Forum Replies Created
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Spencer Burton
Keymaster7 years, 1 month ago in reply to: Using a Refinance to partially repay investors #3230Great 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.
Good luck!
https://www.adventuresincre.com/tenth-walkthrough-office-value-add/
Keymaster7 years, 1 month ago in reply to: Lease Up during construction for multifamily #3226Great question. By default, the operation begin date is set to one day following the construction end date. However, this assumption can be changed so that your lease-up begins at some other time (such as during your construction period). To do this, simply change the ‘Operation Begin Date’ assumption on the Summary tab cell M16 to whatever date makes sense.
Best of luck!
Keymaster7 years, 2 months ago in reply to: Delayed Construction Starting Date #3222Joaquin,
The red “Error in Budget Timing” alert is part of the error checking feature I’ve added to the Budget tab. Essentially, this tool checks the periodic budget cash flows (shown along the right-hand side of the page) and confirms that the sum of each exactly matches the amount budgeted for each item along the left-hand side. When the cash flows don’t match or the draws are schedule for periods beyond the pre-set construction period length (set on the Summary tab), then a red alert appears along the top of the page as well as next to each incorrectly modeled item.
So in the case of your model, the reason the alert is triggering is that several items are modeled to draw beyond the 16 months construction period you set on the Summary tab. Make sure your ‘Start Month’ plus ‘Length (in Months)’ does not exceed your construction period and/or increase your ‘Development Length’ assumption in cell M13 of the Summary tab so that you’re not attempting to make draws beyond your construction period.
Let me know if you have any other questions!
Spencer
Keymaster7 years, 2 months ago in reply to: Funding Office Tenant Improvements/Leasing Commissions/Other CapEx #3224This is a great question. If the TIs and LCs are modeled as budget line items on the Budget tab, they will be funded by the construction loan. Otherwise, they will be funded by equity during operation.
Keymaster7 years, 2 months ago in reply to: Delayed Construction Starting Date #3218Hi Joaquin,
Wow, I missed this question – I really apologize for not getting to it sooner! I’m guessing the issue is related to the Start Month and Budget Item length assumptions in your Budget tab, but I find it strange it’s shutting Excel down.
I know it’s been a month since your inquiry, but if you’re still running into this issue, I’d be happy to take a look at your file and see if I can’t troubleshoot the issue. Post the file in your response and set the reply to private, and I’ll take a look and get right back to you.
Spencer
Keymaster7 years, 3 months ago in reply to: How to handle Analysis Date different than Lease date? #3212I’ll start with the easy question – it’s not possible to incorporate a mid-month bump. To do this would require daily cash flow tracking, for which the marginal benefit is far outweighed by the processing strain such modeling would create.
In terms of annual bumps. Unfortunately, this is another area where I opted for simplicity over precision. Market rent increases and rent bumps occur at the beginning of each year, rather than on the anniversary of the analysis start or lease start. With that said, since making the decision to do it this way, I’ve developed a simpler method (formula) for timing rent bumps that doesn’t create much of a burden on the model. I’m planning on incorporating this change in the next version of the model.
Keymaster7 years, 3 months ago in reply to: Securities Load #3210Not sure I entirely follow, but if you’re looking to add a capitalized expense to a deal without it being included in the project budget, you can manually add it to the ‘Other CapEx’ line.
You notice on the OpSt tabs (MF-OpSt row 92 and ORI-OpSt row 90), the font in the Other CapEx monthly row is orange (optional input). This is meant to allow manual entry of capital items in the period(s) of your choosing.
Hope this answers your question!
Keymaster7 years, 3 months ago in reply to: Discount Rate on Summary Page not Showing on 12.9.17 Model #3206My guess is you are using the Development module (ie. Development Length is set to a value greater than 0 on the Summary tab). When the Development Module is activated, the discount rate and PV are hidden on the Summary tab. This is because the Ai1 does not do a Present Value on Development deals. I may add this as a feature at a future date, but for now on Development deals valuation is only done using a direct cap.
Keymaster7 years, 3 months ago in reply to: Self Storage #2976I just saw this response to the Self-storage thread – sorry for the delay! If you’re still willing, I’d love to use the Self Storage P&L statements to help build out a Self-Storage module. You can reach me at:
Keymaster7 years, 3 months ago in reply to: Analysis Period #3208No. The model is built for analysis periods between 2 and 10 years.
Keymaster7 years, 3 months ago in reply to: Import into Google Sheets #3202I haven’t attempted to import the model into Google Sheets. But given the complexity of the Ai1, I would guess that it won’t be compatible. Nonetheless, give it a try and let me know if you have any success.
Keymaster7 years, 5 months ago in reply to: ORI Calc not adjusting to Market Rent #2850I’ve made the change in beta v0.5.9 of the model. You are correct, the previous version was using the 1st Generation Base Rent as the starting market rent, rather than the Future Leasing Assumption Market Rent amount. Really appreciate you finding this error.
Keymaster7 years, 5 months ago in reply to: Preferred Return Calculation #2852Thanks for pointing this out! This is not necessarily an error (the outcome is still correct), but it does suggest that the ‘Sponsor Capital Account’ lines on the Equity CF and Sponsor CF tabs are superfluous. I’ll remove references to the ‘Sponsor Capital Account’ in the next version of the model, to avoid confusion in situations where the Sponsor is not owed a preferred return.
This really gets to the waterfall’s methodology. Here’s why the outcome is still correct, even when the waterfall model is showing a growing Sponsor Capital Account:
The base line assumption, is that the LP’s capital account during development and operations grows by the rate of the preferred return (D18). Distributions in hurdle 1 (Preferred Return and Return of Capital) are then made based on the assumption entered in the ‘Distribution as %’ table (H17 and I17). Methodologically speaking, hurdle 1’s sole purpose is to pay down the LP’s capital account, irrespective of the sponsor’s capital account balance. And since the LP capital account grows at the rate of the preferred return, hurdle 1 also indirectly pays the preferred return amount owed to the LP; assuming there is sufficient cash flow to do so. Consequently, the amount distributed to the Sponsor in hurdle 1 is purely the difference between the amount distributable to the LP in order to pay off the LP’s Capital Account, grossed up by the LP’s Distribution share in hurdle 1 (I17). The balance of the Sponsor’s capital account, grown or not by the rate of the preferred return, does not affect the amount distributed to the Sponsor in hurdle 1 or any other hurdle. You can see this formula for the Sponsor’s hurdle 1 distribution in row 59 of the Equity CF tab.
Keymaster7 years, 5 months ago in reply to: ORI Calc not adjusting to Market Rent #2848Thanks for the heads up on this. I’ll look into it and include a fix in the release coming this Saturday.
Keymaster7 years, 5 months ago in reply to: Number of Tenants issue #2846Could you attach the file with the error? That would be helpful to troubleshoot this. Be sure to check the ‘Set as private reply’ box when you attach the file if you want to protect the confidentiality of the deal you’re modeling.
In terms of what might be the issue. One possibility is that there’s an actual bug – if so, once I see the file I’ll be sure to include a fix in an upcoming version. If it’s not a bug, than it’s an input error. I see a couple common input errors on the rent roll that you should look out for:
1) Be sure no cells are left blank. So if you select 11 tenants, be sure you’ve completed each cell in each row for each tenant.
2) Be sure you’ve entered values without words where inputs include in-cell labels. So for instance, column BK (Downtime) includes in-cell labels “X months”. The user enters 9, and the cell outputs “9 months” but Excel still treats the value as the number 9. However, if the user enters “9 months”, Excel does not recognize the input as a number but rather as text and can’t use the value in subsequent formulas.