We know it takes your value-add time to price, check and flex DCF scenarios for institutional deals – let alone spec ideas.
industry issues
Existing DCF software is complex
Brokerage teams have been subjected to forced upgrades by Argus Enterprise type software and forget most of the training when they return to the day job. Too many menus, too many magic switches to make the ‘black box’ method work, and it means that only a few geeks or specialists know how to navigate the software. But IRRs are simple, and the new generation of investment surveyors expect straightforward, intuitive apps that help them get on with servicing their clients.
Key person risk/model templates
Many firms don’t know the original provenance of their corporate template(s). There is seldom any documentation. Templates have been often butchered, and even the key person cannot quickly or reliably change it at speed. When a key person leaves it’s time-consuming to find a person willing to take on the responsibilities of the team’s corporate template. As the market changes (e.g. from standards offices to life sciences and mixed-use assets), corporate static templates become a headache to change quickly.
Clients want more DCF analysis
Clients are never easy at the best of times! But due to an increasingly regulatory world around us, there is a need for more investor questionnaires, more Investment Committee scrutiny, etc. Base case scenarios consume time, let alone the many sensitivity scenarios institutional real estate clients demand. Colleagues prefer to work on deals – not the two-variable dimensional tables in Excel spreadsheets that take an age to calculate, check and print off.
Difficult to trust final numbers
Whether teams use ‘black-box’ methods (e.g. Argus Enterprise, KEL, MRI Software) or ‘transparent’ methods (e.g. Excel model templates, Google sheets), neither methods automatically instil trust in institutional clients. This is because they are ‘single track’ methods. To progress deal conversations, there is often a delay because clients go away to ‘do their own numbers’. Advisor-brokers spend a ton of time simply trying to convey that an agreed list of assumptions does calculate the discussed IRR.
Free-up your time to focus on deals.
Case Studies
Case Study A
One of the largest Endowments in North America invested in a billion-dollar real estate project in Europe. The junior analysts were not comfortable navigating and extracting figures from their outdated 1990s’ software. Final numbers were copied & pasted, and then dumped into Excel. The problem was that NIA and GIA metrics were not tracked properly. This meant that the Day-1 multi-million CAPEX Project was calculated on the basis of NIA rather than GIA figures. There was an immediate Day-1 loss compared to acquisition predictions.
Case Study B
One of the top 10 wealth managers hold regular Investment Committees to review and consider Discounted Cash Flow projections for new deals. While the deals are often for the same European client fund mandate, they often encounter different manually-created Excel template formats presented to Investment Committee. They complain about the lack of DCF standardisation, consistency of underwriting presentations for the same fund managers, and were compelled to start investigating modern solutions.
Testimonials
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Fund Manager, M&G Real Estate
“I have been building and reviewing CRE models for the last 2 decades and your product is the real deal”
Vice Chairman, Blackstone
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Intellect Automation International Pty Ltd. All rights reserved. 2021