The question is that If you were an outside investor being approached by Wildcat
ID: 2789807 • Letter: T
Question
The question is that 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?
Other Assumptions Purch Price Credit Loss Operating Expenses OpEx Escalation Leasing Commi ssions Exit Cap Wildcat Mgmt 10, 400, 000 3.5% 61%YI EGI 2.5% 2.0% Y1 Gross Rent 8·4% 1.5%)outside equity under management Financing Assumptions LTV term rate Prepay Penalty 650% 25 6·75% 3.0% Investor contrib Wildcat contrib 90% 10% Total S 3276000 Total $364000 10% 20%) Wildcat 80% Investors 12% Investor pref Excess Splits IRR GuaranteeExplanation / Answer
Answer: a)To assess the financial gain from the investment I need to understand on what basis these assumptions are being made and would like to know the reasoning behind it. This is going to be prime importance while assessing return from making an investment for a longer term.The other information which I would like to know is as follows:
b)The assured IRR(Internal rate of return ) is only 12% which is as per the industry norms or company has defined on its own.As per the later calculation, while doing an analysis, IRR of investor is 24% which almost double and for the company is 29% which highlight the fact that at the time of assumption we have taken lower IRR which gives out a signal that assumption is being taken at very conservative levels. This is not good sign while making an assumption since assumption and calculation are better if they fall in line.
C) while assessing the company financial projection I will also take into account the period for which forecasting is being done which is not very clear in the projections. Only 4-year projections are being undertaken to assess the viability of the investment which is a too small period as compared to loan for 25 years.
These are the some of the observations and questions pertaining to this financial projections before making an investment into it.
(ends)
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