Angus Cartwright III Case Study v2 Essay

1477 Words May 10th, 2015 6 Pages
RES 9776 – Spring 2015
Real Estate Finance

Professor: Stephen J. Pearlman

Case Study - Angus Cartwright III

Joonho Kim
Yan Chen
Qinqin (Renee) Yang
Jae Paik

Contents

I. Case Overview 2
II. Analysis and Assumptions 2
III. Financial Analysis 4
IV. Recommendations Reasoning 5
Appendix 6
Exhibit 5
Exhibit 8

I. Case Overview
Angus Cartwright III, an investment advisor, was asked to provide investment advisory services for two clients, John DeRight and Judy DeRight. They both wanted to purchase a property that (1) is large enough to attract the interest of a professional real estate management company and (2) has a minimum leveraged return on their investments of 12% after
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As a continuing effort to improve quality of his assumptions, we could revisit and review his assumptions with the following generic questions:
Is 3% or 4% increase in cash flow reasonable in current market/economic condition?
How realistic is it to negotiate a rental guarantee with developers to be at 93% occupancy rate?
How realistic is it that the capital reserve will remain at the same level for the next 10 years?
How realistic is it that the leasehold payment will remain at the same level for the next 10 years?
Should there be any significant changes in the outcome of the analysis, if the timing of the reserve disbursement is not assumed to be at the end of the lease term?
Will there be any trend or expected government legislating new tax laws that will have significant impact on real estate investments?

III. Financial Analysis
The financial returns for the other three properties are shown in the following exhibit (Exhibit 6).

Alison Green
Stony Walk
Ivy Terrace
Fowler
Equity Required
$3,600,000
$3,500,000
$2,900,000
$2,400,000
Simple Return Measures
Capital Rate-Purchase
9.06%
9.19%
9.12%
8.39%
Capital Rate-Sale
9.08%
9.513%
9.515%
8.44%
Cash-on-Cash Return (year1)
12.06%
9.46%
11.59%
3.76%
Increase in Capital Value
30.21%
26.09%
25.00%
41.49%
Discounted Return Measures
IRR
14.93%
14.54%
15.13%
15.38%
NPV @ 12%
$ 734.29
$ 699.92
$ 619.68
$ 688.85
Profitability Index (NPV/Equity)

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