Real Estate funds Model
Originally published: 11/07/2019 08:55
Last version published: 12/09/2019 13:10
Publication number: ELQ-31542-6
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Real Estate funds Model

The new technique to evaluate Real Estate funds ( discount cash flow & economic value add )

This model is a case study for real estate funds. It shows how you can evaluate the funds and estimates an overall return through three scenarios.

Firstly, if you have limit information with limit data, as the advance assumption builds, we see equity of €298 Million & €448 of debt. The ratio debt to equity is 60 % which creates an XIRR of 12.39%.

Secondly, evaluating the cash flow projection according to the real-estate funds PPM of the funds projection such as initial equity , equity reimbursement (from asset sales ), cash distribution, activities and capital gains and cash distribution yield all for 7 years which represents the funds management plan. These come from advanced studies and sophisticated analysis to estimate value add & dividend yield.

We can then see the difference between XIRR For Equity ( 12.52%) & average return
against overall average of total funds ( 8.208%) and average return against average of equity (12.9393%). There are lots of details and sophistication which proves the study for comparison as the difference between XIRR (8.5533%) & NPV (8.5632%) and weighted average return for the funds (8.5430%) .

Finally, estimating free cash flow for funds (FCFF), net investment and the NOPLAT (FCFF = NOPLAT - Net Investment) we get the return on invested capital (ROIC) and weighted average cost capital employed in the funds (WACC), analysing the economic model analysis and the value adds. Both results equal each other regarding evaluation on the second scenarios and the three-D scenarios i.e. from DCF for the funds or EVA.

This Best Practice includes
1 Excel spreadsheet

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