Problem $23-3$

$7$

points

A commercial real estate investment fund must report its quarterly investment performance to investors. A summary of its $(1)$ beginnjing and end$-$of$-$quarter assets and equity and $(2)$ cash inflows and outflows during the quarter are as follows:

$\backslash$table$[[$Beginning of Quarter,,During Quarter$],[$$$69$ million,Cash,$$10$ million,NOI from operations$],[$$$519$ million,Market value of props,$$2$ million,Paid management fees$],[$$$39$ million,Other Investments,$$25$ million,Distributions to investors$],[$$$338$ million,Fund debt,$$219$ million,Investor contributions$],[,,$$$194$ million,Property acquisitions$],[,,$$$44$ million,Property dispositions$]]$

References

The other investments will earn $4$ percent interest $(1$ percent per quarter$)$ and fund debt will be at a $6$ percent rate $(1\mathrm{.}5$ percent per quarter$).$

The properties were appraised at the end of the quarter for $$674$ million.

Assume any interest on short$-$term investments is offset by interest paid on short$-$term debt.

Required:

a$.$ What would be the beginning equity value?

b$.$ What would be the ending equity value $($MVEE$)?$

c$.$ Assuming that all cash flows from operations, equity contributions, acquisitions, and distributions occurred at the end of the quarter, what would be the quarterly return $($IRR$)?$

d$.$ Assume that all cash distributions to investors occurred equally in $30-$day intervals during the quarter. $($Investor contributions still occur at the end of the quarter.$)$ What would be an approximation to the IRR using the Modified Dietz approach?

e$.$ Assume that all cash distributions to investors occurred equally in $30-$day intervals during the quarter. What would the return be before fees? $($Investor contributions still occur at the end of the quarter.$)$

f$.$ Assume that all cash distributions to investors occurred equally in $30-$day intervals during the quarter. What would be the return at the property level? $($Investor contributions still occur at the end of the quarter.$)$