Real Estate Financial Modeling Course - Office Development

Learn how to build an Office Real Estate Financial Model from scratch based on a real Case Study.

Description

This course is based on the following Case Study:

Background

As an investor at Udemy Capital specializing in office building developments, you are planning to purchase a land plot to develop a modern, build-to-suit office building for a major tenant who is willing to sign a 10-year lease (with no break options) for their headquarters. As part of Udemy Capital’s underwriting process you need to model the following assumptions on a monthly cash flow basis. If you think, that some of these assumptions may not make sense or could be more accurate, feel free to change them as long as you justify it properly.

Land & Acquisition Costs

Location: Barcelona’s Prime Office Area

Purchase of the Land on 01 January 2025

Land Purchase Price: to be determined by a minimum Levered IRR (LIRR) of 15% and an Equity Multiple (EM) of at least 1.80x

Buildability: 10,000 sqm

Real Estate Transfer Tax: 10% over Land Purchase Price

Notary & Registry: 0.25% over Land Purchase Price

Buy-Side Brokerage Fee: 1.50% over Land Purchase Price

Due Diligence: 75,000€

Development

Project: 10,000 sqm

Construction Period: 18 months starting in Month 1

Hard Costs: 1,800 €/sqm

Soft Costs: 15% over Hard Costs

Contingency: 5% over Hard + Soft Costs

Leasing Costs: 1 month of Rent

Tenant Improvements: 23.50 €/sqm to be paid out for 2 months and starting the first month of rent

Operations

Gross Leasable Area (GLA): 10,000 sqm

Rent: 23.50 €/sqm

Yearly Rental Bump: 2.50% on each lease anniversary

Free Rent: 5 months of rent

Operating Expenses (Opex): 15% over Gross Rental Income

Non-Recoverable Expenses: 10% of Opex

Building Capex Maintenance: 5% over Gross Rental Income

Exit / Sale

Holding Period: 5 years

Exit Cap Rate: 4.25%

Selling Costs: 1.50% over Sales Proceeds

Acquisition Loan

None, land will be acquired with Equity

Development Loan

Loan to Cost (LTC): 60%

Arrangement Fee: 1.00% over Loan Proceeds

Equity First Structure

All-in interest rate: 5.50%

Repayment: bullet at Refinance

Refinance Loan

Refinance Month: at stabilization after TIs and Free Rent Periods

Arrangement Fee: 1.00% over Loan Proceeds

LTV: 55% of value at refinance

Cap Rate at Refinance: 4.75%

All-in interest rate: 4.50%

Amortization: French amortization schedule

Loan Term: 15 years

Outputs

In order for your Investment Committee to consider this deal you will need to show:

Annual Cash Flow Tab

Land Purchase Price

Levered IRR

Equity Multiple

Profit

Equity Peak

Sensitivity Tables

- Rent and Hard Cost

- Land Purchase Price and Exit Cap Rate

Who this course is for:

College students or career switchers who want to break into the Real Estate Investment Industry and work for companies such as real estate funds, family offices, consulting firms, investment banks, etc.
Current real estate professionals who want to boost their financial modeling skills.
Current real estate investors who want to feel confident in modeling their own deals.
Job applicants that have a Real Estate Financial Modeling test coming up.