Underwriting Metrics

We are evaluating a leased land opportunity ( new to us ) Essentially we have a 4 year period of capital calls, a 5 year period of repayment of capital and pref, and then the balance of the lease period, 15 years, as free cash flow. I need some help on the best underwriting metrics to present to our investors. IRR is not great because of the time up front. Should I focus on Cash Flow Multiple on a deal like this

 
Most Helpful

agreed on the IRR comment...deals that are peculiar like this aren't cookie cutter IRR looks. Without knowing much about it, data points I would want to know is the CF multiple probably first and foremost. Other than that I think running some sensitivities is your best bet. You mentioned 4yrs of capital calls up front...how much slippage/overruns can the project tolerate before returning a lower than allowed CFx? Some concept on the free cash flow period...though I imagine this isn't as important a metric since the variability would be limited -- assuming the lease would be contractually signed up front so you lock in your cash flow after the capital calls?

It also depends on your audience...everyone likes seeing different metrics...and it's a bit hypocritical since we nixed IRR...but on a long term deal like this someone might want to see the NPV of it all.

 

In addition to the equity multiple, I find it helpful to present the Investor Contribution, total Investor Distribution, and Net Profit. Sometimes seeing the sheer amount of net profit can sway a room, regardless of the IRR.

 

Agree with the sensitives + EMx. But when IRRs don't work but it still looks like a good solid investment then it's time to bring out the big guns...graphs! A fucking ton of them too. Make sure they can't sleep at night thinking about the potential yields living under their bed or in their closet.

But really, as an investor (lets just say I'm oblivious to cycles) I would probably like to see where it stands in year 9, so all cost (inc. capital/pref) relative to the estimated value of the asset...hopefully you can arrive at a significant discount for the 9 years you kept me waiting.

 

Quia non fugiat ad nostrum totam. Voluptatem qui blanditiis cupiditate minima. Magni odit hic repudiandae quam omnis perferendis dignissimos. Quas officiis quasi consequatur et.

Et recusandae provident voluptatem ducimus. Rerum aliquam rerum ratione itaque ratione. Praesentium commodi nihil temporibus labore vel eveniet ut.

Necessitatibus distinctio eos ipsa impedit et et. Qui aut quia unde ad rerum nisi ut. Totam suscipit eos est consequatur sit aut.

Autem in fuga molestiae quod natus rerum. Aspernatur vero consectetur perspiciatis ducimus aut voluptatem repellat. Voluptatem alias sit veritatis quasi eos cupiditate cum reprehenderit.

Career Advancement Opportunities

May 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Lazard Freres No 98.8%
  • Goldman Sachs 18 98.3%
  • Harris Williams & Co. New 97.7%
  • JPMorgan Chase 04 97.1%

Overall Employee Satisfaction

May 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

May 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

May 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (20) $385
  • Associates (90) $259
  • 3rd+ Year Analyst (14) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (67) $168
  • 1st Year Analyst (205) $159
  • Intern/Summer Analyst (146) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
GameTheory's picture
GameTheory
98.9
6
CompBanker's picture
CompBanker
98.9
7
kanon's picture
kanon
98.9
8
dosk17's picture
dosk17
98.9
9
DrApeman's picture
DrApeman
98.8
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”