Companion files

The Real Estate Secondaries Investor

A Practitioner’s Guide to Pricing an Appraisal, LP Portfolios and Real Estate Continuation Vehicles

Julian R. Sterling

Five Excel workbooks. Every figure the book prints is reproduced by a live formula in the first four, and each of them ends with a checks sheet listing the book’s figure beside what the workbook computes. The fifth is a working document: the seventy-two questions of Appendix A, with room to answer them. They are free. Nothing is gated behind a sign-up, and no email address is asked for.

• Chapters 5 to 9 · start here

  The discount you are actually paying

  The whole argument of the book in one file. An interest reported at €38.5 million, offered at 82 per cent of that number, and the four discounts that follow.

  The headline is 18.00 per cent. Remove the smoothing from the appraisal series and it is 14.42. Add the unfunded commitment, which is funded at par and bought at no discount, and it is 13.01. Deduct the management fees the interest still owes to the end of the fund’s life and it is 9.18. The headline is roughly twice the truth, and none of the three deductions is a market view.

  Sheet 4 carries the threshold that matters most: below α = 0.1315 — below an appraiser absorbing about 13 per cent of new information each quarter — an 18 per cent discount to the appraisal buys no discount to value at all.

  The_Discount_You_Are_Actually_Paying.xlsx · XLSX · 11 KB

• Chapters 10 to 12 · the second road

  Pricing from the tape

  The same value reached from the other direction, without using the reported net asset value at all. Six assets, an estimated rental value, a non-recoverable ratio, an exit yield and a capital expenditure line each.

  Gross asset value rebuilds to €291.83 million and the interest to €36.57 million — against €36.89 million from unsmoothing the reported series. The two methods share no inputs and land 0.87 per cent apart.

  Sheet 3 marks the in-place debt, worth €1.478 million to this interest and invisible in the accounts. Sheet 4 is the one to read before bidding: twenty-five basis points on the exit yields moves the value of the interest by 7.79 per cent — more than the entire unsmoothing argument is worth.

  Pricing_from_the_Tape.xlsx · XLSX · 11 KB

• Chapters 15 and 16

  Sell or roll — and the redemption queue

  A continuation vehicle offers 90 per cent of net asset value, or a rolled interest for 4.0 years on new terms. Rolling only wins if the assets return 1.667× — a 13.62 per cent annual return.

  Sheet 2 converts the vehicle’s fee and carried interest into the language the decision is made in: they cost a rolling investor 1.62 points of annual return — and more, not less, if your opportunity cost is higher.

  Sheet 3 is the open-ended fund version. If the appraisal stands above spot value, the redemption queue pays you at a number that still has to fall. A one-year queue justifies selling today at up to a 14.45 per cent discount; a three-year queue, 31.80.

  Sell_or_Roll.xlsx · XLSX · 10 KB

• Chapter 17

  The portfolio bid

  Five interests, one price. Price each line at a margin on its own adjusted value and the portfolio discount is 22.22 per cent. The simple average of the five line discounts is 23.92. Only the first is true, and the second is the one that ends up in memos.

  Sheet 2 prices the seller’s all-or-nothing requirement. Excluding the weakest line takes the discount on the remaining four from 22.22 to 19.63 per cent — so insisting on a single lot costs the seller 2.60 points. That is the number to negotiate with.

  The_Portfolio_Bid.xlsx · XLSX · 9 KB

• Appendix A · the working document

  Seventy-two questions for a real estate secondary

  The seventy-two questions of the appendix, in the same order and the same words, read from the same source file as the chapter so the book and the workbook cannot drift apart.

  Columns for the answer, the source document, the owner and the date. The status column marks any question answered without a source as unsourced, and the progress sheet counts only the sourced ones. An answer whose only authority is the seller is not an answer.

  Seventy_Two_Questions.xlsx · XLSX · 13 KB

Conventions

Blue text on a pale blue fill is an input — edit these. A yellow fill is the carrying assumption of the sheet, the one to argue about first. Black text is a formula. Nothing is locked, protected or watermarked, there are no macros and no external links, and every file opens in Excel, LibreOffice or Numbers.

If a figure disagrees with the book

The checks sheet in each of the first four workbooks lists every printed figure beside a live formula that recomputes it. If a line reads anything other than “reproduced”, the workbook is right and the book is wrong — please say so, and it will be corrected.

Articles on this book

• What does an 18 per cent discount to net asset value actually buy?An 18 per cent discount to reported net asset value is worth 9.18 per cent once three computable deductions are made.
• Pricing StrategyA list price of 148.00, a pocket price of 112.51, and the nine deductions in between — with what one point of price is actually worth.

