7 Crucial Metrics to Include in Your Deal (…read this before submitting your next deal for review)

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Let’s face it, every piece of communication to a buyer or funding source is an opportunity for you to look smart or look stupid.

In case it was a question, you want to look smart.

The person you’re sending a deal to is probably smart, so your goal is to think like they think.

If you’re formally submitting a deal to an institutional investor, there is some key information that is required to have analyzed before you hit the send button.

That’s what you’re getting today – the 7 crucial metrics you must include in every deal you submit for review. Check them out and never look stupid again.

7 Crucial Metrics to Include in Your Deal Submission

1. Executive Summary

What is the deal about?

What is the situation?

Is there a story?

This gives them a high-level feel for the deal:

  • Market
  • Property type
  • Deal size $$
  • Debt/equity
  • What the formal submission is for

Here is an example:

The Park Ave Apts is a 115-unit garden style multifamily complex located in Dallas, Texas. It consists of 12 two-story buildings with an average unit size of 1,160 SF.

The Property was recently constructed and is in lease up. It is currently 60% occupied with average rents of $1,400/Unit. The Property includes high-end amenities including direct access garages.

The Borrower is currently under contract to purchase the Property for $35M ($304,784/unit). Borrower is required to close within 30 days. The requested loan amount is $26.25M (70% LTV), with the funding to coincide with the purchase.

The Borrower is a JV between Partner 1 (5%) and Partner 2 (95%). The Partner 1 will be the controlling member and property manager.

Simple, high-level, to the point. After reading this, every investor has enough information to make a choice: keep on reading, or pass if it’s not a fit.

2. Deal Metrics

Now this might differ slightly whether debt or equity but the fundamentals are the same. Key deal information in a table format.

Clean and simple.

For debt, I’d make sure we have this information at minimum:

  • Loan Amount
  • Term
  • LTV
  • Debt Yield
  • Rate Type (Fix / Float)
  • Interest Rate expectations
  • DSCR off of proposed rate

For equity, I’d make sure we have this information at minimum:

  • Price $ (Expectations)
  • Cap Rate
  • P/SF, P/Unit
  • Occupancy
  • Trailing 12 NOI
  • Year 1 NOI
  • Unlevered and Leverred IRR (5, 7, 10 Years- or whatever horizon your investor typically does)

(NOTE: Don’t forget to download your free resource for raising millions in capital for all your real estate deals with a “Wall Street” grade, done for you investor Pitchbook. Grab it here.)

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3. Property Information

Location, location, location!

Make sure you have the address and maybe a little information about the property. This is real estate.

Also, be sure to describe the property: construction type, amenities, etc.

Here is a great example of a property description for a luxury apartment building in a major city (doesn’t have to be as detailed as this but more is better):

The property’s main entrance includes a well landscaped circular drive and a two-story lobby with terrazzo floors, and marble and wood paneled walls.

The apartments for rent here all feature generous floor plans, with one-bedroom, two-bedroom, three-bedroom, and four-bedroom units. The finished ceiling height is 8 feet. Apartment walls are painted sheetrock and floors are oak parquet. Most of the apartments feature marble bath/powder rooms with new fixtures and kitchens improved with new cabinetry, granite counter tops and stone tile flooring.

Appliances include refrigerator, dishwasher, oven/range, microwave and hot water dispenser. There are large walk-in closets in every unit.

In 2015 renovations were undertaken to all public corridors including new carpet and wallpaper. 

The building is constructed of reinforced concrete with a brick and masonry façade.

Heating and cooling are provided by a central plant with individual unit fans in each apartment.

There are five passenger and two service elevators.  

There is an on-site parking facility and attentive 24-hour doorman service, closed-circuit TV security system, and valet and maid service.

The custom-designed children’s playroom is well stocked with toys and games.

The property’s fully equipped fitness center is similarly well-appointed with state-of-the-art cardio and strength-training equipment.

A lush green rooftop sun deck offers striking views of the city below. There is also a resident storage area.

4. Property Financials and Performance

Need to see a few years of operating data if available.

You should be able to provide a breakdown of revenue and expenses to get the NOI number for at least the last year. Try to get a few years of data if you can.

Recent leasing information is great too especially if it’s an office, retail or industrial building.

For office, retail, industrial, make sure there is a rent roll with detailed information about their leases, such as:

  • Lease expiration date
  • Rent
  • Rent bumps

5. Borrower Business Plan/ Sources And Uses (for Debt requests only)

Example:

Borrower plans to repay existing debt in the amount of 10mm. In addition, the borrower plans to make substantial improvements to each apartment unit.

The borrower plans to update the apartments in groups of 20 at a time. The borrower will give tenants notice and give them ample time to relocate.

The scope of the work for each of the apartments will include an update to the heater/cooling system, new kitchen appliances, cabinets, and counter tops, new ceilings in living room with recessed lighting and updated electrical and new tub/shower and vanities in the bathrooms.

Estimated renovation cost per unit is $13,000. Down time for the 20 apartments is expected to be approximately 3 months for work plus 2 months for lease-up.

While working on the apartments in groups of 20, borrower plans to provide updates to common areas and hallways: new wallpaper, new carpet, new paint where applicable. Also new landscaping to provide a more open, cleaner looking apartment complex.

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6. Sponsor Background/ Track Record (for Debt requests only)

7. Any Market Information

If available.

Major employers, new supply, rent growth expectations. You can find lots of good free information by going to large brokerage sites and looking for a research section: try Marcus and Millichap.

Now there is always more or less you can provide. And there are definitely relationships you have or will have where you know they want/need something specific so you can always add it in there.

In general, this is how the real pros generally like to look at their deals. If you’re bringing someone new a deal and it’s in the above format and has all pertinent deal information, you will be taken seriously and will you have instant credibility.

Not to mention, sticking to this format provides you with a checklist to ensure that you are doing a thorough initial analysis on the deal to make sure it is attractive. Your clients will notice and it will get you on their preferred list.

Heck, you may even want to start expecting holiday cards and gifts in the mail!

Now go forth and prosper!

(NOTE: Before you go, don’t forget to download your free resource for raising millions in capital for all your real estate deals with a “Wall Street” grade, done-for-you investor Pitchbook. Grab it here.)

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Peter Kasyanenko
Peter Kasyanenko is a portfolio manager at a New York City-based major U.S. life insurance company, co-managing over $40 billion in commercial mortgages. Peter has also been involved in the underwriting of $5 billion in closed real estate acquisitions, developing strategies for large institutional clients, and tracking real estate capital market activity. Peter resides with his wife, Rachelle, in New Jersey and enjoys an active, outdoors lifestyle.

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Peter Kasyanenko

About Peter Kasyanenko

Peter Kasyanenko is a portfolio manager at a New York City-based major U.S. life insurance company, co-managing over $40 billion in commercial mortgages. Peter has also been involved in the underwriting of $5 billion in closed real estate acquisitions, developing strategies for large institutional clients, and tracking real estate capital market activity. Peter resides with his wife, Rachelle, in New Jersey and enjoys an active, outdoors lifestyle.
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