Interviewer view · keep this screen to yourself

A Singapore logistics REIT refinances its debt at a higher 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.

Quaystone Logistics REIT (fictional, listed in Singapore) earns net operating income (NOI) of SGD 200 million a year. It has SGD 1,500 million of debt at 3 percent, and management and trust costs of SGD 15 million a year. The debt must be refinanced at 5.5 percent, and buyers now value warehouses at a 5.5 percent cap rate instead of 5 percent. What happens to funds from operations (FFO), which funds the payout, and to debt as a share of portfolio value, which Singapore caps at 50 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.

Two effects of higher rates: on cash income and on asset values
- Income: FFO = NOI minus interest minus management and trust costs
- Value: portfolio value = NOI divided by the cap rate
- Gearing: debt divided by portfolio value, against the 50 percent cap
- Options: sell assets, issue new units, or raise NOI

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: Interest today
What a strong candidate does: 3 percent of SGD 1,500 million.
Interest at 3 percent (SGD million): 1,500 × 0.03 = 45
Step 2: FFO today
What a strong candidate does: NOI minus interest minus management and trust costs.
FFO today (SGD million): 200 - 45 - 15 = 140
Step 3: FFO after refinancing
What a strong candidate does: Interest at 5.5 percent is SGD 82.5 million.
FFO after refinancing (SGD million): 200 - 1,500 × 0.055 - 15 = 103
Step 4: Fall in FFO
What a strong candidate does: The drop as a share of today's FFO.
Fall in FFO (fraction): (140 - 102.5) ÷ 140 = 0.2679
Step 5: Portfolio value at the new cap rate
What a strong candidate does: NOI divided by 5.5 percent, against SGD 4,000 million at 5 percent.
Portfolio value at 5.5 percent (SGD million): 200 ÷ 0.055 = 3,636
Step 6: Debt as a share of value
What a strong candidate does: SGD 1,500 million over the new value, against 37.5 percent before.
Gearing after the cap rate move (fraction): 1,500 ÷ (200 ÷ 0.055) = 0.4125

The recommendation to listen for

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

Quaystone should plan for a payout about 27 percent lower and start cutting debt now, because refinancing at 5.5 percent takes FFO from SGD 140 million to SGD 102.5 million while gearing rises from 37.5 to 41.25 percent with no change in rent. First, interest is the only line that moved, so cost cuts elsewhere cannot fill a SGD 37.5 million gap. Second, at 41.25 percent the REIT is still under the 50 percent cap, so it has time to sell an older warehouse or two near book value and repay debt. The risk is selling into a weak market, or issuing units below their asset value, which hurts existing unitholders. As a next step, list the leases expiring in the next two years and their rent gap to market, because raising rents on renewal is the cheapest way to rebuild FFO.

Risks a strong answer names: A further rise in cap rates would cut values again; Units may trade well below asset value, making new equity expensive.

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.

Next: another case in Partner mode

Swap roles and run the next case, so you both practise answering and scoring.

Run the next case: Lifting a London sandwich line's output Choose another case