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The Private Equity Case Study: The Ultimate Guide

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The private equity case study is an especially intimidating part of the private equity recruitment process .

You’ll get a “case study” in virtually any private equity interview process , whether you’re interviewing at the mega-funds (Blackstone, KKR, Apollo, etc.), middle-market funds , or smaller, startup funds.

The difference is that each one gives you a different type of case study, which means you need to prepare differently:

What Should You Expect in a Private Equity Case Study?

There are three different types of “case studies”:

• Type #1: A “ paper LBO ,” calculated with pen-and-paper or in your head, in which you build a simple leveraged buyout model and use round numbers to guesstimate the IRR.
• Type #2: A 1-3-hour timed LBO modeling test , either on-site or via Zoom and email. This is a pure speed test , so proficiency in the key Excel shortcuts and practice with many modeling tests are essential.
• Type #3: A “take-home” LBO model and presentation, in which you might have a few days up to a week to pick a company, research it, build a model, and make a recommendation for or against an acquisition of the company.

We will focus on the “take-home” private equity case study here because the other types already have their own articles/tutorials or will have them soon.

If you’re interviewing within the fast-paced, on-cycle recruiting process with large funds in the U.S. , you should expect timed LBO modeling tests (type #2).

If the firm interviews dozens of candidates in a single weekend, there’s no time to give everyone open-ended case studies and assess them.

You might also get time-pressured LBO modeling tests in early rounds in other financial centers, such as London .

The open-ended case studies – type #3 – are more common at smaller funds, in off-cycle recruiting, and outside the U.S.

Although you have more time to complete them, they’re significantly more difficult because they require critical thinking skills and outside research.

One common misconception is that you “need” to build a complex model for these case studies.

But that is not true at all because they’re judging you mostly on your investment thesis , your presentation, and your ability to answer questions afterward.

No one cares if your LBO model has 200 rows, 500 rows, or 5,000 rows – they care about how well you make the case for or against the company.

This open-ended private equity case study is often the final step between the interview and the job offer, so it is critically important.

The Private Equity Case Study, in Parts

This is another technical tutorial, so I’ve embedded the corresponding YouTube video below:

Table of Contents:

• 4:32: Part 1: Typical Case Study Prompt
• 6:07: Part 2: Suggested Time Split for a 1-Week Case Study
• 8:01: Part 3: Screening and Selecting a Company
• 14:16: Part 4: Gathering Data and Doing Industry Research
• 22:51: Part 5: Building a Simple But Effective Model
• 26:32: Part 6: Drafting an Investment Recommendation

Files & Resources:

• Case Study Prompt (PDF)
• Private Equity Case Study Slides (PDF)
• Cars.com – Highlighted 10-K (PDF)
• Cars.com – Investor Presentation (PDF)
• Cars.com – Excel Model (XL)
• Cars.com – Investment Recommendation Presentation (PDF)

We’re going to use Cars.com in this example, which is one of the many case studies in our Advanced Financial Modeling course:

Advanced Financial Modeling

Learn more complex "on the job" investment banking models and complete private equity, hedge fund, and credit case studies to win buy-side job offers.

The full course includes a detailed, step-by-step walkthrough rather than this summary, an additional advanced LBO model, and other complex case studies for investment banking, hedge funds, and credit.

Part 1: Typical Private Equity Case Study Prompt

In some cases, they’ll give you a company to analyze, but in others, you’ll have to screen for companies yourself and pick one.

It’s easier if they give you the company and the supporting documents like the Information Memorandum , but you’ll also have less time to complete the case study.

The prompt here is very open-ended: “We like these types of deals and companies, so pick one and present it to us.”

The instructions are helpful in one way: they tell us explicitly not to build a full 3-statement model and to focus on the market and strategy rather than an “extremely complex model.”

They also hint very strongly that the model must include sensitivities and/or scenarios:

Part 2: Suggested Time Split for a 1-Week Private Equity Case Study

You have 7 days to complete this case study, which may seem like a lot of time.

But the problem is that you probably don’t have 8-12 hours per day to work on this.

