Stephenson real estate recapitalization case answers

Finance Assignment ---Four Pages 1100words

RUBRIC – FINAL INDIVIDUAL EXAM

Instructor Expectations

 Did the student demonstrate an understanding of PRESENT VALUE DISCOUNTING?

 Did the student demonstrate an understanding of SENSITVITY ANALYSIS?

 Did the student employ CRITICAL THINKING when answering the final questions?

 Is the paper spell checked and grammar checked?

 Is the paper conclusion oriented and avoids use of slang I.E. GOOD, BAD, GREAT ETC.?

Background

After graduating from Temple, you were hired by Stephenson Real Estate of Maryland as a financial analyst reporting to the Director or Acquisitions. Based on your recent analysis and the company’s acquisition of a large track of land located in the Southeast USA, they are now turning their attention to evaluating an existing income producing asset called Anywhere Shopping Center. The selling broker called the director this am to say the sales contract for Anywhere Shopping Center was cancelled by a buyer and that we now have an opportunity to buy the asset from the owner but we must act quickly and submit an offer by August 7th at 8:30pm.

The broker provided a few updated details on the asset that has changed since you last evaluated the acquisition. Using your XLS model, update same based on the following:

 Based on a further review of the Starbucks lease it was discovered that the actual rent in year one is $15.00/sf and the rent increases 1.5% per year.

 The real estate assessment increased and resulted in a new real estate tax of $1.50/sf no other changes to the current model.

 The lender requoted the acquisition this am, and the new loan terms are as follows:

o 6.5% interest rate

o 65% loan to value.

Your supervisor would like to take advantage of this opportunity and has tasked you with updating the XLS model.

 Question 1: Based on the updated XLS per the details noted above…what is the new leveraged IRR (cell B37 of Leverage tab) based on our original offer of $714,688 (that was based on an unleveraged discount rate of 10%)? INSERT LEVERAGED TAB HERE.

 Question 2: Using the new spreadsheet from Question #1, your supervisor now stated that their new leveraged IRR threshold (cell B37 of Leveraged tab) is 20%. Using Goal Seek solve for a 20% return in cell B37 in the Leveraged tab. INSERT LEVERAGED TAB HERE.

With this information now complete, please proceed to the next part of the analysis and prepare the following:

 Update the concluded market value balance sheet (from your group homework assignment) to INCLUDE the acquisition of Anywhere Shopping Center. INSERT MARKET VALUE BALANCE SHEET HERE. INCLUDE A WORKING CAPITAL AMOUNT OF $20K FOR THIS ACQUISTION.

Finally, your supervisor now has asked that you interpret the consolidated market value balance sheet and tasked you with the following questions.

 By adding Anywhere Shopping Center to the market value balance sheet what is the impact on the value of the company?

 Explain why HERE.

 Lastly what are the positives and negatives (risks) list 2 each of increasing the debt of Anywhere Shopping Center to say 95% LTV? Insert new leveraged tab HERE.

RUBRIC – FINAL INDIVIDUAL EXAM

Instructor Expectations

· Did the student demonstrate an understanding of PRESENT VALUE DISCOUNTING?

· Did the student demonstrate an understanding of SENSITVITY ANALYSIS?

· Did the student employ CRITICAL THINKING when answering the final questions?

· Is the paper spell checked and grammar checked?

· Is the paper conclusion oriented and avoids use of slang I.E. GOOD, BAD, GREAT ETC.?

Background

After graduating from Temple, you were hired by Stephenson Real Estate of Maryland as a financial analyst reporting to the Director or Acquisitions. Based on your recent analysis and the company’s acquisition of a large track of land located in the Southeast USA, they are now turning their attention to evaluating an existing income producing asset called Anywhere Shopping Center. The selling broker called the director this am to say the sales contract for Anywhere Shopping Center was cancelled by a buyer and that we now have an opportunity to buy the asset from the owner but we must act quickly and submit an offer by August 7th at 8:30pm.

The broker provided a few updated details on the asset that has changed since you last evaluated the acquisition. Using your XLS model, update same based on the following:

· Based on a further review of the Starbucks lease it was discovered that the actual rent in year one is $15.00/sf and the rent increases 1.5% per year.

· The real estate assessment increased and resulted in a new real estate tax of $1.50/sf no other changes to the current model.

· The lender requoted the acquisition this am, and the new loan terms are as follows:

· 6.5% interest rate

· 65% loan to value.

Your supervisor would like to take advantage of this opportunity and has tasked you with updating the XLS model.

· Question 1: Based on the updated XLS per the details noted above…what is the new leveraged IRR (cell B37 of Leverage tab) based on our original offer of $714,688 (that was based on an unleveraged discount rate of 10%)? INSERT LEVERAGED TAB HERE.

· Question 2: Using the new spreadsheet from Question #1, your supervisor now stated that their new leveraged IRR threshold (cell B37 of Leveraged tab) is 20%. Using Goal Seek solve for a 20% return in cell B37 in the Leveraged tab. INSERT LEVERAGED TAB HERE.

With this information now complete, please proceed to the next part of the analysis and prepare the following:

· Update the concluded market value balance sheet (from your group homework assignment) to INCLUDE the acquisition of Anywhere Shopping Center. INSERT MARKET VALUE BALANCE SHEET HERE. INCLUDE A WORKING CAPITAL AMOUNT OF $20K FOR THIS ACQUISTION.

Finally, your supervisor now has asked that you interpret the consolidated market value balance sheet and tasked you with the following questions.

· By adding Anywhere Shopping Center to the market value balance sheet what is the impact on the value of the company?

· Explain why HERE.

· Lastly what are the positives and negatives (risks) list 2 each of increasing the debt of Anywhere Shopping Center to say 95% LTV? Insert new leveraged tab HERE.