Angus Cartwright III Case Study v2
RES 9776 – Spring 2015
Real Estate Finance
Professor: Stephen J. Pearlman
Case Study - Angus Cartwright III
Joonho Kim
Yan Chen
Qinqin (Renee) Yang
Jae Paik
Contents
I. Case Overview 2
II. Analysis and Assumptions 2
III. Financial Analysis 4
IV. Recommendations Reasoning 5
Appendix 6
Exhibit 5
Exhibit 8
I. Case Overview
Angus Cartwright III, an investment advisor, was asked to provide investment advisory services for two clients, John DeRight and Judy DeRight. They both wanted to purchase a property that (1) is large enough to attract the interest of a professional real estate management company and (2) has a minimum leveraged return on their investments of 12% after tax. Their major goals are:
Diversification of investment portfolio
Protection from future inflation
Take some tax advantages (especially for John)
Mr. Cartwright selected four properties and performed various financial analyses to best match the needs of his clients with the characteristics of the properties and the returns they offered.
II. Assessment of the Analyses and Assumptions:
Cartwright employed three stages of analysis: Preliminary Analysis (Exhibit 1 to 3), Risk Analysis (Exhibit 4) and Financial Analysis (Exhibit 5 to 10).
Preliminary Analysis starts with gathering key facts and data such as purchase prices, current and future income, depreciation, estimated sales price and cash flows, loan and its rate and amortization, taxes and etc. The 1st year setups (Exhibit 2) for each property were developed and major comparable statistics (Exhibit 3) were calculated. Such analyses serve as a foundation for identifying directions and strategies for further detailed analysis, including financial analysis, physical inspection and an examination of day-to-day operations of potential investment properties.
Risk Analysis consisting of a review of financial leverage (loan to value ratio) and operating risk (debt coverage ratio)
Real Estate Finance
Professor: Stephen J. Pearlman
Case Study - Angus Cartwright III
Joonho Kim
Yan Chen
Qinqin (Renee) Yang
Jae Paik
Contents
I. Case Overview 2
II. Analysis and Assumptions 2
III. Financial Analysis 4
IV. Recommendations Reasoning 5
Appendix 6
Exhibit 5
Exhibit 8
I. Case Overview
Angus Cartwright III, an investment advisor, was asked to provide investment advisory services for two clients, John DeRight and Judy DeRight. They both wanted to purchase a property that (1) is large enough to attract the interest of a professional real estate management company and (2) has a minimum leveraged return on their investments of 12% after tax. Their major goals are:
Diversification of investment portfolio
Protection from future inflation
Take some tax advantages (especially for John)
Mr. Cartwright selected four properties and performed various financial analyses to best match the needs of his clients with the characteristics of the properties and the returns they offered.
II. Assessment of the Analyses and Assumptions:
Cartwright employed three stages of analysis: Preliminary Analysis (Exhibit 1 to 3), Risk Analysis (Exhibit 4) and Financial Analysis (Exhibit 5 to 10).
Preliminary Analysis starts with gathering key facts and data such as purchase prices, current and future income, depreciation, estimated sales price and cash flows, loan and its rate and amortization, taxes and etc. The 1st year setups (Exhibit 2) for each property were developed and major comparable statistics (Exhibit 3) were calculated. Such analyses serve as a foundation for identifying directions and strategies for further detailed analysis, including financial analysis, physical inspection and an examination of day-to-day operations of potential investment properties.
Risk Analysis consisting of a review of financial leverage (loan to value ratio) and operating risk (debt coverage ratio)