Starwood Capital interview, help

Question

Hi Everyone,

I have an upcoming interview with Starwood Capital for a full time acquisitions analyst role. I'm really excited about this and want to kill the interview.

Anyone have experiences they can share about Starwood interviews or REPE acquisitions interview questions in general?

I did REPE two summers ago, so I have been out of the game for a bit. Any major deals I should be aware of? Any sources you recommend I read up on for news / technicals?

Also, if anyone knows how the tax overhaul specifically helps REPE, please let me know. Thank you!

JSmithRE2010 · Accepted Answer

One technical question you’re almost guaranteed to get: A building is being purchased at a 6.5% cap rate with with a 50% LTV Loan with a 5% interest only rate. What is the Cash on Cash return after year 1 assuming no revenue/expense growth?

Know why you want to work in PE rather than an operator.

They give a tough modeling speed test. Be able to build a simple acquisition pro Forma that’s fully dynamic. Youll need to calc levered and unlevered equity multiple, IRR, CoC Yield. Be able to built a debt schedule for mezz (interest only) and an amortizing loan.

JSmithRE2010 · Answer

You’re solving for Cash Flow / Equity Invested. It’s tricky because you have to use a random number for purchase price (typically 100 to make it easy).

So assuming $100 purchase price it’s $6.5 in NOI less $2.5 in Debt Service = $4 in CF

Equity invested is $50 because it’s a $100 purchase price and $50 loan. $4 / $50 = .08 or 8%

Norcal88100 · Answer

You are over complicating the math a little bit as you don't need a balance. Just calculate what ratio of debt:equity you are taking on - in this case its 1:1 (50% LTV) - one part debt, one part equity then calculate the return of each part multiplied by the respective ratio (Note: equity is always quoted as 1). The debt part math is 6.5% (cap rate/unlevered CoC) - 5% (interest rate) = 1.5% * 1 (debt ratio). Your equity part math is simply the 6.5% (cap rate/unlevered CoC) * 1. Combine the two = 1.5% + 6.5%= 8%

To use another example lets say you took on 75% LTV.

lkjhg · Answer

Go into it with a thick skin, some of the interviewers will purposefully try to be dicks to see how u hold up. Try to be interesting, they will straight up ask u why they should bother with u if they don't find ur story interesting

Also brush up on bond math and conceptually understand risks applied to risk free rates vs a corporate bonds vs discount rates on real estate etc...

Have a well thought out opinion on the market going forward

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Starwood Capital interview, help

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