Annual-based Real Estate Acquisition Model with Refinance Options and IRR Hurdles (joint venture)
Recent update: Added option for up to 4 properties to be analyzed at once as well as improved general formatting.
This annual-based, real estate model is adaptable, dynamic, and convenient. It allows users to quickly evaluate multi-family real estate deals and provides straight forward numbers to investors and sponsors. The model allows for IRR (internal rate of return) hurdles, incorporates complex logic to generate a dynamic refinance liquidity event, and is able to use high level revenue/cost assumptions for very quick analysis or more granular configurations.
Data entry starts with configurations regarding the acquisition and operations of a property where there are different room types. The rent roll schedule allows for different rents and changes to rent from current to new and growth over time. Expenses are input and can also grow by a separate rate on the pro forma tab.
The IRR hurdles in the model can be used by sponsors to incentivize investors to invest by showing how cash is split as the return grows. This profit sharing is driven by return performance; the sponsor will receive a greater portion of profits contingent on how high the investor pool's IRR is.
Cash flows are split as hurdles are achieved with remaining cash allocated to the next tier, according to the promote schedule, i.e., dynamic inputs define promotes and hurdles.
Complex refinance logic allows users to visualize debt service and available cash, regardless of what year a user refinances and what year a user exits. This includes flexibility for making the initial loan interest only for some amount of years and then it goes p+i until the refinance event or exit event.
Various variables are used to define expenses and revenues, as well as the growth of both. Drop-downs were included so users could put in a single number to current expenses and revenue, avoiding detailed population of expenses and unit makeup. The model also allows users to choose 'high-level assumptions' or 'detailed assumptions'.
A printer friendly ‘executive summary’ is included.
Note: I am not a financial advisor and this is not financial advice. Use this template at your own risk.