Excel Modelling Test

Instructions
You are looking at buying a mixed-use property which will be held by a company created for the purpose.
Based on the assumptions given in the Assumptions page and those in the Tenancy Schedule page, please:
#

Task
Model the Rental income of the asset on a quarterly basis; please assume the asset is located in
continental Europe with rents indexed by Consumer Price Index (CPI) at the beginning of each year.
For the vacant unit, please assume a start of the new contract on 1st January 2017, allowing for 9
months rent free.

Set of assumptions to use

Income assumptions; Year by year assumptions; rent roll in the
Tenancy Schedule

Model the pre-tax unlevered cash flow (project cash flow) of the asset including the costs and the
2 purchase and the sale of the asset; please assume all operating costs are NOT recoverable; calculate
the corresponding IRR

Cost assumptions; Buy and sell assumptions

3 Model the levered cash flow; calculate the corresponding IRR

Financing assumptions

Assuming at the end of the life of the investment the asset will be sold within its SPV (ie the buyer will
4 buy the company holding the asset) please model the discount for latent capital gains tax (DTL) the
Tax assumptions
buyer will request; calculate the corresponding post tax IRR

Create a yearly cash flow summarising your work you have done so far (ie showing your model on a
yearly basis)

None

Create 2 Data Tables (sensitivity tables) showing the impact of a change in assumptions on the net
equity (post tax) IRR.

Candidate's choice

Calculate:
- the Net Initial Yield at which the asset is acquired,
- the running NOI Yield for each year over the holding period,
7
- the weighted average contractual lease length at the beginning of the business plan,
- the compound average growth rate (CAGR) of the rental income,
- and the net present value of the pre-tax unlevered cash flow.

Candidate's choice

Tenancy Schedule
Tenant

Lease
Status
Rented
Rented
Rented
Rented
Rented
Rented
Rented
Vacant
Rented
Rented
Rented
Rented
Rented
Rented
Rented
Rented
Rented

A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
TOTAL

Area
(sqm)
370
330
200
70
180
400
75
2,000
75
415
80
125
290
155
13,300
23,450
10,600
52,115

Lease
Start
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09
31-Dec-09

Lease
End
30-Aug-18
31-Mar-19
31-Mar-17
31-Mar-17
08-May-18
31-Mar-19
31-Mar-17
31-Mar-15
31-Mar-19
31-Mar-17
31-Mar-19
31-Mar-19
31-Mar-15
31-Mar-18
30-Jun-18
31-Mar-19

Passing
Rent (p.a.)
50,000
100,000
115,000
50,000
100,000
150,000
60,000
100,000
155,000
60,000
65,000
130,000
85,000
1,000,000
2,000,000
800,000
5,020,000

ERV
(p.a.)
100,000
110,000
125,000
55,000
110,000
165,000
65,000
600,000
65,000
140,000
60,000
55,000
120,000
80,000
880,000
1,800,000
720,000
5,250,000

Ren. Proba
%

Void
(Quarters)

Rent Free
(Quarters)

Key Assumptions
Constants
No of Days in a year
No of Months in a year
No of quarters in a year
Income assumptions
Probability of tenants renewing lease upon expiry
Void upon expiry
Rent free upon expiry

Quarters
Quarters

Costs assumptions
Property Management fees
Other Operating Expenses (p.a.)
Non-Operating Expenses (p.a.)
Capex

% of Rental Income
Cost Inflation
Cost Inflation
% of Rental Income

Buy and sell assumptions

Purchase price
Acquisition costs
Net exit yield
Sales costs
Hold period
Start date
Exit date
Financing assumptions
Asset level third party debt
Base rate (Euribor)
Margin (Interest Rate)
Debt amortization (p.a.)
Tax assumptions
Capital Gains Tax
Discount for latent capital gain tax (DTL)
Asset depreciation p.a. (on construction)
NPV Assumptions
Discount Rate

% of Purchase Price
% of Sale Price
Years

LTV

365
12
4

Year by year assumptions

Consumer Price Index
Market Rent Growth
Cost Inflation

2014
-

2015
0.5%
-3.0%
1.0%

75.0%
2.0
1.0
Sensitivity Tables
3.0%
500,000
200,000
5.0%

55,000,000
3.0%
7.0%
2.0%
5.0
Dec-14
Dec-19

IRR Sensitivity Table on Net exit yield (%) and Purchase price (Millio
Net exit yield (%)
Step (%)

7.0%
0.5%

Purchase price (Million) 55,000,000

Step (Million)
2,000,000

IRR Sensitivity Table on Debt amortization (p.a.) (%) and Margin (Int
60.0%
1.0%
2.5%
2.0%

30.0%
50.0%
3.0%

8.0%

Debt amortization (p.a.) (%)

Step (%)

2.0%
0.5%

Margin (Interest Rate) (%)

Step (%)

2.5%
0.5%

2016
1.0%
1.0%

2017
1.5%
5.0%
1.0%

2018
1.5%
2.5%
1.0%

2019
2.0%
2.5%
1.0%

2020
2.0%
2.5%
1.0%

2021
2.0%
2.5%
1.0%

Purchase
price
(Million)

rchase price (Million)

