Ridge Business Center

Ridge Business Center is a warehouse/office property in Charlotte. The property includes a well-maintained building totalling 5
The property has been offered for sale by the current owner at asking price of $5 Million. As a Financial Analyst of XYZ Investo
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 b

Investment Assumptions
Acquisition Date 1-Jan-21
Holding Period 5 years * time 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=
Cost of Sale 2% * 2% of Sale Earnings go to broker/lawyer

Loan Assumptions
Loan Start Date 1-Jan-21
Term of Loan 5 years
LTV 75% * of Price
Interest Rate 4.0%
Loan Fees 1%
Amortization Period 25 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 th
4) Consider Suite 1006 as vacant for the entire duration of 5 years

Rent Roll ( As of 31 July, 2020)

Suite Leased Area Status Lease Start Date Lease End Date
(sq. ft) (mm/dd/yy) (mm/dd/yy)
1001 10,000 Occupied 03/01/18 03/31/28
1002 10,000 Occupied 06/01/19 06/30/29
1003 15,000 Occupied 01/01/20 01/31/30
1004 5,000 Occupied 03/01/18 03/31/28
1005 10,000 Occupied 06/01/19 06/30/29
1006 6,000 Vacant
Total 56,000

Expense Assumptions
1) All expenses are paid by landlord
2) All expenses grow 2% annually

Expense Assumptions
Expense Type Annual Expense ($)
CAM $25,000
Taxes $75,000
Insurance $25,000
Utilities $20,000
Repairs $45,000
Total $190,000

Capital Expenditure
Year Annual Amount
($ psf)
2021 $2.00
2022 $1.25
2023 $1.00
2024 $1.00
2025 $1.00
maintained building totalling 50,000 sq ft in leasable area.
nancial Analyst of XYZ Investors, you are expected to identify if the property will
XYZ Investors.
ment. Required sheets have been provided.

ollowing formula: Sale Price= 5th Year NOI/Terminal Cap Rate

an amortization schedule

ctual $ as and when required.

d insurance over and above the rent

Annual Rent PSF Rent Increase Date Rent Increase Lease Type
(as of 31 July, 20) (mm/dd/yy) Annual (%)
$12.15 01/01/21 3% NNN
$11.50 01/01/21 3% NNN
$10.75 01/01/21 3% NNN
$12 01/01/21 5% NNN
$12 01/01/21 5% NNN

$10.32
Rent Roll ( As of 31 July, 2020)
Suite Leased Area Status Lease Start Date Lease End Date Annual Rent PSF
(sq. ft) (mm/dd/yy) (mm/dd/yy) (as of 31 July, 20)
1001 10,000 Occupied 03/01/18 03/31/28 $12.15
1002 10,000 Occupied 06/01/19 06/30/29 $11.50
1003 15,000 Occupied 01/01/20 01/31/30 $10.75
1004 5,000 Occupied 03/01/18 03/31/28 $12
1005 10,000 Occupied 06/01/19 06/30/29 $12
1006 6,000 Vacant
Total 56,000 $10.32
Rent Increase Date Rent Increase Lease Type Annual rent Monthly rent Annual rent
(mm/dd/yy) Annual (%) For the year 2021 For the Year 2021 For the year 2022
01/01/21 3% NNN 125145.00 10428.75 128899.35
01/01/21 3% NNN 118450.00 9870.83 122003.5
01/01/21 3% NNN 166087.50 13840.63 171070.125
01/01/21 5% NNN 61800.00 5150.00 63654
01/01/21 5% NNN 123600.00 10300.00 127308

$595,082.50 $49,590.21 $612,934.98

 Monthly rent Annual rent Monthly rent Annual rent Monthly rent
For the Year 2022 For the year 2023 For the Year 2023 For the year 2024 For the Year 2024
10741.6125 132766.3305 11063.860875 136749.320415 11395.77670125
10166.958333333 125663.605 10471.967083333 129433.51315 10786.126095833
14255.84375 176202.22875 14683.5190625 181488.2956125 15124.024634375
5304.5 65563.62 5463.635 67530.5286 5627.54405
10609 131127.24 10927.27 135061.0572 11255.0881

