Best practice in financial models

• Simple tips to help you become an efficient financial modeller.
• How to avoid errors and present your models in a persuasive way

Implicit investment valuation methods

• Term & Reversion
• Layer / Hardcore
• Property yields
• Defining term and reversionary yields
• Calculating the equivalent yield

Build your cash flow from scratch

• Inputs: passing rent, estimated rental value, initial and exit yields, market growth, review cycles and most
• importantly, target returns
• Outputs: internal rate of return, net present value and worth
• Annual and quarterly discounted cash flows: modelling purchase price, passing rent, rent reviews, exit rent and exit price

Analyse the results

• IRR, NPV and Worth
• Data tables & sensitivity analysis
• Risk visualisation (charts)

Case study

Single-tenant office building in the UK

Multi tenant properties

• Modelling tenancy schedules and rents forecast
• Rent reviews, upward-only, break options, lease expiry
• Modelling hypothetical second leases
• Void period, rent free and estimated rental values

Time-varying rental growth

Net Operating Income Forecast

• Modelling capital expenditure for refurbishment and operating costs (letting fees, void costs, empty rates)

Investment decision

• When to accept the project and make investment recommendation

Case Study

Multi-tenant office building in the UK

Capital Structure, sources of debt funds & lending criteria

• Capital structures: debt & equity
• Explanation of different debt & equity structures
• Sources of debt fund & lending criteria

Debt Covenants & calculations

• Operational Covenants: asset maintenance, disclosure requirements, insurance and credit line
• Financial Covenants: interest cover ratio, debt service coverage, loan to value, debt yield

Senior debt repayment modelling

Rolled-Up (Capitalised) Interest

Interest Only

Constant Amortisation

Fully-Amortising Constant Payment

Partially-Amortising Constant Payment

Pro-forma cash flow development modelling

• Site Purchase
• Gross Development Value (GDV) versus Net Development Value (NDV)

Development Timeline Modelling:  Phases and Duration

Development Costs Modelling: Hard Costs and Soft Costs

• S-Curve
• Straight-Line
• Known Costs

Mezzanine finance

• Modelling mezzanine structures
• Mezzanine interest and fees

Debt Prioritisation

• Modelling cash flow waterfall
• Coupon and capital repayment schedule

Analysis

• Maximum loan amount based on financial covenants
• Credit Analysis
• Stress test
• Capital adequacy calculations

Case study:

Office development lending 

Real Estate Risk

Sensitivity Analysis 

Data Tables

Scenario Analysis

Automatic scenario modelling

Simulation Analysis

Monte Carlo analysis 

Case Study:

Learn how to add a real life tenancy schedule and debt facilities into the models. Analyse any investment-grade commercial property transactions in the European markets.