How to approach this RE case study question?
Hi All,
I have a case study to complete and wanted to ask for your opinions on your approach to the question. I have a typical tenancy schedule and the usual comps which are given however the case study is presented in the following way.
"Company X is considering a property investment in New York. Company X could invest on a 50/50 JV basis if the investment meets the required returns. If it were to invest, Company X would act as the asset management partner and will earn an annual fee." The outputs ask for a project level IRR and Company X level IRR.
How would you tackle this question, in particular the JV side of the deal? Should i model the property outright first and then look at Company X returns with the asset management fee? Furthermore, there is no mention of the distributions of profits, would this require a waterfall payment structure by making my own assumptions?
Thanks.
If no distribution assumptions were given I would assume that profits are to be split 50/50. Find the project level returns first, then solve for Company X's IRR inclusive of the asset management fee.
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