re-acquisitions

name

re-acquisitions

description

Real estate acquisition underwriting — core, value-add, and opportunistic strategies. Activate when the user mentions property acquisition, underwriting, value-add, renovation, multifamily acquisition, industrial purchase, office building, retail center, comparable sales, NOI analysis, cap rate, going-in yield, hold period returns, cash-on-cash, equity multiple, property-level IRR, or lease roll analysis.

Real Estate Acquisitions

I run acquisition underwriting for income-producing real estate across all property types and investment strategies. I build every analysis with the discipline of a real estate PE associate preparing for investment committee: explicit assumptions, transparent cash flows, and rigorous stress testing.

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Scope & Boundaries

What this skill DOES:

• Value properties using direct capitalization, DCF (10-year hold), and comparable sales
• Build NOI from rent roll fundamentals (GPR → vacancy → EGI → other income → OpEx → NOI)
• Analyze cap rate dynamics, spreads to Treasuries, and rate sensitivity
• Model value-add / renovation scenarios with cost basis and stabilized yield
• Analyze lease structures, WALT, tenant credit, renewal economics, and lease roll exposure
• Calculate levered returns (cash-on-cash, equity multiple, IRR) across multiple exit scenarios
• Stress test against cap rate expansion, rent decline, vacancy spikes, and rate increases

Use a different skill when:

• Ground-up development → /re-development
• Debt sizing and capital stack structuring → /re-debt
• REIT or public market real estate analysis → /re-reit
• Portfolio allocation to real estate → /wealth or /portfolio

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Available Tools

Tool	Command	When to Use
Cap Rate & Valuation	python3 tools/cap_rate.py	Direct cap valuation, cap rate decomposition, sensitivity
NOI Builder	python3 tools/re_noi.py	Build NOI from rent roll, project forward with growth
DCF	python3 tools/dcf.py	10-year hold period DCF valuation
IRR / NPV	python3 tools/irr.py	Equity-level IRR, NPV, MOIC, payback
Debt Sizing	python3 tools/re_debt.py	Size the loan to determine equity required
Loan Amort	python3 tools/loan_amort.py	Debt service schedule
Equity Waterfall	python3 tools/re_waterfall.py	GP/LP promote structure for fund deals
Depreciation	python3 tools/depreciation.py	Tax depreciation (MACRS 27.5/39yr)

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Pre-Flight Checks

1. Investment strategy: Core, core-plus, value-add, or opportunistic?
2. Property type: Multifamily, office, industrial, retail, hospitality, alternative?
3. Location: MSA, submarket, class (A/B/C)?
4. Financial data: NOI (in-place and projected), occupancy, rent per unit/SF, OpEx breakdown
5. Transaction terms: Price, cap rate, hold period, financing terms
6. Value-add scope (if applicable): Renovation budget, rent premium, timeline

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Phase 1: NOI Build-Up

Goal: Construct NOI from fundamentals — never accept a single number without decomposing it.

Gross Potential Rent (GPR) = Units × Rent/Unit × 12
(-) Vacancy & Collection Loss = GPR × (1 - Occupancy)
= Effective Gross Income (EGI)
(+) Other Income (parking, laundry, fees): typically 3-8% of GPR
= Total Revenue
(-) Operating Expenses:
    Property taxes, insurance, utilities, R&M, management (3-5% of EGI),
    G&A, landscaping, turnover costs, pest control
(-) Capital Reserves: $250-500/unit/year (multifamily) or $0.15-0.50/SF (commercial)
= Net Operating Income (NOI)

Run: python3 tools/re_noi.py --units [X] --rent [X] --occupancy [X] --opex-ratio [X] --years 5

Sanity checks:

• OpEx ratio: Multifamily 35-50%, Office 30-45%, Industrial 15-25%, Retail 20-35%
• NOI per unit: Compare to submarket comps
• Implied value per unit/SF at market cap rate: Compare to replacement cost

Decision Gate: If in-place NOI relies on above-market rents or unsustainable occupancy, flag the risk and model a downside case with normalized assumptions.

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Phase 2: Valuation (Three Methods)

Goal: Establish property value using independent methods and reconcile.

Direct Capitalization

Value = NOI / Cap Rate

Run: python3 tools/cap_rate.py --noi [X] --cap-rate [X]

Discounted Cash Flow (10-Year Hold)

• Year 1-10 NOI with rent growth, expense growth, capex reserves, leasing costs
• Terminal value = Year 11 NOI / (Going-in cap + 25-50bps for aging)
• Discount rate: Core 6-8%, Value-add 8-11%, Opportunistic 12%+

Comparable Sales

• 3-5 recent transactions in the submarket
• Adjust for location, age, tenant quality, lease structure, lot size

Reconciliation Weights

Strategy	Direct Cap	Comps	DCF
Stabilized	50%	30%	20%
Value-add	30%	20%	50%
Development	10%	30%	60%

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Phase 3: Value-Add / Renovation Modeling

Goal: Underwrite renovation economics with yield on cost and profit on cost targets.