Also by Julian R. Sterling

The other books with companion files. The full list of titles is on the author page.

• Breaking Into European Defence ProcurementThe money and the instruments, the 35 per cent content test, and proposal economics.
• Closing the DealTwo defensible bridges 20.70 million apart, a peg worth 7.00 million, and the six choices that remove 6.60 of a 12.00 earn-out.
• CMBS and CRE CLOsWhere the loss actually lands, from appraisal reduction to realised severity, and what the B-piece is really being paid for.
• How to Read a Commercial LeaseThe three refinements chapter 19 names and never performs, and the renewal rate below which the mark-to-market is worth nothing.
• How to Read a Credit AgreementWhere the default actually comes from, the cure that costs 5.5 times the other, and the capacity nobody adds up.
• How to Read a Limited Partnership AgreementWhat the clawback actually collateralises, and why every dollar won on the tax clause lands in the uncollateralised column.
• How to Read a Private Funds Financial StatementsThe Harbourgate reporting pack, five worked cases, and rebuilding your own account.
• How to Read a Real Estate Loan AgreementThe cure ratio in closed form, the four-point window in which the cheap cure works, and the cure sized to the wrong threshold.
• Insurance Capital for Asset ManagersWhy the same fund costs two insurers different amounts, and what opacity costs a manager in euros.
• Logistics and Industrial Real EstateNet effective rent, the ageing asset, and the development letting decision.
• Office Real EstateA six per cent yield that returns 3.2 per cent once the re-letting cycle is paid for, and the headline-to-net-effective rent arithmetic.
• Operational Due Diligence in Private EquityThe rating model built and then broken, and why refining a rubric weakens it.
• Personal Finance for BeginnersWhat a minimum payment really does, and what the snowball and the emergency fund actually cost.
• Private Equity Investor RelationsWhat a fund has returned, read six ways — and the eleven-point gap between them.
• Private Equity Real EstateBoth worked waterfalls to the dollar, the two capital stacks, and the arithmetic of the promote made changeable.
• Private Markets PerformanceThirty-one of the thirty-three figures chapter 19 publishes reproduce exactly — and the two that do not are named rather than quietly adopted.
• Raising a Real Estate FundThe chapter 17 funnel run on a calendar — when the first close actually lands, and why more travel does not help.
• Real Estate Financial ModelingProperty, development and fund models built line by line, and the modelling test worked end to end.
• Real Estate Fund ManagementThe waterfall of 6.11, the build-to-core of 8.7 and the proceeds gap, reproduced as live formulas rather than asserted.
• Real Estate Joint VenturesThe JV waterfall and promote, the complete venture, and failure to fund.
• Real Estate Transaction Due DiligenceWhat the diligence cost, which workstreams paid for themselves, and the investigation the book skips, priced.
• REIT Analysis and ValuationFFO of 532.0, AFFO of 381.0, net asset value and dividend safety — every figure a formula you can change.
• Retail Real EstateThe occupancy cost of every unit in a centre, the sixteen per cent of the rent roll no tenant can sustain, and the right-size-convert-or-hold decision priced.
• Sale and LeasebackA €179.5 million transaction end to end, with rent cover measured on the entity that actually signs the lease.
• Self-Storage Real EstateThe cohort engine behind a 590-unit store, and the rate increase on existing customers priced against the move-outs it causes.
• Senior Living and Healthcare Real EstateThe resident engine of a seventy-bed home, the payor mix, and a rota costed at the employer's real hourly rate.
• Significant Risk TransferThe bank's ceiling and the investor's floor derived independently, and the narrow band of prices at which both can say yes.
• Stock Market Investing for BeginnersWhat compounding and fees actually cost, with figures — and a calculator for your own.
• Student Housing Real EstateRevenue per available bed against the rate card, the letting campaign week by week, and the cost base of a 520-bed scheme.
• The AIFMD II HandbookThe reverse stress test computed, and the facility term that moves it more than any asset.
• The Asset-Based Finance HandbookThe borrowing base off a live loan tape, the Meridian transaction, and trigger design.
• The CBAM Compliance HandbookWhat 2027 really costs, how big the buffer should be, and the term the surrender formula counts twice.
• The Co-Investment PractitionerWhat dilution really costs, what a pay-to-play clause is worth, and how much to hold back.
• The Continuation Fund HandbookThe Thalia transaction, the bid funnel, and the fees behind the roll decision.
• The Data Center Development HandbookThe underwrite computed: the levered return the chapter never builds, and what a twelve-month slip costs.
