Test Taker First Name: Prajal

Test Taker Last Name: Ghimiray Instructions:

Test Taker Email: prajalghimiray107@gmail.com 1. Answer all the questions below
Test Taker Phone Number: 7363839932 2. Once you finish make a simple DCF model and debt amortization sched

1. Our client is a real estate private equity company that focuses on multifamily acquisitions. A property we are looking at has a net operating income (NOI) of $567,678
What is the cap rate? NOI Price
$567,678 $10,650,567
Test Taker Answer: 5.33%

2. The same client was told by a broker that one of his listings is selling for roughly $55,000,000 at a 6% cap rate.
What is the rough estimate of the NOI of the property? Purchase Price Cap Rate
Purchase Price = NOI/Cap Rate $55,000,000 6%
Test Taker Answer: $3,300,000

3. The property acquisition price is $45,500,000. The bank is lending the acquirer $25,000,000.
What is the LTV? Acquisition Price Lending Amount
LTV = Lending Amount /acquisition price $45,500,000 $25,000,000
Test Taker Answer: 54.95%

4. Describe what a promote structure is (also known as a waterfall) for sponsors and investors in real estate?

Test Taker Answer: Real estate sponsors usually invest their own capital into a deal alongside their equity co-investors. While it is possible for spon

5. Please describe the relationship between debt and equity in real estate.

Test Taker Answer: Real estate debt is a debt instrument that the borrower is obliged to pay back with a predetermined set of payments. The debt

6. What is the difference between levered and unlevered cash flows?

Test Taker Answer: Levered free cash flow refers to the amount of funds that is left over once debt and interest on debt have been paid. Levered
7. What are the two main types of "capital events" or "exits" in real estate ?

Test Taker Answer: Both PE funds and REITs provide an alternative way to invest in real estate. Rather than purchase and operate properties dire
 and debt amortization schedule with the assumptions provided

ng income (NOI) of $567,678. The asking price is $10,650,567.

s. While it is possible for sponsors to subordinate their own capital to that of their investors, it is far more typical that they earn the exact same returns as the other equity investors u

d set of payments. The debt instrument is secured by a specified real estate property as collateral. Real estate debt typically takes the form of a mortgage or deed of trust. Equity re

bt have been paid. Levered free cash flow = Unlevered free cash flow – interest – principal repayments Unlevered free cash flow refers to the amount of funds that a co
e and operate properties directly, investors can pool their money with other investors. Once these funds have been pooled together, management teams with real estate expertise ta
urns as the other equity investors until they reach a certain return threshold.The amount of money paid to the sponsor above the amount earned on his/her contributed capital to the

mortgage or deed of trust. Equity real estate investing earns a return through rental income paid by tenants or capital gains from selling the property.

rs to the amount of funds that a company has before interest payments and other obligations are met. Unlevered free cash flow = EBITDA – Capex – Working capital – Tax.
t teams with real estate expertise take an active role in deciding how and where to invest those funds in order to provide the investors with passive income. Additionally, both types
on his/her contributed capital to the deal is the promote.

Capex – Working capital – Tax.

e income. Additionally, both types of funds can pursue similar real estate investment strategies, so the distinction between what a PE fund does and what a REIT does can sometim
at a REIT does can sometimes be confusing. The differences between the two are often more about the legal and operational aspects of the businesses.
Assignment: Create a simple Discounted Cash Flow Analysis (DCF) for 10 years and a debt amortization table. Then within the DCF Determine:
1. Determine the Net Operating Income (NOI) for each year
2. Determine the cash flow for each year
3. What is the Acquisition Cap Rate?
3. Determine the cash on cash return for each year
4. What is the IRR?

Property Details: Create Model Below Here

Asset Type: Multifamily
Units: 354
Purchase Price: $24,000,000 $67,797 per unit
Vacany: 10%
Exit Cap Rate: 5%
Rent Assumption (Gross $8,500 per unit

Operating Expense Assumptions:

R&M $200 per unit
Cleaning $215 per unit
Utilities - Electricity $115 per unit
Utilities - Water/Sewage $215 per unit
Utilities - Gas/Trash $500 per unit
Marketing $125 per unit
Payroll $1,200 per unit
RE Taxes $900 per unit
Insurance $400 per unit
Property Management F 5% of gross income
RUBS $200 per unit

Debt Assumptions
Loan to Value (LTV) 65%
Interest Rate 4.50%
Amortization 25 Years

Further Modeling Assumptions

Rental Annual Increase 2%
Expense Annual Increas 2%
hin the DCF Determine: