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 1-Jan-26 [4 Standard Years and 1 Leap Year]
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
Sale Price $9,769,428.03
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 ($) Monthly Expenses Amount
CAM $25,000 NNN 10416.66666667
Taxes $75,000 Non-NNN 5416.666666667
Insurance $25,000
Utilities $20,000
Repairs $45,000 Rent Increase Factor 1.02
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.
ancial 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 Rent IF Y1 Rent IF Y2 Rent IF Y3
(as of 31 July, 20) (mm/dd/yy) Annual (%)
$12.15 01/01/21 3% NNN 1.03 1.0609 1.092727
$11.50 01/01/21 3% NNN 1.03 1.0609 1.092727
$10.75 01/01/21 3% NNN 1.03 1.0609 1.092727
$12 01/01/21 5% NNN 1.05 1.1025 1.157625
$12 01/01/21 5% NNN 1.05 1.1025 1.157625

$10.32
 Rent IF Y4 Rent IF Y5
Monthly Rent PSF (as of 31st July 20)
1.1592740743 1.12550881 1.0125
1.12550881 1.12550881 0.958333333333333
1.12550881 1.12550881 0.895833333333333
1.21550625 1.21550625 1
1.21550625 1.21550625 1
 Test Taker First Name: Dhruv
Test Taker Last Name: Shah
Test Taker Email: dhruvshh10@gmail.com
Test Taker Phone Number: +91-7980107563

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 9769428.03159334

Net Sale Price 9964816.5922252
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 1/31/2021 2/28/2021 3/31/2021
Month 0 Month 1 Month 2 Month 3
Sections required
Income $ 58,562.50 $ 60,515.21 $ 60,515.21 $ 60,515.21
Expenses $ 5,416.67 $ 5,525.00 $ 5,525.00 $ 5,525.00
NOI $ 53,145.83 $ 54,990.21 $ 54,990.21 $ 54,990.21
Cash flow Before Debt
Cash Flow After Debt
 4/30/2021 5/31/2021 6/30/2021 7/31/2021 8/31/2021 9/30/2021 10/31/2021
Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10

$ 60,515.21 $ 60,515.21 $ 60,515.21 $ 60,515.21 $ 60,515.21 $ 60,515.21 $ 60,515.21

$ 5,525.00 $ 5,525.00 $ 5,525.00 $ 5,525.00 $ 5,525.00 $ 5,525.00 $ 5,525.00
$ 54,990.21 $ 54,990.21 $ 54,990.21 $ 54,990.21 $ 54,990.21 $ 54,990.21 $ 54,990.21
 11/30/2021 12/31/2021 1/31/2022 2/28/2022 3/31/2022 4/30/2022 5/31/2022
Month 11 Month 12 Month 13 Month 14 Month 15 Month 16 Month 17

$ 60,515.21 $ 60,515.21 $ 62,539.41 $ 62,539.41 $ 62,539.41 $ 62,539.41 $ 62,539.41

$ 5,525.00 $ 5,525.00 $ 5,635.50 $ 5,635.50 $ 5,635.50 $ 5,635.50 $ 5,635.50
$ 54,990.21 $ 54,990.21 $ 56,903.91 $ 56,903.91 $ 56,903.91 $ 56,903.91 $ 56,903.91
 6/30/2022 7/31/2022 8/31/2022 9/30/2022 10/31/2022 11/30/2022 12/31/2022
Month 18 Month 19 Month 20 Month 21 Month 22 Month 23 Month 24

$ 62,539.41 $ 62,539.41 $ 62,539.41 $ 62,539.41 $ 62,539.41 $ 62,539.41 $ 62,539.41

$ 5,635.50 $ 5,635.50 $ 5,635.50 $ 5,635.50 $ 5,635.50 $ 5,635.50 $ 5,635.50
$ 56,903.91 $ 56,903.91 $ 56,903.91 $ 56,903.91 $ 56,903.91 $ 56,903.91 $ 56,903.91
 1/31/2023 2/28/2023 3/31/2023 4/30/2023 5/31/2023 6/30/2023 7/31/2023
Month 25 Month 26 Month 27 Month 28 Month 29 Month 30 Month 31

$ 64,637.97 $ 64,637.97 $ 64,637.97 $ 64,637.97 $ 64,637.97 $ 64,637.97 $ 64,637.97

$ 5,748.21 $ 5,748.21 $ 5,748.21 $ 5,748.21 $ 5,748.21 $ 5,748.21 $ 5,748.21
$ 58,889.76 $ 58,889.76 $ 58,889.76 $ 58,889.76 $ 58,889.76 $ 58,889.76 $ 58,889.76
 8/31/2023 9/30/2023 10/31/2023 11/30/2023 12/31/2023 1/31/2024 2/29/2024 3/31/2024
Month 32 Month 33 Month 34 Month 35 Month 36 Month 37 Month 38 Month 39

$ 64,637.97 $ 64,637.97 $ 64,637.97 $ 64,637.97 $ 64,637.97 $ 67,155.73 $ 67,155.73 $ 67,155.73

$ 5,748.21 $ 5,748.21 $ 5,748.21 $ 5,748.21 $ 5,748.21 $ 5,863.17 $ 5,863.17 $ 5,863.17
$ 58,889.76 $ 58,889.76 $ 58,889.76 $ 58,889.76 $ 58,889.76 $ 61,292.56 $ 61,292.56 $ 61,292.56
 4/30/2024 5/31/2024 6/30/2024 7/31/2024 8/31/2024 9/30/2024 10/31/2024 11/30/2024
Month 40 Month 41 Month 42 Month 43 Month 44 Month 45 Month 46 Month 47

$ 67,155.73 $ 67,155.73 $ 67,155.73 $ 67,155.73 $ 67,155.73 $ 67,155.73 $ 67,155.73 $ 67,155.73

$ 5,863.17 $ 5,863.17 $ 5,863.17 $ 5,863.17 $ 5,863.17 $ 5,863.17 $ 5,863.17 $ 5,863.17
$ 61,292.56 $ 61,292.56 $ 61,292.56 $ 61,292.56 $ 61,292.56 $ 61,292.56 $ 61,292.56 $ 61,292.56
12/31/2024 1/31/2025 2/28/2025 3/31/2025 4/30/2025 5/31/2025 6/30/2025 7/31/2025
Month 48 Month 49 Month 50 Month 51 Month 52 Month 53 Month 54 Month 55

$ 67,155.73 $ 67,039.36 $ 67,039.36 $ 67,039.36 $ 67,039.36 $ 67,039.36 $ 67,039.36 $ 67,039.36

$ 5,863.17 $ 5,980.44 $ 5,980.44 $ 5,980.44 $ 5,980.44 $ 5,980.44 $ 5,980.44 $ 5,980.44
$ 61,292.56 $ 61,058.93 $ 61,058.93 $ 61,058.93 $ 61,058.93 $ 61,058.93 $ 61,058.93 $ 61,058.93
 8/31/2025 9/30/2025 10/31/2025 11/30/2025 12/31/2025
Month 56 Month 57 Month 58 Month 59 Month 60

$ 67,039.36 $ 67,039.36 $ 67,039.36 $ 67,039.36 $ 67,039.36

$ 5,980.44 $ 5,980.44 $ 5,980.44 $ 5,980.44 $ 5,980.44
$ 61,058.93 $ 61,058.93 $ 61,058.93 $ 61,058.93 $ 61,058.93
* Summarize the monthly Cash flow Annually here
Year 1 Year 2 Year 3 Year 4 Year 5