You’re likely working or studying full-time, which means you might have 2-3 hours per day at most.

So, I would suggest the following schedule:

• Day #1: Read the document, understand the PE firm’s strategy, and pick a company to analyze.
• Days #2 – 3: Gather data on the company’s industry, its financial statements, its revenue/expense drivers, etc.
• Days #4 – 6: Build a simple LBO model (<= 300 rows), ideally using an existing template to save time.
• Day #7: Outline and draft your presentation, let the numbers drive your decisions, and support them with the qualitative factors.

If the presentation is shorter (e.g., 5 slides rather than 15) or longer, you could tweak this schedule as needed.

But regardless of the presentation length, you should spend MORE time on the research, data gathering, and presentation than on the LBO model itself.

Part 3: Screening and Selecting a Company

The criteria are simple and straightforward here: “The firm aims to find undervalued companies with stagnant or declining core businesses that can be acquired at reasonable valuation multiples and then turn them around via restructuring, divestitures, and add-on acquisitions.”

The industry could be consumer, media/telecom, or software, with an ideal Purchase Enterprise Value of $500 million to $1 billion (sometimes up to $2 billion).

Reading between the lines, I would add a few criteria:

• Consistent FCF Generation and 10-20%+ FCF Yields: Strategies such as turnarounds and add-on acquisitions all require cash flow. If the company doesn’t generate much Free Cash Flow , it will have to issue Debt to fund these strategies, which is risky because it makes the deal very dependent on the exit multiple.
• Relatively Lower EBITDA Multiples: If the company has a “stagnant or declining” core business, you don’t want to pay 20x EBITDA for it. An ideal range might be 5-10x, but 10-15x could be OK if there are good growth opportunities. The IRR math also gets tougher at high EBITDA multiples because the maximum Debt in most deals is 5-6x.
• Clean Financial Statements and Enough Detail for Revenue and Expense Projections: You don’t want companies with 2-page-long Cash Flow Statements or Balance Sheets with 100 line items; you can’t spare the time required to simplify and consolidate these statements. And you need some detail on the revenue and expenses because forecasting revenue as a simple percentage growth rate is a bad idea in this context.

We used this process to screen for companies here:

• Step 1: Do a high-level screen of companies in these 3 sectors based on industry, Equity Value or Enterprise Value, and geography.
• Step 2: Quickly review the list of ~200 companies to narrow the sector.
• Step 3: After picking a specific sector, narrow the choices to the top few companies and pick one of them.

In software , many of the companies traded at very high multiples (30x+ EBITDA), and others had negative EBITDA , so we dropped this sector.

In consumer/retail , the companies had more reasonable multiples (5-10x), but most also had low margins and weak FCF generation.

And in media/telecom , quite a few companies had lower multiples, but the FCF math was challenging because many companies had high CapEx requirements (at least on the telecom side).

We eliminated companies with very high multiples, negative EBITDA, and exorbitant CapEx, which left this set:

Within this set, we then eliminated companies with negative FCF, minimal information on revenue/expenses, somewhat-higher multiples, and those whose businesses were declining too much (e.g., 20-30% annual declines).

We settled on Cars.com because it had a 9.4x EBITDA multiple at the time of this screen, a declining business with modest projected growth, 25-30% margins, and reasonable FCF generation with FCF yields between 10% and 15%.

If you don’t have Capital IQ for this exercise, you’ll have to rely on FinViz and use P / E multiples as a proxy for EBITDA multiples.

You can click through to each company to view the P / FCF multiples, which you can flip around to get the FCF yields.

In this case, don’t even bother looking for revenue and expense information until you have your top 2-3 candidates.

Part 4: Gathering Data and Doing Industry Research

Once you have the company, you can spend the next few days skimming through its most recent annual report and investor presentation, focusing on its financial statements and revenue/expense drivers.

With Cars.com, it’s clear that the company’s “Dealer Customers” and Average Revenue per Dealer will be key drivers:

The company also has significant website traffic and earns advertising revenue from that, but it’s small next to the amount it earns from charging car dealers to use its services:

It’s clear from this quick review that we’ll need some outside research to estimate these drivers, as the company’s filings and investor presentation have little.