• The Distressed Debt InvestorWhere the fulcrum security actually breaks, and what an 80-cent recovery is worth once composition and time are priced.
• The ESG Manager in Private EquityThe exit in equity and IRR, the line the book drops, and the half-turn nobody controls.
• The EU AML HandbookThe back book sized, and the month beyond which no headcount recovers a one-year window.
• The Evergreen Fund HandbookWhat the sleeve costs, and the headline IRR at which a closed-ended fund merely ties.
• The Family Office ProfessionalWhat an office costs, and the level of wealth at which building one starts to pay.
• The Fund Finance ProfessionalChapter 8 builds the reported-to-eligible NAV bridge; chapter 9 computes every ratio without it. Two points at every state — and what a subscription line does to the IRR.
• The Growth Equity InvestorWhat a pro rata cheque really costs, and the band where defending your ownership loses money.
• The Infrastructure Investment AnalystDebt sculpted to a coverage floor, and one asset valued twice to the last decimal.
• The Private Credit InvestorThe two coverage ratios are not measured on the same thing: the erosion is 47.7 per cent, not the 28.7 the headline implies.
• The Private Equity Fund Controller PlaybookThe book defines IRR, DPI, RVPI and TVPI, tells you to update them at the exit, and prints not one value. Computed: a 1.833× deal inside a fund at 0.892 TVPI.
• The Private Equity Operating PartnerThe value creation bridge built in full, and who actually made the return.
• The Private Equity Secondaries InvestorThe seller’s floor beside the buyer’s ceiling — and the zone that usually is not there.
• The Private Fund Compliance OfficerThe grey zone as basis points, a broken deal four ways, and how many items you must test.
• The Private Markets Limited PartnerWhat a co-investment programme really saves, and the loss rate that erases it.
• The Private Markets Valuation SpecialistThe book describes its illustrations without numbers on purpose. These files close the chain, with every step visible.
• The Private Wealth FundraiserThree peaks, years apart, and the signature that tells a forecast miss apart.
• The Real Estate Asset ManagerBusiness plans, leasing, and what deferring the work on a building actually costs.
• The Real Estate Debt InvestorThe margin against the return on capital, the floor priced, and what prepayment protection buys.
• The Real Estate Development ManagerThe residual appraisal, the worked scheme, land diligence and the risk register.
• The Venture Capital AssociateWhat defending a position costs, and how many companies a reserve pool actually defends.
• Real Estate FinanceFour people look at one building and reach four numbers; the lender is whole only above 105,109,489, twelve per cent below today’s value rather than forty.
• Financial Risk ManagementA fund inside every limit that cannot meet a redemption — and the number that decides it is the one with no currency attached.
• Business ValuationThree advisers land 26.8 per cent apart on one company, and the whole gap turns out to be 1.96 points of perpetual growth.
• Quantitative FinanceThree models agree to a quarter of one per cent about a number that one unobservable input moves a hundred and three times as much.
• Asset ManagementFour people quote four returns for one mandate, all correct and 2.7017 points apart — forty-eight times the manager’s net skill.
• Alternative InvestmentsA manager reports 13.29 per cent and the endowment earns 6.26 — both correct, and only a third of the advertised advantage arrives.
• Credit AnalysisFour defensible EBITDAs on one borrower give leverage from 3.19x to 6.47x — and the add-back argument is fifty times the covenant headroom.
• Venture CapitalOne company out of twenty-eight returns 56.7 per cent of the fund, and half the capital goes in after the decision — at half the return.
• Machine Learning for FinanceFive people quote the accuracy of one credit model, all five are right, and the number that decides how much money it makes is none of them.
• Commercial Real Estate InvestingThe equity earned 8.6647 per cent and the investor received exactly 8.0000 - the preferred return, and nothing above it.
• Mergers and AcquisitionsThe board paper says the deal creates 13,436,667 of value. The arithmetic says it destroys 17,530,855. Nobody is lying.
• DerivativesThe treasury report says the hedge cost 1,233,698. That is the interest differential, not a cost. The number that mattered appears in no report at all.
• Treasury ManagementFive cash balances for one company, all correct and 145,600,000 apart — and the revolver that is two-thirds of the liquidity leaves at a revenue fall of 8.4127 per cent.
• Financial Planning and AnalysisRevenue 3.0190 per cent above budget and operating profit 16.3209 per cent below it, in the same quarter, with every figure correctly stated.
• Energy TradingA position report that is 91.7031 per cent hedged and correctly computed, on a book that is short 2,542,000 MWh — and a margin call of 198,400,000 the next morning.