CRE Recruitment Prep

ROI (Return on Investment)

ROI = NOI / Total Investment. It is a year-by-year measure focusing on the return from the amount paid for the property, differing from the cap rate, which focuses on market value.

Cap Rate

A property’s annual Net Operating Income (NOI) divided by its purchase price; indicates potential return. lower cap rates signify lower risk, and higher caps indicate higher risk and potential returns.

IRR (Internal Rate of Return)

The discount rate that makes the net present value (NPV) of all cash flows from an investment equal to zero. Reflecting the annualized rate of return over the investments life time, accounting for both size and timing of cash flows.

Cash on Cash Return

Annual pre-tax cash flow divided by total cash invested; measures profitability relative to cash investment.

Equity Multiple

Total return on an investment divided by total equity invested; indicates the ratio of total cash flows to initial investment.

“How many times did I get my money back?”

Debt Service Coverage Ratio (DSCR)

NOI divided by annual debt service; used to assess a property's ability to generate enough income to pay off debt.

Hard Costs

Tangible expenses directly associated with construction, such as materials and labor.

Soft Costs

Indirect expenses not directly linked to construction, including design, permits, fees, and legal expenses.

After Tax Return on Equity (ATROE)

After-tax cash flow divided by equity investment.

Dry Powder

Available capital that private equity firms or investors have reserved for future investment opportunities.

Basis Points

A unit of measurement used in finance to describe small changes in interest rates or percentages, where 1 basis point equals 0.01% and 100 basis points equals 1%

Market Fundamentals

Economic and demographic trends, such as population growth and job creation, that drive demand for real estate.

Investment Horizon

The timeframe an investor uses to evaluate potential investments based on their financial goals. A longer investment horizon may allow for more aggressive investments, while a shorter horizon typically necessitates more conservative choices to mitigate risk.

Leverage

The use of borrowed capital to increase the potential return on investment; can amplify both gains and losses.

Risk/Return Profile

The relationship between the expected returns of an investment and the level of risk associated with it.

Cap Rate versus IRR

Cap Rate is a static snapshot: just NOI ÷ Purchase Price. It says, “What’s my yield today if nothing changes?”

IRR is dynamic: it layers in all the moving parts over time — rent growth, expenses, vacancy, financing, sale proceeds, and the exact timing of each cash flow.

Mixed-Use Development

A real estate project that combines residential, office, and retail spaces to create a vibrant community.

HUD Programs

Programs developed by the Department of Housing and Urban Development offering support for affordable housing development.

Cash Flow Health

The overall financial performance of a property based on its ability to generate cash income relative to expenses.

Opportunistic Investments

High-risk, high-return investment opportunities, often involving distressed properties or value-add projects.

Economic Fundamentals

population growth, job creation, and income levels that drive demand in real estate markets.

How is Cash-on-Cash ROI different from ROI?

Cash-on-Cash ROI = Annual Pre-Tax Cash Flow / Total Cash Invested. It focuses on yearly profitability, while ROI looks at the entire investment period Total Cash Flow / Total Cash Invested

What is the difference between IRR and Equity Multiple?

IRR focuses on the efficiency and timing of returns, while Equity Multiple shows total returns without timing considerations.

How is Net Operating Income (NOI) calculated?

NOI = Gross Rental Income + Other Income − Vacancy Loss − Operating Expenses (e.g., maintenance, management fees).

What are the steps to create a DCF (Discounted Cash Flow) model?

1. Forecast NOI over the holding period.

2. Choose a discount rate (e.g., WACC).

   1. Mostly uses Investor required return

3. Calculate terminal value using a cap rate on stabilized NOI.

   1. NOI/Exit Cap

4. Discount cash flows and terminal value to present value.

   1. Divide by 1 + discount rate

5. Sum the values to determine the NPV.

How does leverage affect real estate investments?

Leverage amplifies returns by reducing upfront equity but increases risk. It's crucial to ensure cash flow can cover debt payments.

What are typical return expectations and risks for multifamily properties?

6-12% returns; low to moderate risk due to steady demand and low vacancy.

What are typical return expectations and risks for industrial/warehouse properties?

7-13% returns; moderate risk driven by e-commerce demand.

What are the return expectations for office buildings?

5-10% returns; moderate to high risk, depending on location and quality.

What are typical return expectations and risks for retail properties?

6-12% returns; moderate to high risk, with grocery-anchored centers being more stable

What are the expectations for hospitality properties?

8-16% returns; high risk due to sensitivity to economic cycles.