Fortunately, it’s easy to Google the number of new and used car dealers in the U.S. and estimate the market size and share like that:

The company’s market share has been declining , and we expect that trend to continue, but it’s not clear how rapid the decline will be.

Consumers are increasingly buying directly from other consumers, and dealers have less reason to use the company’s marketplace services than in past years.

We create an area for these key drivers, with scenarios for the most uncertain one:

You might be wondering why there’s no assumed uptick in market share since this is supposed to be a “turnaround” case study.

The short answer is that we think the company is unlikely to “turn around” its core business in this time frame, so it will have to move into new areas via bolt-on acquisitions .

For example, maybe it could acquire smaller firms that sell software and services to dealers, or it could acquire physical or online car dealerships directly.

Another option is to acquire companies that can better monetize Cars.com’s large and growing web traffic – such as companies that sell auto finance leads.

As part of this process, we also need to research smaller companies to acquire, but there isn’t much to say about this part.

It comes down to running searches on Capital IQ for smaller companies in related industries and entering keywords like “auto” in the business description field.

In terms of the other financial statement drivers , many expenses here are simple percentages of revenue, but we could also link them to the employee count.

We also link the website traffic to the sales & marketing spending to capture the spending required for growth in that area.

Finally, we need to input the financial statements for the company, which is not that hard since they’re already fairly clean:

It might be worth consolidating a few items here, but the Income Statement and partial Cash Flow Statement are mostly fine, which means the Excel versions are close to the ones in the annual report.

Part 5: Building a Simple But Effective Model

The case study instructions state that a full 3-statement model is not necessary – but even if they had not, such a model would rarely be worthwhile.

Remember that LBO models, just like DCF models , are based on cash flow and EBITDA multiples ; the full statements add almost nothing since you can track the Cash and Debt balances separately.

In terms of model complexity, a single-sheet LBO with 200-300 rows in Excel is fine for this exercise.

You’re not going to get “extra credit” for a super-complex LBO model that takes days to understand.

The key schedules here are:

• Transaction Assumptions – Including the purchase price, exit assumptions, scenarios, and tranches of debt. Skip the working capital adjustment unless they specifically ask for it. For more on these nuances, see our coverage of Enterprise Value vs. purchase price and cash-free debt-free deals .
• Sources & Uses – Short and simple but required to calculate the Investor Equity.
• Revenue, Expense, and Cash Flow Drivers – These don’t need to be super-complex; the goal is to go beyond projecting revenue as a simple percentage growth rate.
• Income Statement and Partial Cash Flow Statement – The goal is to calculate Free Cash Flow because that drives Debt repayment and Cash generation in an LBO.
• Add-On Acquisitions – These are part of the “turnaround strategy” in this deal, so they’re quite important.
• Debt Schedule – This one is quite simple here because the deal is not dependent on financial engineering.
• Returns Calculations – The IPO vs. M&A exit options add a bit of complexity.
• Sensitivity Tables – It’s difficult to draft the investment recommendation without these.

Skip anything that makes your life harder, such as circular references in Excel (to avoid these, use the beginning Cash and Debt balances to calculate interest).

We pay special attention to the add-on acquisitions here, with support for their revenue and EBITDA contributions:

The Debt Schedule features a Revolver, Term Loans, and Subordinated Notes:

The Returns Calculations are also simple; we do assume a bit of Multiple Expansion because of the company’s higher growth rate by the end:

Could we simplify this model even further?

I don’t think the M&A vs. IPO exit options mentioned above are necessary, and we could also drop the “Growth” vs. “Value” options for the add-on acquisitions:

Especially if we recommend against the deal, it’s not that important to analyze which type of add-on acquisition works best.

It would be more difficult to drop the scenarios and Excel sensitivity tables , but we could restructure them a bit and fold the scenario into a sensitivity table.

All investing is probabilistic, and there’s a huge range of potential outcomes – so it’s difficult to make a serious investment recommendation without examining several outcomes.

Even if we think this deal is spectacular, we must consider cases in which it goes poorly and how we might reduce those risks.

