Commercial Real Estate - Acquisition Model
Originally published: 29/08/2019 07:06
Last version published: 11/11/2019 13:58
Publication number: ELQ-44832-7
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Commercial Real Estate - Acquisition Model

Model provides to the user a detailed excel spreadsheet in which, the viability of an investment in an commercial RE

Description
This is a fully functional dynamic Commercial Real Estate Acquisition Model that will provides for the user a detailed excel spreadsheet, in which, the viability of an investment in an office or other type of commercial real estate can be accessed with accuracy. The model does that by capturing some of the most complex issues related with commercial leases, namely the renewable probability, free rents concessions, different contracts schedules, reimbursements structures, and so on.

Model Options:

• Starting with the Investment Summary sheet, the user will fill out a set of key inputs such as acquisition price, Loan-to-value, acquisition and refinance loans info, CAP rate for both refinance and eventual sale, capital and waterfall structure.
• In the Investment Summary sheet, you have an overall view of the property's potential investment and, at the same time you are able to play with different scenarios by changing the key drivers.
• The summary tab also includes IRR sensitivity tables and dynamic charts, which update automatically accordingly with the hold period.
• In the Assumptions Sheet you can model up to ten different leases, by taking into account:
• Contract Duration: besides the contracts in place, the user can model up to three generations of new/renewal leases.
• Reimbursements Structure: Besides the triple Net and double net leases the model is also capable of modeling complex reimbursement structures like Full Service and base year stops
• Monthly Dynamic & Annual Cash Flow: in order to calculate the key investments metrics needed to determine the feasibility of the project, and the overall value of a potential selling, the cash flow is calculated in a monthly base;
• Acquisition Loan: Set based on the acquisition price and LTV ratio
• Permanent finance:The model also covers a refinance option through a permanent financing,
• Equity Waterfall Model: the template provides a 3 tier Equity waterfall model, so the user will be able to determine how much capital the limited partner and General partner will get, and their respective rates of return.

Instructions

• You only need to input information into the dark blue font cells in the Investment Summary and Assumption sheets. If the contents of a cell
are colored black, it means that is a formula.
• The template is provided with information from a hypothetical property, for demonstration purposes that must be erased for a real property valuation;
• The investment summary sheet provides an overview of the property based on several key metrics and assumptions. In the Assumptions sheet the user can define the remaining drivers;
• To assess the sale value of the property, this model is designed to capitalize the NOI of the 12 months subsequent to that of the disposition divided by the defined exit cap rate;
• The maximum horizon for this model is ten years.

This Best Practice includes
1 Excel template

Acquire business license for $25.00

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Further information

Evaluate the viability of an investment in an existing office or other type commercial real estate

Acquisition of Commercial Real Estate property

Does not work well for non-real estate businesses.

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  • Amir Ganic(last updated: 28/09/2019 19:53)

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