PROPOSED INDUSTRIAL FUND MODEL

Background - Engaged by the COO of a commercial real estate service and investment company which oversees more than 47 million square of industrial and office space, to create a return model for a proposed $100 million industrial fund.   

Challenge - Create a return model for the proposed fund that was simple to use but that still allowed a high degree of individual asset sensitivity, including: revenue & expense assumptions, acquisition assumptions, debt & equity assumptions, and occupancy & lease up assumptions.  All the individual property cash flows had to be rolled up to a fund level and the resulting net cash flow after debt had to be run through a partnership waterfall.  The waterfall had to allow complete sensitivity in order to evaluate different partnership structures.     

Results - Using Excel, we created a fund model that was easy to use yet allowed the client a very high degree of sensitivity to determine return profiles under different asset assumptions and deal structures.  The fund return metrics were displayed alongside the input assumptions which allowed the client to immediately evaluate the impact of different variables.  The model was completely transparent with cash flow detail for every asset so the client could audit and modify the model if necessary.