Part 6: Drafting an Investment Recommendation

For a 15-slide recommendation, I would recommend this structure:

• Slides 1 – 2: Recommendation for or against the deal, your criteria, and why you selected this company.
• Slides 3 – 7: Qualitative factors that support or refute the deal (market, competition, growth opportunities, etc.). You can also explain your proposed turnaround strategy, such as the add-on acquisitions, here.
• Slides 8 – 13: The numbers, including a summary of the LBO model, multiples vs. comps (not a detailed valuation), etc. Focus on the assumptions and the output from the sensitivity tables.
• Slide 14: Risk factors for a positive recommendation, and the counter-factual (“what would change your mind?”) for a negative one. You can also explain the potential impact of each risk on the returns and how you could mitigate these risks.
• Slide 15: Restate your conclusions from Slide 1 and present your best arguments here. You could also change the slide formatting or visuals to make it seem new.

“OK,” you say, “but how do you actually make an investment decision?”

The easiest method is to set criteria for the IRR or multiple of invested capital in each case and say, “Yes” if the deal achieves those numbers and “No” if it does not.

For example, maybe the targets are a 30% IRR in the Upside case, a 20% IRR in the Base case, and a 1.0x multiple in the Downside case (i.e., avoid losing money).

We do achieve those numbers in this deal, but the decision could go either way because the deal is highly dependent on the add-on acquisitions.

Without these acquisitions, the deal does not work; the IRR falls by 10%+ across all the scenarios and turns negative in the Downside case.

We need at least 5 good acquisition candidates matching very specific financial profiles ($100 million Purchase Enterprise Value and a 15x EBITDA purchase multiple with 10% revenue growth or 5x EBITDA with 3% growth).

The presentation includes some examples of potential matches:

While these examples are better than nothing, the case is not that strong because:

• Most of these companies are too big or too small to fit into the strategy proposed here of ~$100 million in annual acquisitions.
• The acquisition strategy is unclear ; acquiring and integrating dealerships (even online ones) would be very, very different from acquiring software/data/media companies.
• And since the auto software market is very niche, there’s probably not a long list of potential acquisition candidates beyond the few we found.

We end up saying, “Yes” in this recommendation, but you could easily reach the opposite conclusion because you believe the supporting data is weak.

In short: For a 1-week open-ended case study, this approach is fine, but this specific deal would probably not stand up to a more detailed on-the-job analysis.

The Private Equity Case Study: Final Thoughts

Similar to time-pressured LBO modeling tests, you can get better at the open-ended private equity case study by “putting in the reps.”

But each rep is more time-consuming, and if you have a demanding full-time job, it may be unrealistic to complete multiple practice case studies before the real thing.

Also, even with significant practice, you can’t necessarily reduce the time required to research an industry and specific companies within it.

So, it’s best to pick companies and industries you already know and have several Excel and PowerPoint templates ready to go.

If you’re targeting smaller funds that use off-cycle recruiting, the first part should be easy because you should be applying to funds that match your industry/deal/client background.

And if not, you can always make a lateral move to a bulge bracket bank and interview at the larger funds if you prefer the private equity case study in “speed test” form.

If you liked this article, you might be interested in:

• The Growth Equity Case Study: Real-Life Example and Tutorial
• The Full Guide to Healthcare Private Equity, from Careers to Contradictions
• Healthcare Investment Banking: The Best Group to Check Into When Human Civilization is Collapsing?

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street . In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

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Wildcat Capital Investors: Real Estate Private Equity

By: Craig Furfine

Wildcat Capital Investors is a small real estate private equity company. Its MBA intern, Jessica Zaski, is asked to develop a financial model for the purchase of Financial Commons, a 90,000 square…

• Length: 12 page(s)
• Publication Date: Jan 20, 2011
• Discipline: Finance
• Product #: KEL553-PDF-ENG

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Wildcat Capital Investors is a small real estate private equity company. Its MBA intern, Jessica Zaski, is asked to develop a financial model for the purchase of Financial Commons, a 90,000 square foot office building in suburban Chicago. By simple metrics, the property seems to be a good value, but with credit conditions tight, Jessica must consider whether outside investors would be comfortable with the risks of investing in the midst of a severe commercial real estate downturn. Wildcat is designed to give students exposure to both the quantitative and qualitative aspects of investing in commercial real estate through a private equity structure. Beyond the numbers, the case allows for a discussion of the process of finding suitable real estate investments. The importance of the simultaneous negotiations that Wildcat must have with the seller, the lender, and the outside investor can be emphasized.

