Real estate private equity internship help- how to determine if a potential value add opportunity is worth looking further into &amp; comparables analysis
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[{"id": "iao91ic", "text": "These are good questions! Glad that you are asking them. Havd you asked your supervisors? I think it worth to ask what their expectations are. Seems like you are doing everything using your approach, they definitely have some key factors that they are looking for when funneling/sourcing deals. Nothing know their expectations is a waste of time and energy from my perspective.", "replies": [{"id": "iao9hr5", "text": "I have asked him earlier for but he just said he would forward the comparables i've identified to the branch which is located in that country as they would know more on this, he didnt really answer my question on what factors to filter out comparables", "replies": [], "depth": 2}], "depth": 1}, {"id": "iaob8i2", "text": "The way most shops will approach this is to get a copy of the argus model (if there is one) and run it through an excel proforma model with a pre-determined set of assumptions for debt, hold period, exit cap rate, etc. \nthis allows you to compare the potential returns (IRR, Multiple, Profit, Cash on cash, etc) against other deals. \n\nTypically the company (your employer) will have a Hurdle Rate. If the initial proforma indicates the deal will achieve or exceed the hurdle rate, it is worth researching further.\n\nOffice deals being represented by brokers generally will have an argus model.", "replies": [{"id": "iapv436", "text": "I see, then from the looks of it they probably just wanted me to start forming some kind of opinion for my learning - the vendor deck shared for some didnt have the numbers yet, just general info on the property and location\n\nNoted on the hurdle rate and argus model, thats new questions i will have to ask when we do catch up!", "replies": [], "depth": 2}], "depth": 1}, {"id": "iapfkko", "text": "Comp properties would be similar vintage (ie year built), and size (In the case of office look at SF), and since you\u2019re focusing on office they need to be similar classes of properties. If you\u2019re looking at a Class B office building your comps should be Class B as well.\n\nI do some acquisitions for multifamily value add, and the best way to see if the property is worth looking into more is to take a look at the rent roll &amp; financials. If you\u2019re familiar with basic underwriting, can you create solid returns on the property given a certain amount of CapEx being injected to \u201cadd value\u201d to the property? \n\nThis is general advice, but I\u2019d be happy to help answer more in depth questions if you want to message me.", "replies": [{"id": "iaptnek", "text": "hmm im not rly into the rent roll and financial parts yet (i will probably get assigned to try modelling it next week). im essentially just getting started with making a \u2018\u2019simple\u2018\u2019 initial slide deck for now (basically comparables property location and general info on it)\n\nThank you for the first paragraph, will try to look into those criteria. I will try to see what i can do and message you if i do have other questions, thank you!", "replies": [], "depth": 2}], "depth": 1}, {"id": "iapjnie", "text": "Ridiculous to ask an intern to determine this, how the fuck are you supposed to know?\n\nWith value add there are generally three key levers - ability to raise rents (below market rents in place with short term turnover of leases), vacancy to be filled, or ability to outlay capital to improve the property (and thus rents).\n\nSomebody who has never done a deal before certainly isn\u2019t going to be able to suss this out. How are you supposed to know if the rents are below market and what they could be raised to? Or if the location is strong or if price guidance is a good/fair deal?\n\nYou should sit down with analysts or associates at your shop and ask them to walk you through their thought process.", "replies": [{"id": "iapu730", "text": "Yeah i will try to come up with a thought process and walk them through it, thanks", "replies": [{"id": "iapw1ey", "text": "I\u2019d prepare whatever you can but run it by the full time junior employees (analyst/associate) before taking it to anyone senior. This is a huge learning opportunity and something most interns don\u2019t get much exposure to.", "replies": [{"id": "iapwcyt", "text": "Alright thanks! Yeap im honoured to even have the opportunity to intern this early and i will try to learn as much as i can", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]