51,000,000
53,000,000
55,000,000
57,000,000
59,000,000

6.0%

Net exit yield (%)

6.5%
7.0%

7.5%

Margin
(Interest
Rate) (%)

(%) and Margin (Interest Rate) (%)

1.5%
2.0%
2.5%
3.0%
3.5%

1.0%

Debt amortization (p.a.) (%)

1.5%
2.0%
2.5%

2022
2.0%
2.5%
1.0%

8.0%

(%)
3.0%

2023
2.0%
2.5%
1.0%

2024
2.0%
2.5%
1.0%

2025
2.0%
2.5%
1.0%

Inflation Modelling
Note: For model simplifications, all costs are assumed to be paid by landlord during rent free p
Consumer Price Index (CPI)
Cumulated CPI
Market Rent Growth
Cumulated MRG

Current Rent Modelling

Tenant

Rent
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
TOTAL

NEW Rent Modelling

Tenant

NEW Rent

A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
TOTAL

Rental Income Modelling

Tenant
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
TOTAL

Year
Year No.
Quarter

2014
Dec-14

2015
1
Mar-15

2015
1
Jun-15

2015
1
Sep-15

2015
1
Dec-15

aid by landlord during rent free period, and being charged on a quarterly basis

Lease
End Date

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Rent Free

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

End Date

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

2016
2
Mar-16

2016
2
Jun-16

2016
2
Sep-16

2016
2
Dec-16

2017
3
Mar-17

2017
3
Jun-17

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

2017
3
Sep-17

2017
3
Dec-17

2018
4
Mar-18

2018
4
Jun-18

2018
4
Sep-18

2018
4
Dec-18

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

2019
5
Mar-19

2019
5
Jun-19

2019
5
Sep-19

2019
5
Dec-19

Mar-19

Jun-19

Sep-19

Dec-19

Mar-19

Jun-19

Sep-19

Dec-19

Mar-19

Jun-19

Sep-19

Dec-19

Pre-Tax Unlevered Cash Flow Modelling

Note: For model simplifications, NO assumptions on Service Charge Prepayments are made.

Profits
IRR
Multiple

harge Prepayments are made.

Year
Year No.
Quarter
Sources and Uses
Sources
Debt
Equity
TOTAL
Pre-Tax Levered Cash Flow Modelling
Base rate (Euribor)
Margin (Interest Rate)
Total Interest Rate
Assumptions

Pre-tax unlevered cash flow

Debt
Principal
BoP
Repayments
EoP
Interests
Debt repayment at sale
Pre-tax levered cash flow
Profits
IRR
Multiple

2014
Dec-14

2015
1
Mar-15

2015
1
Jun-15

2015
1
Sep-15

2015
1
Dec-15

2016
2
Mar-16

Uses
Acquisition price
Acquisition costs
-

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

2016
2
Jun-16

Jun-16

2016
2
Sep-16

Sep-16

2016
2
Dec-16

Dec-16

2017
3
Mar-17

Mar-17

2017
3
Jun-17

Jun-17

2017
3
Sep-17

Sep-17

2017
3
Dec-17

Dec-17

2018
4
Mar-18

Mar-18

2018
4
Jun-18

Jun-18

2018
4
Sep-18

Sep-18

2018
4
Dec-18

Dec-18

2019
5
Mar-19

Mar-19

2019
5
Jun-19

Jun-19

2019
5
Sep-19

Sep-19

2019
5
Dec-19

Dec-19

Year
Year No.
Quarter
Post-Tax Levered Cash Flow Modelling
Book value
Acquisition price
Depreciation (%)
Sale price
BoP
Depreciation
EoP
Capital gains tax
Discount for latent capital gain tax (DTL)
Capital gains tax to be paid to buyer of SPV
Pre-tax levered cash flow
Capital gains tax to be paid to buyer of SPV
Post-tax levered cash flow
Profits
IRR
Multiple

Assumptions
55,000,000
3.00%
-

2014
Dec-14

2015
1
Mar-15

2015
1
Jun-15

2015
1
Sep-15

2015
1
Dec-15

2016
2
Mar-16

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

55,000,000
16,500,000
(8,250,000)
8,250,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

2016
2
Jun-16

2016
2
Sep-16

2016
2
Dec-16

2017
3
Mar-17

2017
3
Jun-17

2017
3
Sep-17

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

2017
3
Dec-17

2018
4
Mar-18

2018
4
Jun-18

2018
4
Sep-18

2018
4
Dec-18

2019
5
Mar-19

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Mar-19

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

2019
5
Jun-19

2019
5
Sep-19

2019
5
Dec-19

Jun-19

Sep-19

Dec-19

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

55,000,000

Year
Year No.
Quarter
Cash Flow Summary (Yearly Basis)

Profits
IRR
Multiple

2014
Dec-14

2015
1
Dec-15

2016
2
Dec-16

2017
3
Dec-17

2018
4
Dec-18

2019
5
Dec-19

Net Initial Yield Calculation

Running NOI Yield Calculation

WALL Calculation

CAGR Calculation

NPV Calculation