Learning Objectives

By working through the financial models, students will take a given set of assumptions and analyze the cash flows expected to be received by the equity partners of Financial Commons. With a given deal structure, the students can then model the cash flow to both outside equity investors and Wildcat, learning the mechanics of private equity. The model will allow students to investigate how the variations in the underlying assumptions affect returns to the property and to the investors.

Jan 20, 2011 (Revised: Jun 19, 2020)

Discipline:

Geographies:

United States

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Real estate industry

Kellogg School of Management

KEL553-PDF-ENG

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Publication date: 20 January 2017

Teaching notes

Wildcat Capital Investors is a small real estate private equity company. Its MBA intern, Jessica Zaski, is asked to develop a financial model for the purchase of Financial Commons, a 90,000 square foot office building in suburban Chicago. By simple metrics, the property seems to be a good value, but with credit conditions tight, Jessica must consider whether outside investors would be comfortable with the risks of investing in the midst of a severe commercial real estate downturn. Wildcat is designed to give students exposure to both the quantitative and qualitative aspects of investing in commercial real estate through a private equity structure. Beyond the numbers, the case allows for a discussion of the process of finding suitable real estate investments. The importance of the simultaneous negotiations that Wildcat must have with the seller, the lender, and the outside investor can be emphasized.

By working through the financial models, students will take a given set of assumptions and analyze the cash flows expected to be received by the equity partners of Financial Commons. With a given deal structure, the students can then model the cash flow to both outside equity investors and Wildcat, learning the mechanics of private equity. The model will allow students to investigate how the variations in the underlying assumptions affect returns to the property and to the investors.

• Real Estate
• Commercial Property
• Private Equity

Furfine, C. (2017), "Wildcat Capital Investors: Real Estate Private Equity", . https://doi.org/10.1108/case.kellogg.2016.000413

Kellogg School of Management

Copyright © 2015, The Kellogg School of Management at Northwestern University

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Wildcat Capital Investors: Real Estate Private Equity – Case Solution

An MBA intern at Wildcat Capital Investors was tasked to come up with a financial model for the purchase of an office building in suburban Chicago. The intern must consider the real estate downturn and the possibility of outside investors taking up the challenge.

​Craig Furfine Harvard Business Review ( KEL553-PDF-ENG ) January 20, 2011

Case questions answered:

