Monkeys,
I have an upcoming modeling test. Details are as follows: 1.5 hours and it's an acquisition model. I expect I'll have to complete a CF statement, sources & uses, a waterfall, an amortization table, and a general overview. Has anyone done something similar? I'm just a bit unclear to what level of detail they expect me to go (i.e. different debt options, multiple hurdles on the waterfall etc.) Since I'm not a gypsy I'll happily offer some modeling tests I've taken in the past.
Thanks.
Do you know what asset class? And PE or REIT? If PE it would be CF Statement, Debt Constraint calc to size the debt (this will give bonus points) and amortization table, and the DCF could be driven by target IRR or price. The waterfall for a PE firm I would suggest minimum 3 hurdles. 90 mins is fairly detailed, unless you're expected to write up concluscions, then I would spend 60min on the model and 30 min on figuring out if your returns make sense and create a recommendation.
Big developer that raises funds. Likely either MF or office. By debt constraint do you mean just calculating loan proceeds based on the value and the LTV? i.e. Value x LTV = Loan amount.
Also, three hurdles seems rather high for 90 minutes...
Debt constraint is a minimum DSCR test based on adjusted going-in NOI (usually adjusted for taxes and etc.), it allows you to calculate maximum achievable loan proceeds by calculating maximum debt service. LTV based on price is a basic requirement to size any deal. Uh, three hurdles is a basic waterfall at my firm, it shouldn't take more than 30 min to make a basic one.
If you're interviewing at a developer, then I am bit out of depth on what kind of modeling test you get.
Despite it being a development firm it’s still an acquisition scenario. And thanks for the tip, but i’m still a bit confused. If you’re already sizing the deal based on LTV then why would you use this debt constrained method to see what maximum proceeds you could get to? Unless you’re doing it just as an extra sensitivity/analysis?
And yeah 30 minutes seems like a lot to dedicate to just one portion of the test! But if that’s really what they judge you on then I can certainly do it
It’s pretty doable but you do end up losing time on some things. You’ll have to straughtlien some BS assumptions and stuff. I’d focus on making sure you balance things well and make the cash, LT/ST debt, WC, capex is somewhat detailed and dynamic and have everything flow thru with circularity on sweep. Then, make sure to throw in a few simple tables at the end showing range of situations for debt multiples entry exit multiples maybe growth rates. Whatever seems relevant do ~3 there.
But this is only 1.5 hour so don’t stress being granular. Mainly make hard coded stuff for less important things but really think through why in your head for working capital requirements and stuff like that. Send me your models and I’ll send you any you don’t have also that I do.
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