24h - Modeling Test - Analyst Level

Hi guys, 

Kind of stuck on a modeling test, would appreciate any help!

 

      "You can assume the property will lease up in even tranches over 5 months"

- Does that mean that after the development part (12-Mths) the property is going from 0% to 100% occupancy in 5 months, proportionally? 

- Is, 5 month post development, my stabilisation date (Month 17)?

     "All leases are 12-Mths - 1 month free for new leases but not for renewals"

Do you have any idea on how to model this? I was thinking of starting with a weighed-average of the different unit rent (not taking SF into account but a monthly rent by unit type) and then calculate a percentage of it representing 1 month on the "Rent Free" line. But how can I keep it dynamic and avoid reaching more than 1 month rent free for all units (60 approx.) Using a MIN function on a total Rent free amount maybe? 

 

 "Purchase price is $X, project will be financed by a loan..., balance of the loan amount to be used to fund development costs and capitalised interest "

Do I assume that the purchase price + purchase costs go with Equity in my source and uses line-item?

 

 

May have some other questions but thanks a lot in advance for that! 

 

Comments (7)

 
Most Helpful
Feb 23, 2021 - 5:47pm

1. Yes, once the project starts lease up straight line the 60 units over 5 months (i.e., 12 units/month)

2. Have a unit tracker for new leases and renewals (during lease up all units will be new leases, afterward you'll need to make some assumptions about renewal rates) and have a concession line item equal to the market rate rent during that month times the number of new leases in that month (negative obviously.

3. Not totally sure what you're asking here, in a sources and uses the sources will just be equity and debt (or if you have some sort of mezz structure you'd show that too) and uses will be purchase price, closing costs (probably wouldn't get too detailed here for a test), financing costs, etc. You shouldn't be allocating the sources to anything in the uses here, just outlining where you're getting the money from and what you're spending it on in.

Hope this helps

 
Feb 24, 2021 - 4:48am

Quick question:

 

"The project will be financed with a senior loan, with max loan amount of 70% LTC and subject to max. 50% of the purchase price. The balance of the loan amount to be used to fund development costs and capitalized interest.  

The senior loan will have no amortization and a PIK (pay in kind) interest of 5.5%."

Am I right: During the whole life of the senior loan (before refi) I'm not paying amort nor interests but once I am refinancing this loan I'm adding X months of capitalized interests to the balance I have to pay?

Thanks!

 
Feb 24, 2021 - 12:37pm

The short answer to your question is yes, you'll accrue interest that adds to the balance of the loan. One thing to be careful about here is that as you add interest you have to make sure you don't go over the 70% LTC inclusive of the accrued interest. This ends up being a circular reference in excel (interest costs = higher total costs = higher loan = Higher interest costs = higher total costs, etc.) so you'll need to watch that or use a work around to avoid it.

 
Feb 24, 2021 - 12:40pm

Thanks again! Just shot the model, we'll see ahah! I think it went well, not perfect but I've shown that I knew how to model on excel and my returns looked ok! I'm supposed to have a call to comment my model.

Thanks a lot for your replies guys!

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