PPM EVALUATION CHECKLIST
Evaluating private placements becomes easier if you use a consistent methodology. You'll also develop your own critical screening factors more quickly by standardizing the measures you use to compare deals.
The "Private Placement Evaluation Checklist" that follows is the uniform method we ourselves use to undertake PPM review for clients. While It's safe to say it may be a bit more involved than you feel you need, start with the portions you feel meets your current needs. and over time you will eventually have created your own uniform method measure that is easily modified for each deal you take a look at. An added bonus: By having a completed checklist for many deals, you will develop a handy reference file for quickly comparing investments.
PPM Evaluation Checklist TOC
NAME OF OFFERING
_____________________________________
OFFERING SIZE
TOTAL ALL-IN $ ____________________
PER UNIT SIZE $ ____________________
SPONSOR NAME
_____________________________________
ADDRESS:
_____________________________________
CONTACT __________________________
PHONE ____________________________
1. ASSET
1.1 QUALITY
Property Name and Address
_____________________________________
_____________________________________
Property Type
_____________________________________
Location
Grade (excellent, good, fair or poor)
_____________________________________
Physical Condition
Age ________
Year Constructed ___________________
Year Last Updated __________________
Maintenance Condition (good, etc.)
_____________________________________
_____________________________________
Construction (wood, brick, steel)
_____________________________________
_____________________________________
Style _______________________________
Marketability (unit size, # of bedrooms, etc. vs. market)
_____________________________________
_____________________________________
Inspection Report and Engineering Study Performed? ____________ (Y,N)
Required Property Improvements:
_____________________________________
_____________________________________
Economic Factors
Lease Terms (pick one)
Duration ___________ (12 mo. or less)
Other (specify) ______________________
_____________________________________
Current Rental Rates (per unit)
Type (# BR) _______ Count ______
$ _____________ Sq ft _____________
Type (# BR) ________ Count ______
$ _____________ Sq ft _____________
Type (# BR) _______ Count ______
$ _____________ Sq ft _____________
Type (# BR) ________ Count ______
$ _____________ Sq ft _____________
Type (# BR) ________ Count ______
$ _____________ Sq ft _____________
Current Occupancy ______________%
Break-Even Occupancy __________%
Market Rental Rate $ _____________
Credit Quality of Tenants ___________
_____________________________________
_____________________________________
_____________________________________
Financing Terms
Loan Maturities ______________ (yrs.)
Interest Rate(s) _______________%
Lender Participations (describe):
_____________________________________
_____________________________________
_____________________________________
Market Trends:
Comparable Available in the market
________________ Sq ft
New Space Under Construction
________________ Sq ft
Occupancy Rates for Similar Space
________________%
Absorption Rate Per Annum
________________ Sq ft
1.2 VALUE
Prices of Comparable Property
Per ____ Sq Ft ____ Unit (pick one)
$ ________________
Gross Rent Multiplier
(Purchase Price / Gross Rents)
________________
Capitalization Rate
(NOI / Purchase Price) _________%
Price of Partnership Property
Price Paid by Investors (PPP)
Per ____ Sq Ft ____ Unit (pick one)
$ ________________
Gross Rent Multiplier
(Purchase Price / Gross Rents)
________________
EQUALIZER™ Capitalization Rate
(NOI / PPP paid by Investors)
________________%
Appraised Value $__________________
Projected Property IRR ___________%
Seller Financing Terms:
_____________________________________
_____________________________________
General Partner Guarantees:
_____________________________________
_____________________________________
2. SPONSOR
2.1 STAFF
Senior Personnel
Executive Personnel _________ (no.)
Avg yrs of real estate exp _________
Avg yrs service w/Sponsor ________
Acquisition Staff
No. of professional personnel
________________
Avg yrs acquisition experience
________________
Acquisition Procedures & Criteria
Describe ____________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
No. acquisitions per yr _____________
Pro Forma financials prepared?
________________ (Y,N)
Comp Property Analysis Performed?
________________ (Y,N)
Management & Legal Involved?
________________ (Y,N)
Property acquisitions through:
Developers? ________________ (Y,N)
Brokers? ________________ (Y,N)
Senior personnel involved?
________________ (Y,N)
Property management involved?
________________ (Y,N)
Property Management Staff
Avg yrs of PM experience ___________
Third-party PM used? _________ (Y,N)
Sponsor tracks PM performance
Budgets ____________ (Y,N)
Variances ____________ (Y,N)
Other? (describe) ___________________
_____________________________________
_____________________________________
Legal & Finance Staff
Number ____________
Average yrs of experience __________
Investor accounting & reporting
_____________________________________
_____________________________________
_____________________________________
IRS & State tax compliance
_____________________________________
_____________________________________
_____________________________________
SEC reporting (if required)
_____________________________________
_____________________________________
_____________________________________
Experience of Senior CFO
_____________________________________
_____________________________________
_____________________________________
2.2 PRIOR PERFORMANCE
Total Dollars Raised in Syndications
$ ________________
Number of Partnerships Formed
__________________
Number of Partnerships Exited
__________________
Investor IRR on Exited Partnerships:
___________________________ / ______%
___________________________ / ______%
___________________________ / ______%
___________________________ / ______%
___________________________ / ______%
___________________________ / ______%
2.3 FINANCIAL CONDITION
Sponsor's Net Worth
$ __________________
Current Ratio
___________________
Net Worth - Sponsor's Parent entity
$ __________________ (N/A if none)
Bank References:
_____________________________________
_____________________________________
_____________________________________
3. PROJECT SUMMARY
3.1 TERMS
Front-end Fees / Investor Capital
_________________%
Contingency Reserves / Capital
1: At Partnership Inception
_________________%
2: In Year Following Pay-in Period
(if Pay-in has a deferral option)
_________________%
Reserve for Capital Improvements
(as a % of Investor Capital)
_________________%
IRR on Property __________________%
IRR to Investor ___________________%
PV Investor Benefits / Investment
_________________%
Property Cost (All-in)
$ _________________
All Investor Cash + Debt Assumed
$ _________________
Property "Markup", if any __________%
Appreciation Necessary to B/E
_________________%
3.2 FEASIBILITY
Reasonableness of Assumptions
Period to stabilization _________ (yrs.)
Cash Flow to Investor in Yr 1 ______%
Annual Rate of Rental Increase
__________________%
Annual Rate of Expense Increase
__________________%
Capitalization Rate on Exit
__________________%
Forecast Opinion from CPA firms?
_______________(Y,N)
Describe ____________________________
_____________________________________
_____________________________________
Accountants Opinion on Tax Issues:
_______________(Y,N)
Describe ____________________________
_____________________________________
_____________________________________
3.3 ECONOMIC VALUE
ARR (or IRR) ___________________%
Payback Period ____________(yrs.)
_____________________________________
_____________________________________
_____________________________________
3.4 RISK
Relative Risk Factor
(i.e. the odds of success)
_____________%
3.5 RISK ADJ EXPECTED RETURN
Economic Value (ROR) x Risk Factor
_______________%