Mix-use Real Estate Model

Project Overview

Our client was a big real estate fund based in London. Their strategic focus is on both acquiring sites and working with joint venture partners to develop and/ or asset manage across London and Southeast England. They were looking to acquire a new mix-use property in West London with an asking price of £15mn. Their existing models had been built years ago and while they gave them the traditional expected return over the investment period, their LPs felt that these models were not reflective enough of the current market conditions.

Our Role

ONS were engaged to build a dynamic mix-use model that the client could leverage for similar deals. They were looking for something that was realistic and dynamic enough such that it allowed them to sell the property in question piece-by-piece with different exit dates. Yet they needed something that was user-friendly and not overly-complex such that their in-house team could reuse it with little modifications. Our team built a highly sophisticated model that not only incorporated all their requirements, but it was flexible to the extent that it made possible for the client to make decisions based on the model itself. It accounted for piece-by-piece asset disposal at a random date, debt refinancing, debt amortisation, and prompted the user whenever the debt was fully repaid or to inject more capital in case the property was making losses. What made it even more accurate was the use of Monte-carlo simulation overgrowth parameters that led to a difference of £1mn in profit as compared to a traditional real estate financial model.

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