• Re-create the base-case property proforma with debt. Using the rent roll numbers in the Excel template, the operating cash flows will differ from the case exhibits by $2-$6 (The reversion cash flow will differ by about $60 due to multiplier effects). Then, complete the waterfall shown in Exhibit 10 using the benchmark assumptions outlined in the case. (Skip to the last page of this document for instructions on filling out the waterfall.) Under these assumptions, calculate the expected return to Wildcat Capital Investors and its limited partners and compare those returns to the property-level return on Financial Commons if it is sold after three years. Returns to Wildcat should be calculated without including its management fee. Note that the waterfall to the equity partners doesn’t get paid until after the loan payments have been made/OLB paid back to the bank.
• For each of the following scenarios, recalculate spreadsheets for exhibits 9 and 10. With the exception of the changes noted below, keep the benchmark assumptions constant. Each scenario will be recalculated independently; that is, each scenario is to be treated as a distinct variation from the benchmark. Assume that outside investors will become partners with Wildcat only if they believe they will receive an IRR of at least 20 percent, and Wildcat will only close on the property if it believes it can earn a 50 percent IRR. Discuss whether or not the deal will proceed. Assume that any unpaid preferred return gets added to the equity contribution, and the following year’s preferred return gets calculated off of that larger balance. Finally, assume that if expenses exceed property income, both partners will make additional equity contributions in the same shares that they made their initial equity contributions to cover the shortfall. a. North Shore Bank does not renew its lease at the end of year 3, and its space remains vacant in Year 4. A new tenant begins leasing the space in Year 5 at $18/sf on a net lease requiring $5/sf of expense reimbursement. The new lease does not contain any rent escalation clause. To make the space suitable, capital expenditures of $4/sf are required in Year 5 for tenant improvements. A leasing broker charges Wildcat 2 percent of the first year’s rent as a commission. As a result of this turnover, Wildcat holds the property for 5 years. [Accuracy check: reimbursements in year 4 are $138,197, and PGI in year 5 is $1,809,245] b. All tenants renew according to the benchmark assumptions. However, due to continued weakness in commercial property demand, Wildcat holds the property for 5 years. During its hold period, Wildcat made capital expenditures of $500,000 in Year 2 for a new roof and $150,000 in Year 3 for a new parking lot. c. After more careful underwriting, the life insurance company offers a reduced loan-to-value of 60 percent and an interest rate of 7 percent. Assume a 3-year holding period. d. The outside investors are nervous about the economic climate. As a result, they demand the following investor-friendly changes to the waterfall structure. Assume a 3-year holding period and that all of the changes below are incorporated simultaneously. i. Outside investors will provide only 90 percent of the required equity ii. Outside investors will receive a 10 percent preferred return iii. Outside investors will receive a 12 percent IRR preference. (This means that at reversion, after the invested capital has been returned to the outside investors and to Wildcat, the outside investors will receive additional cash until they achieve a 12 percent IRR over the lifetime of the investment. The remaining cash flow will then go through the promotion.) iv. Cash flows in the promoted structure will be split 80/20 rather than 70/30
• Evaluate the benchmark assumptions Zaski made for reasonableness. Would you have made different assumptions? What do you think is the fair market price for Financial Commons? Explain why your answer does or does not differ from $10,400,000.
• If you were an outside investor being approached by Wildcat and were shown the financial projections outlined above, what additional information would you seek before investing?

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Wildcat Capital Investors: Real Estate Private Equity Case Answers

This case solution includes an Excel file with calculations.

Executive Summary – Wildcat Capital Investors

According to our data, we believe that Wildcat Equity Partners should not continue with the project. While we found that Wildcat Capital Investors does, in fact, earn a satisfactory return on their base case scenario, this scenario seems like more of a best-case scenario than anything else.

In other scenarios, such as revisions 2A and 2B, both investor and wildcat will not continue the deal as the return that they will receive will be lower than their required IRR.

Meanwhile, in revisions 2C and 2D,  only one of them will earn satisfactory returns, so it would not be possible for them to continue the deal based on these scenarios.

As we will discuss in more detail later, Wildcat made a number of serious omissions that led to their base case number being a lot higher than any of the other hypothetical scenarios.

According to our analysis of 2009 market conditions, it would be much more reasonable to assume that something would go wrong, that someone would not renew their lease, or that extra demands would be made to compensate for the uncertain market. The deal is an appealing risk because there really isn’t much else to buy out there right now.

And it could be claimed that in five years, the markets will be growing again, and it might be a great time to sell. This is purely speculative, though, and as a developer, it doesn’t make a whole lot of sense to go against your numbers and act only on your belief that the market conditions will change within a relatively short hold period of three years or even five.

Additionally, this is a terrible time to be out in the market looking for a loan, as the credit crunch is only just loosening. While the loan provided in the base case is not terrible, it is probably a lot worse than what Wildcat could be getting in a healthier market.

All of these things considered, we feel that it would be an incredibly high-risk decision to go forward with this property and that Wildcat would be better off passing and waiting on a better opportunity than taking such a huge risk on one of their first development opportunities.