List all risk profiles and their return expectations

• Core: 5-8% stable returns, low risk.

• Core Plus: 7-10% returns, moderate risk.

• Value-Add: 10-15% returns, moderate to high risk.

• Opportunistic: 15%+ returns, high risk.

What are current Commercial Real Estate Trends

• High interest rates raise cap rates.

• Office demand is declining due to WFH.

• ESG investments are growing.

• Multifamily remains strong due to affordability issues.

• Retail and industrial sectors show resilience.

How do Treasury rates impact real estate?

Higher Treasury rates increase borrowing costs and cap rates, reducing property valuations. Lower rates decrease costs, boosting values.

How do asset types influence each other?

• Office → Retail: Office activity supports urban retail demand.

• Industrial → Retail: E-commerce shifts demand to warehouses.

• Residential → Office: Nearby residential demand grows with job creation.

• Mixed-Use Developments: Success in one asset type supports others.

What is "dry powder" in real estate?

Reserved capital for opportunistic investments during favorable market conditions.

What are examples of notable deals? Be able to talk about them in specific detail

• Google’s $2.4B acquisition of Chelsea Market.

• Hudson Yards

• Hub RTP developments for mixed-use transformation.

• RAM Realty’s Development of University Place

What is the Low-Income Housing Tax Credit (LIHTC)?

A tool for financing affordable housing by providing tax credits to developers for low-income units.

Where would you invest in real estate today and why?

Mixed-use properties and adaptive reuse projects, like converting offices to residential because mixed-use properties combine residential, office, and retail spaces, making them more versatile and resilient. Adaptive reuse addresses shifting market needs, such as the decline in office demand and rising housing needs.

What factors should you consider when analyzing a market?

1. Economic fundamentals (e.g., population growth).

2. Supply-demand dynamics.

3. Demographics.

4. Infrastructure and accessibility.

5. Cap rates and pricing trends.

How would you allocate $100 million across asset types?

• 40% Multifamily: Steady cash flow, high demand.

• 30% Industrial: Growth from e-commerce trends.

• 15% Retail: Focus on grocery-anchored centers.

• 10% Alternative assets: Data centers, other tech-driven sectors.

• 5% Opportunistic: Distressed or value-add opportunities.

What would you look for in a real estate investment?

1. Market Fundamentals: Strong job growth, population trends.

2. Asset Quality: Good location, modern amenities.

3. Value-Creation Opportunities: Upside potential through capital improvements.

4. Risk-Adjusted Returns: Balanced risks and rewards.

5. Exit Strategy: Clear plan for profitable disposal.

Levered vs Unlevered IRR

Levered IRR accounts for debt financing in an investment, measuring the return on the equity portion invested, while Unlevered IRR assesses the return on the total property investment, irrespective of financing. Understanding the difference is vital for investors as it helps in evaluating the impact of leverage on investment returns. Generally, higher risk investments may offer greater potential returns, reflected in a higher IRR, making it essential to consider both types when analyzing investment opportunities.

How would a lower acquisition price impact IRR?

It would increase the IRR as the upfront investment would decrease

Cash on Cash vs Equity Multiple

EM measures the total return on an investment over its entire life, reflecting how much the initial equity has grown overall, regardless of timing. In contrast, CoC focuses specifically on the annual cash income generated, providing insights into the investment's immediate cash flow health and profitability. (the denominators are the same just different numerators)

Hudson Yards

• transformed underutilized areas into highly profitable mixed-use developments 

  • Manhattan West Towers: Brookfield Properties has appointed JLL as the exclusive leasing agent for its Manhattan West office towers.

  • 70 Hudson Yards: Related Companies plans to commence construction on a 45-story, 1.1 million-square-foot office tower named 70 Hudson Yards. This project aims to address the anticipated demand for premium office space by 2027-2028

Google Deal

In March 2018, Google made headlines by acquiring Chelsea Market in New York City for $2.4 billion. This 1.2 million-square-foot complex, located at 75 Ninth Avenue, occupies an entire city block and showcases the tech giant's interest in prime real estate. Prior to the purchase, Google leased about 400,000 square feet within the building. The acquisition expanded Google's footprint in the Chelsea neighborhood, complementing its existing headquarters and reflecting the growing trend of tech companies investing in urban properties.

University Place

• RAM Realty Advisors is a real estate investment and development firm known for its strategic projects, including the development of 900 Willow and University Place.

