KeyBank Real Estate Capital Interview Flashcards

KeyBank Real Estate Capital Interview Flashcards Walk me through a DCFWith the DCF you are finding the intrinsic value of the company1. Project NOI for 5-20 years2. Calculate Terminal Value using either Growth rate or Terminal MultipleGrowth --> (FCFt * (1 + g)) / (WACC - g)TM --> EBITDAt * Selected EV/EBITDA3. Discount FCF projections and TV by an appropriate cost of capital Internal rate or return (IRR)The point at which the net present value of an investment equals zero What are the three main financial statements and how are they connected?The three financial statements are the income statement, balance sheet and cash flow statement and they all connect through the net income. Net income is the first line item on the cash flow statement and once you subtract dividends from the net income you will have your retained earnings that belong in the balance sheet.Tell me about yourselfI am a senior year finance major here at GSU. I was born and raised in Houston, Tx. I got to Atlanta at Georgia State University originally on a football scholarship. I have spent my college career developing my finance, communication and leadership, skills. I have much extensive real-world experience in all aspects of finance, from investing to consulting and to being able to run an entity. Currently, I manage my family real estate portfolio, sourcing and analyzing future investment opportunities. This past summer I was able to work at Loop Capital as an investment banking summer analyst, advising companies to make capital investments through comparable firm analysis. I built my own business from the ground up, utilizing my strengths and learning on the go, even striking a deal with Georgia State University where I gave 10% of sales to a Georgia state foundation of my choice. I am also heavily involved in our GSU Real Estate Society Program.Using financial modeling and qualitative industry analysis to make decisions and I am looking for an opportunity to apply and enhance my skill set.terminal valueFree cash flow(1+g)/(WACC-g)The present value of at a future point in time Why Would a Company use Debt Instead of Equity? In a situation where there are stable cash flows, you might issue debt. You would do this because you understand that your steady cash flows will cover your debt service.What are key characteristics of a good LBO target? Explain what is meant by an exit strategy?An ideal company for a LBO would be a company in the maturity stage. One with stable cash flows. They are far

more predictable than other businesses.

How would you value real estate?1) Precedent Transactions approach, where you compare the real estate to other similar buildings that have recently sold/been acquired in that location.2) The DCF approach, in which you discount the values of future NOI cash flows back to the present.3) The replacement cost approach, which you see what it cost to replace the building considering the area and platform it is built on.Why do you want to work at a larger firm? I like the prospect of getting the exposure to many professionals, industries, products, and concepts in a top notable firm. I know that in that environment I'm going to get access to the best learning experience possible. I have reached to former employees and they described it to me as a more casual and entrepreneurial environment than many other banks. I will be able to get more exposure to a multitude of asset classes.How do you determine which valuation methodology to use?The best way to determine the value of a company is to use a combination of valuation techniques. For example, if you have a precedent transaction valuation that you feel is extremely accurate, you may give that result more weight.Or if you are extremely confident in your DCF analysis, you will place more emphasis on its outcome. Valuing a company is as much an art as it is a science.Discount RateRisk-Free rate + Risk Premium What are the functions that drive real estate's valueLocation, Revenue Growth and Profitability Where do you see yourself in 5 years?I see myself in a quantitative and analytical role, interacting with clients.Walk me through the 3 financial statements. The balance sheet is a snapshot at a point in time. On the top half you have the company's Assets and on the bottom half its Liabilities and Shareholders' Equity (or Net Worth).The assets and liabilities are typically listed in order of liquidity and separated between current and non-current.The income statement covers a period of time, such as a quarter or year. It illustrates the profitability of the company from an accounting (accrual and matching) perspective. It starts with the revenue line and after deducting expenses derives net income.The cash flow

statement has three sections: cash from operations, cash

used in investing, and cash from financing. It can be calculated using the direct approach or the reconciliation approach.What serves your motivation?What keeps me going everyday is knowing I am going to add value to others by adding value to myself. I believe in helping and creating for others. I believe if you do things for yourself you will burnout. Knowing I will help build something for others in the future is motivates me.

Unlevered cash flowthe money the business has before paying its financial obligations What do you do outside of school?My biggest time commitment outside of my academics goes to my professional development. I spend a lot of time building skills that will help me in my finance career as well as networking. I also read many self-improvement books when I have the time.Asset-Backed Securities (ABS)A asset-backed security is a security that pays its holder a periodic payment based on cash flowsfrom the underlying asset that funds the security.How would you handle a difficult situation such as an irate analyst.I would first decide to speak to the analyst and establish an initial connection with the analyst in a one on one setting. I would ask him or her what made him so upset. We would then focus on the problem and find the steps to extinguish the problem.When should a company use equity rather than debt to fund a project?If the projects to be funded may not generate predictable cash flows in the immediate future, the company would want to avoid the obligation of consistent coupon payments required by the issuance of debt. Issuing stock is also an effective way to adjust the debt/equity ratio of a company's capital structure or to monetize the owners' investment.What are the key elements you feel you need to be successful part of the firm?In order to be successful in real estate, I believe you need a positive attitude, great work ethic, and great person-ability.Name a time you thought quantitativelyIn my business analysis class we were given a project where we had to project revenue based on seasonality .First I gathered all the information possible from the teacher. Then I preceded to list every holiday that would influence my business each quarter. My business model dealt with chocolates so mothers day, valentine, christmas and halloween were very important dates. I took these into account and projected the revenues accordingly.What is one of your biggest weaknesses and how do you deal with it?Relative to my peers one of my weaknesses can be my artistic and conceptual thinking. I am a very practical person. I am a 1 + 2 = 3 thinker. Coming from an abstract approach can be difficult. In order to improve I have been collaborating with different types of individuals on things, I would not normally do to gain different perspectives.Net Present ValueSum of the present values of expected future cash flows from an investment, minus the cost of that investment Name 3 strengths and 3 weaknessesWork Ethic, Leadership, Interpersonal Communication SkillsPatience, Delegating Responsibility, Artistic Thinking Walk me through an LBOIn Step 1, you make assumptions for the Purchase Price, Debt and Equity, Interest Rate on Debt, and Revenue Growth and Margins.Project the target's operating