Case Study Revision

Question 1

What is Total Return?

Answer 1

> Income Return + Capital Return
CV(t) - CV(t-1) - CAPEX(t) + NI(t) / CV(t-1) + CAPEX(t)

Question 2

Why did the Fund have a target Total Return and not an IRR?

Answer 2

> Fund sits in a wider open-ended vehicle
Assets could be held into perpetuity
Total return is time weighted, strips out cash flows
Allows for benchmarking and comparability to other Funds
IRR is a money weighted returns were the cash flows have an influence on the return
IRR most suitable to developments rather than standing assets
Total Returns allows for a separation of income and capital returns

Question 3

What is a Business Plan?

Answer 3

A business plan is a formal statement of the business goals, strategies and financial projections.

Question 4

What is an Equivalent Yield?

Answer 4

> The weighted average of the NIY and RY
Represents the return a property is expected to produce assuming no growth but based on the current income and ERV
The IRR of the property given its current Gross Value

Question 6

Why have steel portal frames instead of concrete frames?

Answer 6

> Steel has a higher strength to weight ratio
Steel is a lighter material as a result requires less foundations than concrete
Steel is more cost effective
Steel has more flexibility
Concrete is naturally fire resistant (residential construction)
Concrete is more naturally occurring hence more environmentally friendly (cement, sand, gravel and water)