtg Financing -> Acquisitions, What are the Roles within Real Estate Private Equity?, Transaction Analyst at a REIT, Q&A: Real Estate Analyst/Associate, What is your compensation in Real Estate Finance?
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Super basic model. I'm going to give this to an intern candidate as a case study test. Thanks for the plug!
I know it is, but I have never made this type of model
Do you have any RE experience or schooling? If not, I’d probably just bow out of the process.
The modeling tests are usually provided to make sure you have a general idea of what’s going on. If you don’t, no need to waste your or their time.
"All expenses paid by landlord" but it also lists the tenants as NNN.
They are, they just get paid back.........reimbursed...
Thanks fella, just stupid wording since you could make a case what "expenses" are like its a MG or a NN lease.
lol so are you just asking for someone to complete this for you?? If you want to be able to land this type of position, you need to able to do this. Take an online course such as A.CRE or REFM and you will be able to do this.
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