24h+24h Case study

Authored by: Certified Real Estate Professional - 1st Year AssociateCertified Real Estate Pro

Associate 3 in RE - Other

Anonymous

10mo

No but would love it too ahah!

1 thing driving me mad in case studies:

"Operating Partner Receives an asset management fee of 1.5% per annum of the initial equity invested"

Basically the GP getting a yearly AM fee.

Questions:
Where do you put this fee? Expense? Section on its own? Should it impact anything before FCF? LP Contrib? GP Distrib?

Would you model the fee to hit each 1st month of the year or each month/12?

Thanks

Authored by: Certified Real Estate Professional - 2nd Year AssociateCertified Real Estate Pro

Associate 1 in RE - Comm

Anonymous

10mo

No but would love it too ahah!

1 thing driving me mad in case studies:

"Operating Partner Receives an asset management fee of 1.5% per annum of the initial equity invested"

Basically the GP getting a yearly AM fee.

Questions:
Where do you put this fee? Expense? Section on its own? Should it impact anything before FCF? LP Contrib? GP Distrib?

Would you model the fee to hit each 1st month of the year or each month/12?

Thanks

How much structuring have you done in your current role? Have you only been modelling hypothetical scenarios?

Assuming you were the Associate 3 who could

"built the whole new fund model from scratch, can model any type of asset-classes Acq or Debt, complex Eq&Debt structures"

If yes, given your experience on building a fund model and being involved with complex equity structures, the question you need to ask is where the AMA sits in the structure. That will answer how you treat it.

Authored by: Certified Real Estate Professional - 1st Year AssociateCertified Real Estate Pro

Associate 3 in RE - Other

Anonymous

10mo

I was thinking:

AM fee (month) = 1.5%*Total Eq/12 (Can make it flexible: Eq% or Revenue%, accruing or not...)

I would imagine GP+LP are paying for this AM fee.

After my last row of property level CF I would have the beginning of my waterfall and would do:

CF Available for distribution

- GP Fees

= Net CF for distrib

Then "normal" waterfall I think...

Any advice?

Authored by: Certified Real Estate Professional - 2nd Year AssociateCertified Real Estate Pro

Associate 3 in RE - Other

Anonymous

10mo

When it comes to final count of Total Distrib I would do:

All waterfall tiers distrib for LP = X

All waterfall tiers distrib for GP = Y

GP Fees = Z

Total distrib = X+Y+Z

I don't think I'm double counting as I've assumed these fees as a contribution from GP+LP but adding these fees as a distrib only for GP!

Check:

The higher the fee the more my LP IRR is diluted

Sounds ok?

Authored by: Certified Real Estate Professional - 2nd Year AssociateCertified Real Estate Pro

Anonymous Monkey

Human

10mo

Most Helpful

My group does a week long case study for our investments team.

The general gist is that you should model the deal/think through risks and mitigants and then make a recommendation whether to pursue or not. Essentially be less of an excel monkey and more of an investor.

My biggest piece of advice is to really think through/have backup for your assumptions (outside of the OM if possible) and be able to explain your model. I see kids get killed all the time because they underwrote using the Sponsor projections and they said "yes do the deal." Of course Sponsor numbers work, that isn't what we are asking. We are asking if we should invest in the deal and at what basis.

Ill be honest, we are less concerned if you picked a 6 cap or a 6.5 cap, and more concerned with the why and how you were thinking about it.

Prospect in IB - Gen

Anonymous

10mo

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