• 900 Willow has been developed into a luxury multi family project while university place has been developed into retail space 

• Chris Birr & Regan Thomas

HUB RTP

Hub RTP is a significant mixed-use development located in the Research Triangle Park area, encompassing 100 acres and costing $1.5 billion. It aims to create a vibrant community that integrates work, living, and recreational spaces. This project exemplifies innovative urban planning, fostering a dynamic environment that connects professional, residential, and leisure activities, enhancing the quality of life for its residents.

How has the retail sector adapted to meet changing consumer behaviors

• Enhanced in-store experiences with interactive activities and services to attract customers.

• Blending online and offline channels for seamless shopping experiences

• Incorporating mixed-use developments that combine retail, dining, and residential spaces.

Gross Potential Rent

Amount of revenue we would receive if all units were leased at asking price

List common operating expenses

Property Taxes, Insurance, Maintenance, Property Management Fee, Other

List some common capital expenses

TI’s, Leasing Commissions, Construction, Reserves

Effective Gross Revenue

Net Rental Revenue (Gross - Vacancy - Concessions - Credit Loss) + Total Other Income

In our model how do we show purchase and sale metrics

We create a column for Year 0 where we show purchase price, closing costs, and loan fees as expenses and loan proceeds as cash flow

Do we include income taxes on our model?

No because each investor will pay their own income tax not the entity that is modeling

How do we build a drop down list in excel ?

Data —> Data Validation —> Allow, List

Color Codes (Blue, Green, Black, Red)

Blue (Hardcoded Manual Input)

Green (Reference to Other Worksheet), Not used often

Black (Formula, based on other values in the sheet)

Red (Call-Out or drawing attention), also sometimes used for negative numbers

What are we doing when we are using Vlookup, Hlookup, and Index & Match

We are looking up a value in the data set based on the given criteria

When do we use the rate function

When we want to find the growth rate of an investment given the # of periods, FV and PV

Why do we get a negative number when calculating PV

Because excel assumes this is the amount we would need to INVEST or SPEND in order to get the specified future value

If you want to change it to positive just put a negative in front of PV in the formula

When do we use the FV function

When we are given a value and a rate of growth over a specified number of years this allows us to find the future value of that investment

When do we use the NPER function?

When we want to calculate how long it will take an investment to reach a specific number

Gross Potential Rent

Commercial: Market Rent/SF * Leasable Area

Multifamily: Market Rent/Unit * Number of Units

General Vacancy

Calculated as a percentage of Gross Potential Rent

Percentage Rent

Typically used in retail leases, rent owed to landlord in addition to base rent if sales exceed a specified amount

Fixed vs Natural Breakpoint

This is in reference to percentage rent, the amount sales must exceed before the retailer owes the landlord more rent than base

Fixed: If rent exceeds a specific predetermined amount

Natural: Annual Base Rent / Breakpoint Percentage

Tenant Pro Rata Share

Tenants percentage share of the total net leasable area T

Tenant SF / Net Leasable Area

Triple Net Lease

Tenant Responsible for Reimbursing Landlord for all operating expenses related to their prorata share of the space

Full Service Gross

Tenant is not responsible for reimbursing the landlord for any operating expenses

Modified Gross

Tenant is only responsible for reimbursing the landlord for SOME operating expenses

Expense Ratio

Operating Expenses / Effective Gross Revenue

Break Even Ratio

(Operating Expenses + Debt Service) / Gross Potential Revenue

Loan to Value

Loan Amount / Property Value

Loan to Cost

Loan Amount / Total Project Costs

Debt Service Coverage Ratio (DSCR)

NOI / Debt Service

Debt Yield

NOI / Loan Amount

The Loan Constant

Total Annual Loan Payments / Loan Amount L

Loan Sizing

Method used by lender to determine the maximum loan proceeds using certain loan constraints

Cap Rate

NOI / Property Value

Calculate NOI given Cap Rate and Property Value

Property Value * Cap Rate C

Calculate Property Value given NOI and Cap Rate

NOI / Cap Rate

Positive NPV

Projected cash flows will exceed our target annualized returns (discount rate) N

Negative NPV

Projected cash flows won’t exceed our target annualized returns (discount rate)

How do we know if we have positive or negative leverage

If our levered cash on cash return is greater than our unlevered cash on cash return we have positive leverage

ALSO if Cap Rate > Loan Constant

A property generates $12M in NOI annually. If the market cap rate is 6%, what’s the valuation?

$12M ÷ 0.06 = $200M

How would you evaluate a lease vs. buy decision for a tenant?

