Interviewer view · keep this screen to yourself

Valuing an office building with a cap rate

You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.

Case timer

00:00

Target length:

1. Read the prompt aloud

Read it slowly, then pause. Let the candidate ask questions before they structure.

A REIT in Singapore owns an office building with net operating income (NOI) of SGD 5 million a year. Similar buildings trade at a 7 percent cap rate. What is it worth? If interest rates rise and cap rates move to 8 percent, what is it worth, and by how much does the value change in percent?

2. Answers to clarifying questions

This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.

3. A model structure

Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.

Value = NOI divided by cap rate
- Same NOI, different cap rates

4. The working, step by step

Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.

Step 1: Value at 7 percent
What a strong candidate does: 5 divided by 0.07.
Value at 7 percent (SGD million): 5 ÷ 0.07 = 71.43
Step 2: Value at 8 percent
What a strong candidate does: 5 divided by 0.08.
Value at 8 percent (SGD million): 5 ÷ 0.08 = 62.5
Step 3: Change in value
What a strong candidate does: New value compared with old.
Change in value (percent): (5 ÷ 0.08 - 5 ÷ 0.07) ÷ (5 ÷ 0.07) × 100 = -12.5

The recommendation to listen for

At the end, say: "The CEO walks in. What is your recommendation?"

The REIT should plan for a lower valuation, because a rise in the cap rate from 7 to 8 percent cuts the building's value by 12.5 percent, from about SGD 71.43 million to SGD 62.5 million, with no change in rent. First, value is the SGD 5 million of NOI divided by the cap rate. Second, this means value moves with interest rates even when the building performs well. The risk is debt: if the REIT has borrowed heavily against the building, its equity falls even more. As a next step, test loan terms against the lower value.

Score the candidate

Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.

This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?

Structuring

1: No clear structure, or a memorized framework that does not fit the problem.
3: A sensible structure, but with some overlap, a gap, or no clear priority.
5: A structure built for this problem, with no overlap and no gaps, a stated hypothesis, and a clear first step.

Math

1: Frequent errors, no units, or needed heavy help to finish.
3: Right answers but slow or messy working, or one error caught late.
5: Accurate and clearly narrated, with units, a sense check, and what the number means.

Exhibit reading

1: Read the chart aloud without finding the number that matters.
3: Found the key number but gave only part of the so-what.
5: Pulled the right number quickly and said what it means for the case.

Synthesis

1: Summarized what was done, with no clear answer.
3: Gave an answer, but with weak reasons or no next step.
5: Answer first, then two or three reasons with numbers, the main risk, and next steps.

Communication

1: Hard to follow: long silences, no signposting.
3: Clear most of the time, with some rambling.
5: Calm and concise, signposted each step, and checked in with the interviewer.

Total

0 out of 25

Score all five criteria to see the band and the feedback template.