Watch Me Solve a Real Estate Technical Interview Modeling Test: Case Study #17, Windsor Crossing
A decade ago, I recorded myself completing a real estate technical interview modeling exercise, start to finish, so our readers could watch over my shoulder and pick up on my process. That video, and the companion blog post, is still one of the most useful things we’ve published for anyone prepping for a real estate private equity technical interview.
We were recently asked to proctor a real estate financial modeling technical exam for a top industrial developer in the United States. The case study went out to a class of prospective analysts, who completed the modeling exercise live and under a time constraint.
A lot has changed since I recorded that first walkthrough. Most notably, AI has fundamentally changed what a take-home modeling test actually tests. Give a candidate an Excel exercise and unlimited time at home today, and you’re no longer necessarily testing that candidate’s modeling proficiency. You’re testing some combination of their modeling skills, AI skills, and ability to use outside resources.
That’s why the firm administered this one live and in person.
There was, let’s just say, a broad spectrum of proficiency in the group that came out of that exam. That told me it was probably time for another one of these walkthroughs.
I couldn’t use the actual case study from that client, out of respect for their confidentiality. So I built a new one that mirrors the same concepts, complexity, and required outputs: Case Study #17: Windsor Crossing, An Industrial Development.
This (long and boring!) video is the solution walkthrough for that case, start to finish.
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You’ll probably also get value out of our How to Prepare for a Real Estate Technical Interview post.
Note on length: This video runs about two hours and twenty-five minutes, which is too long for one sitting or one YouTube upload. So I’ve split it into three parts. Details on each are below.
Quick note on errors: A couple errors I spotted post-video. First, I incorrectly linked the financing fee calculation to total project cost rather than loan amount and incorrectly calculated one of the ‘total /SF’ cells. You’ll undoubtedly spot more errors… no one one-shots an error-free model! So, as you find errors, please let us know and we’ll flag them for others.
The Windsor Crossing Case Study
Windsor Crossing is a 200,000 SF speculative warehouse, divided into two 100,000 SF suites with 32-36 foot clear height, on a 15-acre site at 3135 Windsor Drive in Lebanon, Pennsylvania. Two credit-quality tenants are lined up. The business plan: develop the box, lease both suites to credit-quality tenants, hold for twelve months of stabilized operations, and sell merchant.
You’re standing in as Alex Morgan, an investment analyst in the Northeast office of Meridian Industrial Partners. No leases have been signed yet, but two tenants are lined up with staggered occupancy dates. Your job is to take a blank Excel workbook (a SOFR curve is provided) and project monthly cash flows from land acquisition through sale, calculate project-level and LP-level returns after the joint venture waterfall, and turn in a concise investment recommendation before Friday’s pipeline meeting. You won’t be told the firm’s target returns going in. That’s intentional. In the real exam this exercise was based on, the omission was meant to test whether the analyst understood appropriate market discount rates without being handed the answer.
Full case detail, along with a downloadable PDF and the solution file, is up at Case Study #17: Windsor Crossing, An Industrial Development. Here’s a summary of the key assumptions.
Modeling Exercise Assumptions
Development Program
- 200,000 SF industrial building on a 15-acre site
- Land purchase price: $4,000,000
- Closing costs: 1% of purchase price
- Hard costs: $110 PSF of total building square footage, including site work and utilities
- Soft costs: 15% of hard costs, excluding TIs, LCs, financing, and contingency
- Construction contingency: 5% of hard costs, assumed fully spent
- Tenant improvements: $10 per leased square foot, paid at each tenant’s occupancy month
- Leasing commissions: 5% of each tenant’s ten-year contractual base rent, net of free rent, paid six months before each tenant’s occupancy month
Leasing
- Two tenants, 100,000 SF each, investment-grade credit (no vacancy or credit loss assumed)
- Base rent: $12.00 PSF, with 3% annual escalations on each tenant’s occupancy anniversary
- Three months of free rent per tenant
- Ten-year lease term (though the hold period ends well before any rollover)
- Recoverable expenses: $2.50 PSF, growing 3% annually; tenants reimburse their occupied share, including during free rent
- Nonrecoverable owner expenses: $0.15 PSF, below the line
- Replacement reserve: $0.10 PSF, no growth
Construction Financing
- Maximum construction loan: 70% of approved total project cost (30% equity required before the first debt draw)
- Interest rate: monthly Term SOFR plus 500 basis points, 0% SOFR floor
- Origination fee: 1% of loan commitment, paid at land closing
- Loan maturity: 36 months from land closing; no amortization, no exit fee
- Equity funds first, debt funds second; unfunded construction and lease-up interest capitalizes into the project budget and loan balance
- No permanent debt; this is a merchant build, sold at the end of the hold period
Reversion
- Sale valued off the next twelve months of NOI following sale, divided by a 5.75% exit cap rate
- Selling costs: 1.5% of gross sale price
Joint Venture Waterfall
- LP funds 95% of required equity, GP funds 5%
- Tier 1: distributed 95/5 until the LP achieves a 12% IRR
- Tier 2: any excess split 80% LP / 20% GP
Required Output
- Required project equity, net profit, IRR, and return on capital, at both the project level and the LP level after the promote
What This Is and Is Not
The finished model that comes out of this exercise isn’t meant to be used on an actual deal, and it likely contains small errors. I performed error checks along the way, but I haven’t gone back and thoroughly audited every cell. If you spot an error in the model, let us know and we’ll roll out an update.
That said, if you’re prepping for a real estate technical interview, I think watching how I approach this exercise, including where I use AI and where I don’t, will help you build your own strategy and your own techniques. I’ve said it before: I learn the most by watching someone else model and then folding what I picked up into my own process. My hope is that you get the same out of this exercise.
And once you’ve followed along, try the extra credit on the case study page: test how the returns move if rents disappoint, construction costs rise, the second tenant shows up late, or the exit cap rate moves against you.
Video: Watch Me Solve the Windsor Crossing Modeling Test
Here’s how the three parts break down:
Part 1: Setup & Property-Level Cash Flows Begin
I lay out the workbook structure, build the project cost section (land, hard costs, soft costs, TI’s, LC’s), work through sources and uses, and explain why I chose goal seek over iterative calculation to handle the construction-debt circularity. From there I move into operating cash flows: modeling rent, the lease assumptions, and using AI to help draft the rent escalation formula.
Part 2: Operating Cash Flows to Unlevered Returns
I finish the operating cash flow section (recoverable and non-recoverable expenses, NOI), model tenant improvements and leasing commissions, build the reversion (sale) cash flows, and calculate the exit cap rate math. By the end of this part, we’ve got the property’s gross unlevered and levered profit, IRR, and equity multiple.
Part 3: Waterfall, Debt & Wrap-Up
This is where the exercise gets more technically challenging: the LP/GP partnership waterfall (contributions, the 12% required return, the tiered distributions), and then the trickiest part of the entire exercise, the construction debt circularity, solved with a goal seek macro built with AI’s help. We close out with the final investment recommendation.
Follow Along Using the Case Study File
To get the most out of these videos, I’d recommend downloading the case and solution file and following along as you watch. You’ll find both, along with the full assumptions, on the Case Study #17: Windsor Crossing page.
As with our real estate financial models, the case study and solution are offered on a “Pay What You’re Able” basis with no minimum (enter $0 if you’d like) or maximum (your support helps keep the content coming). Just enter a price together with an email address to send the download link to, and then click “Continue.”
If you have any issues, questions, or suggestions related to this exercise, don’t hesitate to reach out.
