Hi all,
Just a quick question....
I am currently working on a portfolio which is forecasting a healthy CoC throughout the hold but in the final stages of the hold period the CoC takes a hammering because we are selling assets at different points.
So I was just wondering when calculating your CoC in a portfolio which sells assets at different points, should you be adding back on the initial equity (or even the sales proceeds) back into your equity invested line?
Thanks in advance
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CoC or ROE is a more of a metric to analyze the operating financials of a stabilized property or portfolio, as opposed to the effect of its various dispositions.
Perhaps you can create two CoC analyses - one solely focusing on the operating performance, while the other includes the various sales?
However, in general, I would predominantly focusing on the operating aspects, and the various exits will completely skew the ratios. You can according adjust the denominator lower as the dispositions velocity increases going forward.
there is not a good/right answer to this but i would calculate a c-o-c yield on each asset (and if you have to combine them while they're owned together, then combine them correspondingly). i can't think of any other way.
Worked with a MF investor whose partnership was structured around cash on cash returns. They would bifurcate cash flows into operating and capital events - with Operating CFs as the numerator and capital events as the denominator. As capital is returned (through refis or sales) your denominator got lower until it hit zero and had "infinite" returns.
This is kinda like the investor I'm working with. I'm thinking of adding back in the initial equity as this would effectively have the same impact as doing it on an asset by asset basis right?
Depends on ownership structure. If properties are all owned in a single portfolio with a single C-O-C return, then I would reduce the basis by the entire sales proceeds. Example:
2 properties, bought for $10mm (equity) each and kick off $1mm of CF each. Sell property 1 for $15mm of cash proceeds. Remaining portfolio (which is now just property 2) has $5mm of basis and $1mm of cash flow (20% cash on cash). But - if you want to see what asset-level cash on cash is for property 2, I wouldn't reduce it's basis by anything happening elsewhere in portfolio.
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