Capital Formation Interview Simulator

If you buy a property at a 6% cap with 50% leverage at 4%, what is the equity yield?

You sell a property for $21,000,000. It had a tax basis of $18,500,000 (this may also be referred to as the net book value, which includes all depreciation up to the date of the offer). You are considering buying a property that is $20,000,000. Could you use a 1031 exchange, and if so, how much gain could you defer?

Your firm is considering selling a building for $25,000,000. That property has a tax basis of $20,000,000. Your firm plans to sell the building and exchange the gains into another project, a redevelopment of an office building inside an Opportunity Zone for a single tenant on a 15-year NNN lease. The new project will cost approximately $40,000,000. If you model a sale at year 10 of the redeveloped office building at $45,000,000, what will be the taxable gain? (Assume 39-yr straight-line depreciation on the redeveloped building)

A CMBS (Commercial Mortgage Backed Securities) issuance has two tranches. What does it mean to be the “B” piece?

A real estate development project you are modeling includes a construction loan. The construction contract will include a 10% retainage provision. When modeling the monthly draws, would the following statement be true or false?

“Don’t worry about the retainage in the model- just input the equity or loan advance amount needed to pay the net draw amount.”

You are modeling a multi-family property utilizing 60% leverage. You have been instructed to complete a 10-year model, but to use permanent financing with only a five-year fixed rate term. How should you model the financing on the remaining five years?

What is the IRR to the Limited Partners under the following scenario?

• Waterfall is defined as: 9% pref, 75/25 to a 12%, then 50/50
• LP investment of $1,000,000
• Zero cash distributed during hold period
• Two year hold period
• $1,450,000 available cash for distribution

What is the cash distributed to the General Partner under the following scenario?

• Waterfall is defined as: 9% pref, 75/25 to a 12%, then 50/50
• LP investment of $1,000,000
• Zero cash distributed during hold period
• Two year hold period
• $1,450,000 available cash for distribution

Which two of the following are appealing characteristics of CMBS financing to the borrower?

Your manager asks you to determine the optimal leverage on a project. Organize the following statements from most important to least important.