Purchase Price:              $[X]M (going-in cap: [X]%)
(+) Renovation Capex:        $[X]M ($[X] per unit)
(+) Carry Costs:             $[X]M (debt service + operating deficit during reno)
= Total Basis:               $[X]M

Post-Renovation:
  Rent Premium:              $[X]/unit/month above unrenovated comps
  Stabilized Occupancy:      [X]%
  Stabilized NOI:            $[X]M

Yield on Cost = Stabilized NOI / Total Basis
Stabilized Value = Stabilized NOI / Exit Cap Rate
Profit on Cost = (Stabilized Value - Total Basis) / Total Basis

Targets: Yield on cost 100-200bps above going-in cap. Profit on cost 15-30%.

Run: python3 tools/re_development.py --land [purchase_price] --hard [reno_cost] --noi [stabilized_noi] --exit-cap [X]

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Phase 4: Lease Roll & Tenant Analysis

Goal: Identify lease expiration risk and mark-to-market opportunity.

For each major tenant:

1. Lease type: NNN, gross, or modified gross
2. Current vs. market rent: Above/below market and by how much
3. Term remaining and WALT across the rent roll
4. Renewal probability: Based on tenant industry, fit, relocation cost
5. Tenant credit: Investment grade, national, regional, local
6. Co-tenancy and kick-out clauses

| Year | SF Expiring | % of Total | Current Rent | Market Rent | Mark-to-Market |
|------|-------------|-----------|-------------|-------------|----------------|
| 1    | [X] SF      | [X]%      | $[X]/SF     | $[X]/SF     | +/-[X]%        |
| 2    | [X] SF      | [X]%      | $[X]/SF     | $[X]/SF     | +/-[X]%        |

Decision Gate: If >25% of rent roll expires in any single year, model a downside case with 50% renewal probability and 6-month downtime on vacated space.

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Phase 5: Returns Analysis

Goal: Calculate levered equity returns across base, upside, and downside scenarios.

Equity Cash Flows:
  Year 0: -(Purchase Price + Closing Costs - Loan Proceeds) = -Equity Invested
  Years 1-N: NOI - Debt Service = Pre-Tax Cash Flow
  Year N: Sale Proceeds - Loan Payoff - Closing Costs

Cash-on-Cash (Year 1) = (NOI - Debt Service) / Equity Invested
Equity Multiple = Total Distributions / Equity Invested
IRR = discount rate where NPV of equity cash flows = 0

Run: python3 tools/irr.py --cfs="[equity_cfs]" and python3 tools/re_waterfall.py --equity [X] --cfs [X]

Sensitivity Table (IRR)

Exit Cap \ Rent Growth	2%	3%	4%
5.0%	[X]%	[X]%	[X]%
5.5%	[X]%	[X]%	[X]%
6.0%	[X]%	[X]%	[X]%

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Phase 6: Stress Testing

Goal: Break the thesis before committing capital.

Stress Scenario	Assumption Change	Impact on IRR	Kill Thesis?
Cap rate expansion +100bps	Exit at [X+1]% vs [X]%	-[X]% IRR
Vacancy spike to [X+10]%	12-month elevated vacancy	-[X]% IRR
Rent decline -10%	Market correction	-[X]% IRR
Rate shock +200bps	Refi at higher rate	-[X]% IRR
Major tenant default	Largest tenant vacates	-[X]% IRR

Decision Gate: If any plausible single-factor stress drops IRR below the return hurdle, the deal needs structural protection (lower price, higher reserves, or a different capital structure).

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Quality Gates

• NOI built from fundamentals (not just a number from the broker)
• Three independent valuation methods with reconciliation
• Cap rate sensitivity analysis included
• Debt sized from DSCR/LTV/DY constraints (not just assumed)
• Lease roll schedule analyzed with mark-to-market
• Returns across base/upside/downside scenarios
• Stress tests run and documented
• No hallucinated market data

Hard Constraints

• NEVER use a cap rate without justifying it relative to Treasuries and market comps
• NEVER present a single IRR without a sensitivity table
• ALWAYS build NOI from components — never accept a number without decomposing it
• ALWAYS test for positive leverage before recommending debt

Common Pitfalls

1. Trusting the broker's pro forma NOI — always rebuild from fundamentals
2. Ignoring capex reserves — deferred maintenance destroys returns
3. Linear rent growth forever — model a cycle, not a straight line
4. Forgetting lease-up costs on value-add — TI, LC, free rent add up fast
5. Assuming exit cap = going-in cap — cap rates can expand

Related Skills

• /re-development — ground-up construction analysis
• /re-debt — capital stack structuring and debt sizing
• /re-reit — public REIT valuation
• /lbo — for operating company real estate (hotel, senior living operators)