I’d start by comparing the present value of expected cash flows under each option. For leasing, that means modeling rent payments, escalations, and expenses over the lease term. For owning, I’d project purchase price, financing, operating expenses, and potential sale proceeds. The key is to compare NPVs of both options, but also factor in softer considerations like flexibility, control, and risk appetite.

How would you help a landlord position an office asset in today’s NYC market?

I’d look at comparable properties and highlight differentiators like location, amenities, and building quality. In today’s market, where there’s a flight-to-quality trend, it’s important to emphasize Class A features and build a leasing strategy that targets tenants upgrading space. Financially, I’d model different rent/tenant scenarios to show the owner how leasing decisions affect NOI and value.

Why are you specifically interested in Consulting & Agency at CBRE, instead of Capital Markets or Investment Sales?

I’m really drawn to Consulting & Agency because it’s where financial analysis meets client strategy. Capital Markets is more transactional — focusing on one-off buy/sell deals. In Consulting & Agency, you’re working directly with landlords and occupiers on long-term decisions, whether that’s how to position a building or how to structure a lease. I want to be in a role where I can build ongoing relationships, but also leverage analysis to shape strategy. From my internship at CBRE, I saw how agency and consulting teams sit at the center of those decisions, and that’s exactly the space I want to be in.

How would you help a tenant decide between renewing their lease, relocating, or buying a building?

I’d start by building a lease vs. buy model. For the lease scenarios, I’d project rent payments, escalations, and operating expenses over the lease term. For the buy scenario, I’d include the upfront purchase price, financing assumptions, operating expenses, and potential sale proceeds. I’d then discount both sets of cash flows to NPV and compare them side by side. Beyond the numbers, I’d also consider qualitative factors — for example, whether the client needs flexibility, whether a new location improves access for employees, and what level of control they want over the property.

If you were advising a landlord with a vacant Midtown office property, what steps would you take to position the asset in today’s market?

I’d start by running rent comps and occupancy comps to see how the building is positioned relative to the market. Then I’d highlight differentiators — like location, amenities, or floor plate efficiency — and use those in marketing materials. From a financial standpoint, I’d build scenarios showing how different rent levels and lease-up timelines impact NOI. In today’s market, with tenants gravitating to high-quality space, I’d recommend emphasizing Class A features and structuring flexible lease terms to attract tenants.

What’s the difference between Agency Leasing and Tenant Representation?

Agency leasing represents landlords and owners — the focus is on marketing space, finding tenants, and negotiating leases that maximize NOI and value. Tenant representation, or consulting, represents the occupier — the focus there is on negotiating the best terms for the tenant, optimizing their footprint, and aligning their real estate strategy with business goals. I think what’s unique about CBRE is how these groups collaborate to create solutions on both sides of the table.

Walk me through how you’d build a lease vs. buy model for a corporate occupier.

On the lease side, I’d model annual rent payments, escalations, and operating expenses over the lease term. On the buy side, I’d model the upfront acquisition cost, financing assumptions, property-level operating expenses, and an exit value at the end of the hold. Then I’d discount the cash flows from both scenarios to present value, compare NPVs, and also look at IRRs. Beyond the numbers, I’d factor in flexibility — leasing can provide optionality, while ownership offers control but ties up more capital.

If a client asks you for market intel on NYC multifamily, what 2–3 points would you highlight today?

I’d say first that multifamily remains one of the strongest asset classes because demand for housing is resilient. Second, while rent growth has slowed from its peak, it’s still positive and provides a hedge against inflation. Third, there are challenges: rising expenses like taxes and insurance, and regulatory pressures in rent-stabilized units. So while multifamily remains attractive compared to office, investors are carefully underwriting expenses and rent growth assumptions.

How would you determine the exit cap rate?

To determine the exit cap rate, I’d look at sales comps in the same market for similar assets, then adjust for property-specific risk and likely market conditions at exit. For example, if comparable Class A offices in Midtown are trading at 5.5–6%, I’d probably underwrite a 6% exit cap, maybe even a bit higher to stay conservative.

How do we determine the discount rate to use?

It is based on investor required return but in corporate finance the actual WACC is calculated and used

WACC

WACC = E/V⋅re​ + D/V​⋅rd​⋅(1−T)

270 Park Ave

New JP Morgan Headquarters, very important as it shows huge confidence in midtown for office (flight to quality)

5 Times Square

• Office → 1,250+ apartments. Largest adaptive reuse example.

  • One of the largest office-to-residential conversions in NYC history.

Hudson Yards West Expansion

4,000 new housing units, new office tower, public space. Moving development West