FINC 4355 Case Study
You have been asked to analyze a property for a refinance with a bank on behalf of a commercial property owner. Use your creativity to put together a loan package for the XYZ Bank to analyze a prospective loan for the property in the form of a cover letter and accompanying analysis.
Property Summary The Southwest Freeway Retail Center is located in southwest Houston, Texas. The property was built in 2005 and is approximately 93% leased. The property is north of the Southwest Freeway (Highway 59) just west of Gessner. The property consists of a 20,000 square foot retail center.
The site is located between two major intersections just east of Beltway 8 and south of Loop 610 along the Southwest Freeway (Highway 59.) The site is also in close proximity to Memorial Hermann Southwest Hospital, which is one of the most sophisticated suburban medical faculties in Houston. Additionally, the site is surrounded by various retail centers, restaurants, area malls, hotels, and residential areas.
There are a total of 7 tenants at this property and there is one vacant space. All tenants at the property have a triple net lease.
The Excel template provided contains three tabs: a rent roll, a loan summary, and a Proforma for your use. Please use the rent roll to create a Proforma and Loan Summary for the property (provided in the template for your convenience.)
Your completed assignment should include the following components:
(1) A detailed cover letter addressed to the banker at XYZ Bank discussing the property, a summary of your analysis, and the property’s strengths and weaknesses that the banker should consider. Your objective is to point out facts to the banker of why this loan would be a good investment for the bank, as well as any risks that exist. You may think outside of the box and use your creativity in terms of the sponsorship of the borrower (his or her management experience, net worth, etc.) or other components that we’ve learned about through the semester as it relates to the property or analysis.
(2) The accompanying Excel file with the Loan Summary and Proforma completed Other notes:
• This is not a group assignment. Please work independently, but feel free to ask me any questions that you have.
• Please note that this is a fictitious property; however, you may submit any graphics or other details in your loan package as you choose in the cover letter.
• I would expect that your Proforma would contain many footnotes on how you arrived at your figures. You would want the banker to follow your logic on how you arrived at the Proforma figures.
• With regard to the loan summary, I would like for you to justify your reason for using the capitalization rate you chose, loan‐to‐value request, etc. You may do this in your cover letter or within the template itself.
• I would suggest that you use Chapters 9‐12 in the book as a reference where applicable as you think about your Proforma or write‐up.
• When the assignment is complete, you may submit it through the “Drop Box” in the Blackboard system.