Key Takeaways
- Value-add deals require monthly lease-up modeling, validated rent premiums, and 10-15% renovation contingency.
- Each financing structure (bridge, mezz, pref equity, seller carry) introduces specific risks that affect the capital stack.
- Portfolio underwriting must disaggregate individual property performance to prevent strong assets from masking weak ones.
- Syndication waterfall modeling must be done period-by-period and should separate LP returns from project returns.
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Test Your Knowledge
1.In value-add underwriting, the rent premium should be validated against which benchmark?
2.What is the typical contingency percentage for renovation budgets on pre-1980 buildings?
3.In the syndication case study, why is the GP's equity return so much higher than the LP's?