RE Debt Fund / Credit Modeling Tests

Does anyone have any modeling tests for lending roles (just the prompt is fine)? I've mainly been on equity advisory & principal side, and don't wanna be too specific about the role, but for a lender that does all kinds of debt (not a lifeco, but really anything else from construction to standard perm).

Figured the RE UW part would be very similar to equity, but was hoping for some insight on nuance that could be tested (back leverage, etc.).

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Based on the most helpful WSO content, here’s what you need to know about RE debt fund and credit modeling tests:

Key Focus Areas:
- Real estate debt modeling tests often include creating debt schedules, understanding cash flow treatment, and calculating key metrics like DSCR (Debt Service Coverage Ratio) and LTV (Loan-to-Value).
- For nuanced lending roles, you might encounter scenarios involving back leverage, construction loans, or permanent financing structures. These tests may also require you to model floating rate debt and incorporate SOFR or other benchmarks.
Differences from Equity Modeling:
- While underwriting for debt shares similarities with equity (e.g., analyzing property cash flows), debt modeling emphasizes the lender's perspective. This includes stress-testing cash flows to ensure debt service coverage and understanding how different loan structures (e.g., mezzanine, bridge loans) impact returns.
- Waterfall models for debt funds differ from equity-side waterfalls. For example, LP-GP waterfall models in debt funds focus on how cash flows are distributed based on loan terms rather than equity IRR hurdles.
Resources and Templates:
- WSO threads highlight the difficulty in finding reliable templates for debt fund modeling. However, users often recommend exploring LP-GP waterfall models tailored for commercial loans to understand cash flow treatment.
- If you're preparing for a test, consider reviewing templates or guides that focus on structured investments, including PIK (Payment-in-Kind) terms, spreads, and warrants.
Additional Insights:
- Some tests may include prompts to model return profiles for structured credit investments, such as early-stage credit deals with specific terms (e.g., 5-year term, 11-15% spread from SOFR).
- For construction loans, you might be tested on draw schedules, interest reserves, and how these interact with project cash flows.

If you're looking for specific prompts or templates, the WSO forums suggest exploring resources like ACRE, Break into CRE, or Joshua Kahr's case studies, which provide redacted examples of real-world modeling tests.

Sources: Debt Fund Modeling in REPE?, https://www.wallstreetoasis.com/forum/real-estate/megafund-repe-modeling-test?customgpt=1, Credit Modeling, Real Estate Debt Modelling, REPE Modeling Test Library

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