This is my first completed acquisition model ever. Can anybody review this please?
Hi all,
This is my first completed acquisition model ever. I am still in the beginning stages of learning acquisitions. Can anybody review this model and let me know if you see any obvious errors? Would also appreciate any other pointers, helpful tips/advice!
I used the Prudential case study that is very popular here in WSO. I completed Section 1-questions 1, 2 and 3. I was not able to do question 4. I know we have to use goal seek, but I wasnt sure about the inputs in "set cell", "by changing cell" and "to value"
Last q- as I am more interested in the debt side of things, besides these basic cash flow principles, what are the things a lender will want an entry level analyst to know?- I know how to calculate debt yield, dscr, anything else that I should be practicing?
Thank you so much!!
| Attachment | Size |
|---|---|
| prudential_model_practice.xls 43.5 KB | 43.5 KB |
| prudential_case_study.pdf 778.57 KB | 778.57 KB |
I'd move CapEx below the line. Banks sometimes will underwrite above the line, but we always go below the line.
move the inputs to span across the top not on the side. also merge and center your annual cash flow title or just take it out. specific years not really needed (2017,2018 etc...). also show formula for sale price. simple things make a big diff when someone is looking at the model.
I would include what everyone else has already said. I didn't read the pdf, I only read the excel
That said income>expenses>NOI>CapEx>Debt>NCF(Net Cash Flow). Only small operators can not capitalize and include capex above the NOI line like a repair and maintenance line item.
You are missing growth rate on income and expenses. Line Item*(1+Growth Rate)^('Year' Row-1). For year row, you should have years labeled 1,2,3,4,5, etc. so for the first year it should read income#(1+3%)^(1-1). Sure anything raised to 0 is itself, but you can just copy down the row.
Agreed with what Shervin said. In regards to expense growth rates, if it doesn't specify in the PDF what expenses grow at, I'd model it to be growing at 1% greater than revenues. Yes, this artificially builds leakage into your model but is a good conservative look at things. So if rents are growing at 3% year-on-year expenses should be growing at 4%.
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