12:17 Back AltInvAssignment... Q Part C. The Option Value of a Profit-Sharing Scheme for the Manager of a Real Estate Private Equity Portfolio: The Project Deutschland Case Study. (20 points) Using the Excel supplement of the Project Deutschland case study, evaluate the upside potential for Tiberius under the profit-sharing scheme contained in the Veritas proposal. Specifically, suppose that Veritas' investment amount of 755.5 million goes to pay DB for the A tranche, so that Tiberius gets no upfront payment from Veritas for its equity and debt holdings. Further, suppose that Tiberius accepts the profit-sharing proposal of Veritas: 100% to Veritas up to a 15% IRR . 80/20% to Veritas/Tiberius from 15% to 20% IRR 70/30% to Veritas/Tiberius thereafter Base management fee of 0.75%. 1. Calculate the amount that Tiberius should expect to receive after 3 years as a compensation for performance and in management fees under the base case scenario. Motivate the incentives for Tiberius and whether management fees should be included in the proposal. 2. Next, consider the upside potential to the base case projections. Specifically, modify the following elements of Tiberius' business plan for property stabilization given in Exhibit 5 of the case and estimate the impact of each change on the expected payouts for Tiberius: a. Exit month: exit 6 months earlier than anticipated in the base case, for all properties. b. Exit NOI: Consider exit NOI figures 5% higher than anticipated, across the board. c. Exit Cap rate: Compress the exit cap rates by 100 bps, across the board. 3. Given the outcome of your analysis in point 2, discuss the added optionality value to Tiberius. Would it warrant the sale of its stakes in the portfolio for no upfront payment? 12:17 Back AltInvAssignment... Q Part C. The Option Value of a Profit-Sharing Scheme for the Manager of a Real Estate Private Equity Portfolio: The Project Deutschland Case Study. (20 points) Using the Excel supplement of the Project Deutschland case study, evaluate the upside potential for Tiberius under the profit-sharing scheme contained in the Veritas proposal. Specifically, suppose that Veritas' investment amount of 755.5 million goes to pay DB for the A tranche, so that Tiberius gets no upfront payment from Veritas for its equity and debt holdings. Further, suppose that Tiberius accepts the profit-sharing proposal of Veritas: 100% to Veritas up to a 15% IRR . 80/20% to Veritas/Tiberius from 15% to 20% IRR 70/30% to Veritas/Tiberius thereafter Base management fee of 0.75%. 1. Calculate the amount that Tiberius should expect to receive after 3 years as a compensation for performance and in management fees under the base case scenario. Motivate the incentives for Tiberius and whether management fees should be included in the proposal. 2. Next, consider the upside potential to the base case projections. Specifically, modify the following elements of Tiberius' business plan for property stabilization given in Exhibit 5 of the case and estimate the impact of each change on the expected payouts for Tiberius: a. Exit month: exit 6 months earlier than anticipated in the base case, for all properties. b. Exit NOI: Consider exit NOI figures 5% higher than anticipated, across the board. c. Exit Cap rate: Compress the exit cap rates by 100 bps, across the board. 3. Given the outcome of your analysis in point 2, discuss the added optionality value to Tiberius. Would it warrant the sale of its stakes in the portfolio for no upfront payment