BGO interviews
BGO interviewsThree lessons from BGO sponsor interviews, applied to the fictional Willow Industrial case.
Check the property behind the model
“we go to the market, we walk the assets.”
Steve ReentsU.S. chief investment officer and managing partner
Test the rent assumption
Willow’s replacement rent looks attractive in the model. Which lease terms, competing space and tenant facts would you check before accepting it?
ExampleUnderwrite a buyer, not just an exit value
“if there’s no buyer when you go to sell, you never created the alpha.”
Steve ReentsU.S. chief investment officer and managing partner
Put the exit cap under pressure
Who could buy Willow in year 5? Explain the evidence for a 6% exit cap, then show the equity loss if buyers require 7%.
ExampleKeep the weak year in view
“you have to maintain discipline and build a portfolio that's going to endure all parts of the cycle.”
Mike KeatingManaging partner, portfolio management
Fund the cash shortfall
Keating discusses a core, open-end portfolio. Apply that discipline to Willow: identify the year 2 equity call and show how 8% interest changes it before choosing leverage.
ExampleLast reviewed