REITs investment model (SCPI in French)

Investment model in REITs "Real Estate Investment Trusts" (SCPI in French) which allows to project IRR

by Pierre-Alexandre HEURTEBIZE
Consultant - M&A, Modelling and Financial analyst - M&A director at HoriZen CapitalFollow 56

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Description
This model will allow you to assess the expected return on investment of a leverage investment in REITs (SCPI in French). Real Estate Investment Trusts allow individual investors to buy shares in commercial real estate portfolios that receive income from a variety of properties.

I have originally built this model for a personal investment in SCPI (the french equivalent of REITs) so the structure may slightly differ from the usual REITs investment in the US which i am less familiar with.

The basics of this kind of investment is : Raise a loan. Invest the money in REITs. Monthly revenue from REITs cover part of loan repayment. After several years, sell the REITs and payback outstanding loan.

The model will require you to input the investment amount you consider, loan amount and loan characteristics, REITs characteristics and the length of detention, along with income tax rate , acquisition costs and forecast revenue and share value growth.
Please note that it is common that investment fees be only charged when REIT's are sold. To allow for all cases, I've included a "Acquisition cost" input and a "Selling cost" input. Based on you specific case you can just set one or the other to 0.

You will also find in the input page a sensitivity analysis using Data Table. If find this super helpful but this can cause the excel model to be drastically slow down so do not hesitate to delete some or all of the sensitivity analysis if you want the model to run quickly. Alternatively you can go to File => option => Formulas => Calculation options and set Workbook calculation to "automatic except for data table" which may already be selected.

Please note that it is common practice that some REITs start paying revenue after a certain holding period (3 to 6 months generally). This version of the model does not account for a waiting period.

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