Sensitivty Table
Transcript
Welcome to this video. In the video, I am going to cover the sensitivity table in the ARGUS Multi Family Model.
Specialized Sensitivity Table
I can see the sensitivity table is massive. A lot of people would go to the Data tab, What-If Analysis, and Data Table to create their sensitivity table. However, this specialized sensitivity table is different than a regular data table in many ways. Let’s get into it.
Row Header and Column Header
The row header is the Exit Cap Rate, which I will input 5%. The column header is the Going-in Cap Rate. I will go back to the Input tab. Copy the going-in cap rate in the Other Assumptions Section. Going back to the Return Sensitivity Table tab. Paste it. I can see all the exit cap rates are the same so I will input 0.5% for the Exit Cap Rate Incremental. Now the Exit Cap Rate ranges from 3.5% to 6.5%. I will also input 0.5% for the going-in cap rate incremental.
How to Read the Table
Click the Update Table button. A progress bar pops up. Because of the massive calculation the computer is doing, it might take up to 15 minutes to update the sensitivity table. I am going to fast forward a little bit.
The update finishes and I can start reading the table. I am going to zoom out a little bit. I can see the table consists of 49 blocks. There are 7 blocks in the first row and each block corresponds to a different Exit Cap Rate but they share the same 2.86% Going-in Cap Rate. Likewise, there are 7 blocks in the first column and each block corresponds to a different Going-in Cap Rate but they share the same 3.5% Exit Cap Rate. Therefore, the first block stands for the returns with a 3.5% Exit Cap Rate and a 2.86% Going-in Cap Rate. The second block stands for the returns with a 4% Exit Cap Rate and a 2.86% Going-in Cap Rate. I can keep reading the blocks this way. Let’s zoom in a little bit. I can see each block is made up of 9 cells. The block row header is Deal Level, GP, and LP. The block column header is IRR, Multiple, and Net Profit. In the first block, the 9.3% is the deal level IRR and the 18.29% is the GP IRR.
To be more precise, the 9.3% is the deal level IRR with 3.5% Exit Cap Rate and 2.86% Going-in Cap Rate. The 18.29% is the GP IRR with 3.5% exit cap rate and 2.86% going-in cap rate. Let’s go to the block in the middle. With a 5% Exit Cap Rate and an 4.36% Going-in Cap Rate, The GP IRR is about 29.43% and GP Multiple is about 11.30x. The LP IRR is about 14.71% and LP Multiple is about 3.32x. The best-case scenario is the left-bottom block where the going-in cap rate is 5.86% and the exit cap rate is 3.5%. The worst-case scenario is the top-right block where the going-in cap rate is 2.86% and the exit cap rate is 6.5%. This table provides comprehensive return analysis on different going-in cap rates and exit cap rates.
I have finished the sensitivity table section in the ARGUS Multi Family Model. Thanks for watching this video. I will see you in the next one.