Financial Modelling Flashcards
(16 cards)
What is the Capital Asset Pricing Model?
It is a financial model that calculates the risk-adjusted expected rate of return for an asset or investment.
E(Ri) = RFR + Beta * (Expected Market Return - RFR)
What is the All risks Yield?
A growth implicit yield used in an investment that reflects all of the risks and rewards of the subject property.
What is a yield?
A measure of investment returns, expressed as a percentage of capital investment.
Yield = Net Income / Purchase Price
What is an IRR?
IRR is the discount rate applied to a cash flow which results in a NPV of zero.
What is the difference between Total Return and IRR?
IRR is a money weighted return since net cash contributions determine the return of the portfolio.
Total Return is a time weighted return, in that the timing of cash contributions are irrelevant since the portfolio is re-evaluated whenever there are cash inflows or outflows.
Summarise the Industrial Development in Birmingham.
- £7 million land value
- 5.50% vacant yield
- 5.00% + PMA for let yield (4.91%)
- 5.00% + PMA for exit yield (4.59%)
- 100,000 sq. ft across 2 units (50/50)
- £13.00 starting ERV
- 12 month void, 12 month rent free
- £24.4 million GDV
- £21.5 million NDV
- £19 million Total Costs
> (£11m construction costs £122 psf) - 13% PoC
- 24% PoC Ex Finance
Why was the Total return calculated over different time periods?
- To ascertain the most optimum time to sell the asset.
- To understand the value-add from a completed development, lease-up and from the hold period post completion.
What did the sensitivity analysis reveal (Industrial Development, Birmingham)?
-10% decrease in construction costs and a 50 bps inward yield movement leads to a 12.2% Total Return.
What was the Total Return at PC, Lease-up and 5-year (Industrial Development, Birmingham)?
Total Return at PC = 14%
Total Return at Lease-up = 15%
Total Return 5-year= 11%
What is the Allocation policy for funds competing on the same investment?
- The investment goes to an independent allocation committee
- They factor in which fund has the greatest need in terms of their mandate - deployment, stage in the Fund cycle
- Then goes on an rotation basis
Summarise the Office, London, Sale (41 Moorgate) financial model.
- Offer at £16.5m (8.0% NIY) from Private PropCo
- 24,000 sq. ft office (12% retail)
- Blended passing rent of £61.00 sq. ft
- All tenants vacant at expiry (Oct-2024, Sept 2025)
- £300 psf CAPEX (CAT B fit-out)
- 24 month void, 6 months rent free
- £73 psf ERV post refurb
- Exit at 5.50% EY, £31 million
- 10.0% Total Return
What did the sensitivity analysis show (Office, Sale, London - Moorgate)
> 4.50% EY with a 10% increase in ERV leads to a 18% Total return
> £190 psf of CAPEX and 12 months void leads to a 14% Total return
Summarise the EPC B analysis (Tunbridge Wells Office)?
- £10 million offer
- 70,000 sq. ft across 2 buildings
- Passing rent of £17 psf
- Where tenants vacant on expiry:
> £75 per sq. ft CAPEX
> 18 month void, 9 months rent free
> Blended ERV of £29 psf
> £300K of Car Park remediation
> £4 million of CAPEX / £64 per sq. ft
Total Return: 11.4%
Exit Profile: £15.5 million (9.3% NIY / 11.4% EY / 11.4% RY)
What was needed to take the asset to an EPC A?
Improvement in the building fabric.
Replace the windows (double glazing)
Increasing the insulation in the roof and walls
Extra £4 million in costs
Summarise the EPC A Scenario?
> £8.5 million global costs (£121 per sq. ft)
£35 per sq. ft blended rents
Exit Equivalent Yield of 9.7%
5.0% 5-year total return
Summarise the Multi-Let Industrial Portfolio Sale
> 9 asset sale (Thurrock, Hemel Hempstead, Sevenoaks, Winchester, Warrington, Castle Donington, Bristol, Newcastle, Leeds
> £150,000,000 sale (5.4% NIY)
> 7.5% Portfolio forecast total return
Benchmark return of 7.1%
> Historic Total Return of 12% and EM of 2.5x
