Leveraged Breakdowns

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For Posterity, here is a link to the model that I reviewed for Jeowong.


Great model, it shows a lot of promise. Some nits and observations below.

  1. Row 27: break out your rent revenue between GPR & vacancy. Real estate investors like to see what your GPR & vacancy assumptions are separate from one another.
  2. Row 28: Similar comment for Other Revenue — show the vacancy loss separately
  3. Rows 30, 32: This is very minor. The mathematically proper way to turn an annual growth rate into a monthly growth rate would be =(1+r)^(1/12)-1. This is a bit more accurate than dividing an annual rate by 12.
  4. Row 33: NOI is always inclusive of management fees. Also, REPE investors only ever use Economic NOI for multifamily, which is inclusive of capital maintenance reserves (the $400/yr metric quoted in the prompt). If you don’t know what Economic NOI is and why it’s important, refer to this post from Green Street Advisors, the premier real estate research outfit.
  5. Rows 47 thru 53: Great find on the CBRE cap rate source. However, you should apply the cap rate to the economic NOI (inclusive of capex). Also, I’ve just updated my post to include an exit cap rate assumption to simplify since I figure it may be too much to ask students to derive their own cap rate like you did. Refer to the latest post, which reads:
    1. The T0 market cap is 4.5%, expanding at 5bps per year. The inflated exit cap is what you apply to your NTM exit NOI for GAV.
  6. The index(range,COLUMN(cell),#) forumla is fancy, but could break if somebody added a column to the left of your model. Can you consider a safer way to build this formula?
  7. Nothing explicitly wrong, but I prefer to separate my purchase & sale rows



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