$51,077.91 $631,323.02 $52,610.25 $650,262.71 $54,188.56

 Annual rent Monthly rent
For the year 2025 For the Year 2025
140851.80002745 11737.650002288
133316.5185445 11109.709878708
186932.94448088 15577.745373406
69556.444458 5796.3703715
139112.888916 11592.740743

$669,770.60 $55,814.22
 Test Taker First Name:
Test Taker Last Name:
Test Taker Email:
Test Taker Phone Number:

Instructions:
1. Answer all the questions below
2. Once you finish make a simple DCF model and debt amortization schedule with the assumptions provided

Qs 1. Please refer to the excel sheet for the case study – Ridge Business Center. Use functions of Excel wherever necessary
Answer:

Qs 2. Investor A & B both invested $100,000 in a private investment and were promised 10% IRR.
- A received $15,000 in Year 1 and $5000 in Year 2
- B received $10,000 in Year 1 and $10,000 in Year 2
Both of them exited the investment at the end of 2nd year. Even though both got 10% IRR on their investments, wha
Answer:

Qs 3. Bond yields are inversely related to Interest Rates. What is the explanation for this relationship?
Answer:

Qs 4. What is DSCR? Why is it important to lenders?

Answer:

Qs 5. Our client is a real estate private equity company that focuses on multifamily acquisitions. A property we are looking
What is the cap rate?
Answer:

Qs 6. Describe what a promote structure is (also known as a waterfall) for sponsors and investors in real estate?
Answer:
 Test Questions

of Excel wherever necessary, no macros should be used for the case study. Calculate Levered IRR on the investment using the data provid

RR on their investments, what could be the possible reason for B’s unhappiness?

s. A property we are looking at has a net operating income (NOI) of $567,678. The asking price is $10,650,567.

ors in real estate?

estment using the data provided.
You must calculate the sections mentioned below on this page, you can add assumptions or other information yo

Purchase Price
Net Sale Price
Net Cash Flow Before Debt (yearly)
Net Cash Flow After Debt (yearly)

Sources and Uses of Cash Flow Returns & Yields

Sources Total % Equity Multiple
Debt Levered IRR
Equity Levered Profit
Total Return on Equity

Uses Total %
Acquisition
Loan Fee
Capital Expenditure
Total
other information you deem relevant to this dashboard page
Analysis Date 1-Jan-21
1/1/2021
Month 0 Month 1 Month 2 Month 3 Month 4 Month 5
Sections required
Income 10428.75 10428.75 10428.75 10428.75 10428.75 10428.75
Expenses
NOI
Cash flow Before Debt
Cash Flow After Debt
 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Month 13 Month 14

10428.75 10428.75 10428.75 10428.75 10428.75 10428.75 10428.75 10741.613 10741.613

 Month 15 Month 16 Month 17 Month 18 Month 19 Month 20 Month 21 Month 22 Month 23

10741.613 10741.613 10741.613 10741.613 10741.613 10741.613 10741.6125 10741.6125 10741.6125

 Month 24 Month 25 Month 26 Month 27 Month 28 Month 29 Month 30 Month 31 Month 32

10741.613 11063.861 11063.861 11063.861 11063.861 11063.861 11063.861 11063.861 11063.861

 Month 33 Month 34 Month 35 Month 36 Month 37 Month 38 Month 39 Month 40 Month 41

11063.8609 11063.8609 11063.8609 11063.861 11395.777 11395.777 11395.777 11395.777 11395.777

 Month 42 Month 43 Month 44 Month 45 Month 46 Month 47 Month 48 Month 49 Month 50

11395.777 11395.777 11395.777 11395.7767 11395.7767 11395.7767 11395.777 11737.65 11737.65

Month 51 Month 52 Month 53 Month 54 Month 55 Month 56 Month 57 Month 58 Month 59

11737.65 11737.65 11737.65 11737.65 11737.65 11737.65 11737.65 11737.65 11737.65

Month 60

11737.65
* Summarize the monthly Cash flow Annually here
Year 1 Year 2 Year 3 Year 4 Year 5