On November 7th and 8th, 58 real estate undergraduate students participated in the second annual Real Estate Private Equity Club Case Competition, co-sponsored by Harrison Street and Capital One. Students were tasked with valuing a local Madison student housing project using only information provided in the case materials. The Real Estate Private Equity Club assigned students to 15 teams of three to four based on academic year, classes completed, and internship experience. The teams then acted as the LP, Fifth Quarter Capital, a private equity company looking to buy out the existing equity partner in a recently stabilized student housing project with the GP, Alvarez Partners. They had nine days to build an underwriting model, presentation, and executive summary for a team of judges comprised of Harrison Street and Capital One employees, UW Faculty, and UW students.
Creating the Model
The subject property of the case was a brand-new amenity-rich student housing asset in Madison that was 100% leased around market rents. The main point of contention was if demand for student housing could keep up with the recent and future influx of supply in the Madison market. Students analyzed how the asset competed in the market and modeled rent growth, expense growth, debt assumptions, sale assumptions, and purchase price to calculate their LP returns.
Most teams decided to invest in the deal. They cited the continued demand in the Madison market for student housing led by the attraction of the University of Wisconsin-Madison. The influx of supply did not deter them because of data suggesting Madison is still severely short on beds. These assumptions led to the deal penciling and the IRR falling within the LP’s requirement.
Matthew Bertram, a junior studying real estate and finance, participated in the case competition. His team, the first-place team, took an uncommon approach. They considered the influx of beds coming into Madison as well as why they thought the location of the subject property wasn’t ideal for students. They utilized this research to decipher a going-in cap rate of about 30 bps over current market assumptions. Other various assumptions were also created using this research and led to an LP IRR that was below the expected range with all three debt options. In the end, his team suggested that Fifth Quarter Capital do not invest in the deal as they believed their underwriting, while still being conservative, did not show returns that would reach investor desires.
Presentations
The first round of presentations was on Thursday, November 7th. Groups and judges were split into three rooms of five groups each. Students gave 15-minute presentations, followed by ten minutes of answering questions from the judges. Most questions regarded the group’s purchase price assumption, view on supply, how competitive the property is in the market, and value creation strategy.
The judges then scored the each group’s Excel model, executive summary, presentation slide deck, and presentation skills to determine who would make it to the Friday competition. Each judge remarked on how well each group thought through the case and presented. On Thursday night, Harrison Street and Capital One hosted a reception at the Fluno Center for all competitors and announced the four finalist teams.
Finalists
On Friday, the finalists gathered once again, this time in front of all the judges and other competitors. The pressure was high as other students and team mentors watched, but each finalist group had an exceptionally strong presentation. Three of the four finalist teams recommended investing in the deal, while one team recommended not to invest. After much deliberation, the judges announced the top teams.
Congratulations to all the finalists of the case competition:
- First Place ($3,000): Alex Lortscher, Matthew Bertram, Jackson Antonow, Evan Mahan
- Second Place ($2,000): Brenna Paul, Niko Czarnecki, Collin Gudgeon, Aidan Fischer
- Third Place ($1,000): Alex Sviatoslavsky, William Castillo, Macy Verhasselt, Kush Patel
- Fourth Place: Jackson Trotter, Giovanni Russo, Daniel Perez-Pineda
Takeaways
Participating in the case competition was a fantastic learning experience for all students involved. The case competition was a great way to build collaboration skills and apply technical analysis as learned in the classroom.
Thank you to all who were involved with the second annual Real Estate Private Equity Club Case Competition, co-sponsored by Harrison Street and Capital One. Special thanks to Harrison Street who generously donated $12,000 so this case competition could become a reality. The Real Estate Private Equity Club, university faculty, sponsors, and students did a wonderful job creating the case materials and organizing the events.
Thank You to the Judges!
- Bethany Corbae, Harrison Street
- Tiffany Holznecht, Capital One
- Mark Eppli, Graaskamp Center, Wisconsin School of Business
- Sean Casey, Harrison Street
- Rochelle Probst, Capital One
- Aidan McCarthy, Student, Wisconsin School of Business
- Joe Curtain, Harrison Street
- Jessica Ravitch, Capital One
- Ryan Sheena, Student, Wisconsin School of Business
- Brian Mutchler, Harrison Street Matthew Poulos, Capital One