Hi, First, I want to thank you for creating the Ai1 Model and putting it on your website for purchase. I think it’s amazing! My question has to do with refinancing a property. Assume I am purchasing a value-add apartment complex. I’m raising equity from investors and getting a loan for the remainder of the purchase. Assume 30% equity and 70% loan. I (sponsor) am putting in no capital. There is an 8% pref and the equity split is 70%/30% investors/sponsor (me). Rents are below market, so i’m going to put in some capex and raise rents. Once the property is stabilized at a higher valuation, I want to refinance the bank debt (assume year 3) and pay back my equity investors. I can refinance and repay 80% of their capital. I plan to hold the apartment for 7 years and then sell it. How can I model this scenario in the Ai1 Model? Thanks for your help!
Great question. To model true Value-Add scenarios such as this, you’ll use the development module. The development module includes construction debt, with permanent debt taking out the construction loan at stabilization – which is consistent with your scenario. I recorded a tutorial that should get you at least 90% of the way (see link below). Let me know if you have other questions about going through the tutorial.
Awesome! Thank you for doing that! I really appreciate the time you spend and the work you put into creating robust, dynamic models.
That being said, I have another question. Is there a way to add sponsor compensation (acquisition fee, asset management fee, disposition fee) into the analysis? If not, could that be something to put on your list if potential future enhancements?
Thanks again. I’m looking forward to viewing the rest of your tutorial videos.
The sponsor compensation question has arisen before. You can not currently add sponsor compensation to the waterfall, but I’ll go ahead and add that to the feature request list.