1. Re-create the base-case property proforma with debt. Using the rent roll numbers in the Excel template, the operating cash flows will differ from the case exhibits by $2-$6 (The reversion cash flow will differ by about $60 due to multiplier effects). Then, complete the waterfall shown in Exhibit 10 using the benchmark assumptions outlined in the case. Under these assumptions, calculate the expected return to Wildcat and its limited partners and compare those returns to the property-level return on Financial Commons if it is sold after three years. Returns to Wildcat should be calculated without including its management fee. Note that the waterfall to the equity partners doesn’t get paid until after the loan payments have been made/OLB paid back to the bank.

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Hi there, is there anyone who knows what I can expect with a case in the PE RE sector?

I watched some youtube tutorials and gained info about the waterfall analysis with a promote structure. My background is from a perspective of single tenant triple net leases.

I have some experience with case studies for real estate and thought I'd pipe in.

You probably wont see a waterfall question unless it is a pretty institutional shop. I personally do not see the point of a waterfall test for an interview, because generally you will know it or you wont (from previous experience) and whether or not you can build a waterfall model from scratch will have no correlation with how good of an analyst you are IMO. Most likely, they they will give you a property (100 unit apartment in this part of NYC , 100K SF shopping center in Orange county), tell you some market rents, and then ask you to provide a valuation. Also, they might ask for things you like about the property, things you don't like, how could you add value,and ultimately would you buy it. In this they want to see how you think and also do want to get some exposure to your modeling capabilities.

It sounds like you have some general real estate experience, that will definitely be helpful. If you want, I can try and dig up an old problem or two.

This is a great response! I'd love to see anything you are able to dig up!!

Hey chad, I know you aren't the original poster, but here is a case study I have from the Related Companies from a while back. http://imgur.com/a/W1HFd

Hope this helps!

Great thank you! I can tell you that I had the case yesterday and it was indeed no waterfall! Perhaps more cases to follow so would be genuinely interested in the old problems you have.

I would assume a 3 tenant rent roll, maybe 1-2 of the leases roll after acquisition. Start with your deal timeline and easiest will be to link key milestones to month numbers. I.e. lease 1 rolls month number 14, etc

Be able to model in your acquisition closing costs (financing fees reduce loan amount to the proceeds you actually apply towards the deal), then apply your debt service.

Know how to get to unlevered cash flows, and then the line items that will get you to levered cash flows. If you can solve for LIRR, you’ll probably be fine. Project level returns can always be converted into GP LP returns via waterfall but it’s somewhat a waste of time to put someone through that in a modeling test, given if someone can get to a LIRR on a tight 1:30-2 hour modeling test, you know they can probably learn a waterfall.

Would still understand how to do a 2 tier waterfall; plan for pari paddy returns to x% to the LP, and then a promote to Alonso beyond that initial hurdle.

Anyone have any RE PE case studies / models for interview prep? Let's trade ( Originally Posted: 08/03/2014 )

I am starting to interview for RE PE associate positions, but I really have no idea what to expect for the modeling / case study part of the interview. I have scoured the internet, but have not found anything useful. From what headhunters have told me, it is usually just single asset, but they don't know much more than that.

If anyone has any case studies or models or anything, that would be very helpful. Office would be ideal, but I don't have any real preference on asset type.

Things I have for trade: - Several practice LBO models - An old modeling test from a PE firm - Various IB / PE interview guides / LBO primers, etc. - Barclays & BAML REIT primers - Brueggeman / Fisher - RE Finance and Investments ebook 14th ed

Anyway, if anyone can help, I would really appreciate it.

Recently had a case study interview at a large RE fund. Pretty much just consisted of modeling out the acquisition of an office property from scratch. The only info I was given was purchase price, leverage, annual rent and assume an exit in 10-years, the rest of the assumptions were up to me. Time was limited so my model was pretty vanilla. In my experience, these tests are more about illustrating your thought process and how you would approach an assignment, being able to articulate that is just as important as the actual model you build. Also, this goes without saying, but make sure to know how to calculate IRR , equity multiple, etc both levered and unlevered. Hope this helps, good luck.

Thanks. How long did you have? I'm assuming all you got was a blank spreadsheet?

Hi! Do u have any interview resources that may be able to help me go through the process?

are these tests taken at home or at the firm? are they open book? college student seeking answers.

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