The Banker is a rich film. There are many films that reflect the racial discrimination and prejudice in that special historical period in the United States. Many people have made in-depth discussions on the social injustices exposed in the film, the editing of film stories, and the interpretation and shaping of roles; this film is relatively unique What's more, the story told takes place in the financial field, and the finance involved in the film is also very interesting.
There are two big deals in this film, the first is the acquisition of Bankers Building, and the second is the acquisition of two banks in Falcon's hometown. This article only analyzes the first transaction, because it involves a lot of numbers and calculations, I believe that the analysis of this article can bring some different understandings.
The Bankers Building has 14 floors and a commercial area of 119,000 square feet. It was the tallest office building in downtown LA at that time and was known as the crown jewel of the building complex in the area.
From the previous plot, we know that all financial institutions, including banks, are stationed inside. Mid City Bank, the bank that has not waited to see Falcon, is on the first floor of the lobby.
Because of the sudden death of his former partner, Falcon was miserable by the former partner’s wife and account manager Reed, which aroused the idea of turning over and becoming the owner, and found the director of S.H.I. The squad (likes to play, Nicholas Hoult played X-men's Beast), began to buy a lot of money.
It's a pity that the little blue beast is not as good as in X-men. Although he is also very smart, he has not graduated from nine-year compulsory education in this world. Falcon has to teach basic math hand in hand. We also learned how to value the building with Teacher Falcon.
First, we must briefly introduce a very important concept that is the core element of valuation-capitalization rate, Capitalization Rate, or Cap Rate for short. You can simply understand it as rate of return. Teacher Falcon first mentioned another concept called Multiplier, which is an outdated and old concept used to calculate the cost of recovery in a few years. For example, if you spend 300,000 to buy a property, the annual net income is 30,000. Then the multiplier is 10, and the investment is recovered in 10 years. .
The capitalization rate is actually the inverse of the multiplier, 30,000/300,000=10%. Not only buying a house, but various interest rates play an important role in the valuation of various financial assets. Regarding the capitalization rate, there will be some analysis later in this article.
So with the capitalization rate, how do we value a real estate? Although there is no further explanation in the film, it is not a CFA teaching film after all, but in the mock test questions that the Falcon teacher temporarily added to the little blue beast who has been trained for 1 month, we can basically infer what elements are needed and what calculations are performed. It is possible to value a building.
This calculation process is as follows, we temporarily call it the basic valuation model, where green is the given condition of the word problem, white is the intermediate calculation step, and blue is the calculation result. It should be noted that the total annual income cannot be directly used to calculate the value. It must be adjusted with the vacancy rate, and after deducting the operating costs and obtaining the net income, the asset value can be finally obtained through the capitalization rate. Obviously, the results calculated by our model are consistent with the results in the film, and the little blue beast has graduated and hit the road.
The next step is to negotiate with the old landlord Renault. However, I need to explain two points first, because there are a lot of you and me in the negotiation process, we only model the final result in the film or the valuation that has an important impact on the plot; in addition, I am in the calculation process It is found that some numbers are slightly different from the values in the movie. The specific reason is unknown, but the large numbers are the same. For the sake of not affecting the understanding of the plot, don't care about these details.
Entering the topic, first, the old landlord gave a false shot at the beginning, said a bunch of numbers that were beneficial to him, and offered a high price.
The corresponding calculation process is as follows. There are three points to be explained here: 1. Since the negotiation between the two is based on the unit price per square foot, for the convenience of the subsequent calculation, two lines of initial conditions-unit price and area are added. The area is based on the total annual income in the above figure. /The unit price is deduced (Note: The area here is the actual calculated area, and there may be months. It is only for the convenience of calculation and is simply summarized. It has no direct relationship with the commercial area mentioned by Falcon in the introduction); 2. Because the vacancy rate was directly adjusted at the unit price level in the subsequent negotiations between the two parties, which meant that there was no need to adjust the total income, the two lines "vacancy rate" and "total annual income (after adjustment)" were deleted directly, and the same below. 3. There is a fractional discrepancy here. The valuation in the film is more than 80, which causes the final purchase price to be more than 100. The reason is unknown. If there is an expert, you can leave a message for discussion, the same below.
Our little blue beast must not ask for it. Where can you tell how much it is. Buying a house is the same as buying clothes. There is always a bargaining, so the two sides started to wrestle:
Lan: Don't talk nonsense, I know you are only 15 cents a level (square feet). Even if the average is 18 cents, (total income) is 245,592, but that is not important. Unless you show me all the lease agreements, I have to calculate it at 15 cents. Ray: 15 is too low. Blue: 15 is great, okay! Especially if you also include the vacancy rate, at least 9%! Lei: Not so much. Blue: I counted it as 12% (Note: Falcon spent a day in the evening and counted it based on the number of lights on. This DD level is almost the same as the muddy water shorting Ruixing). With such a high vacancy rate, would you be 13.5 cents per square? Lei: We can always find tenants to fill the hole. Lan: Let's even get a draw for 16 cents, right? Calculated at a capitalization rate of 10%, it is worth 1,383,000 yuan. But the capitalization rate of 10% is of course too low. The transactions I and my partner make are all 12%, which is 1,152,533 yuan.
Here, the little blue beast actually reported two valuations during the bargaining process. The calculation process is as follows:
Among them, the number calculated by 10% Cap Rate is 40 more than that in the movie. For the time being, I think it is the result of ignoring the fraction. It can be seen that through the vigorous operation of the little blue beast, the valuation was cut by more than half abruptly. The reason is that the unit price is cut, and the Cap Rate is raised, which shows the interest rate. How important it is. Increasing the Cap Rate means that investors require a higher level of income. After all, buying other properties can earn 12%; conversely, when the income and other conditions are determined, requiring an increase in the rate of return must depress the initial investment To reach. So intuitively, a high Cap Rate is beneficial to the Marvel buying team, and vice versa, it is beneficial to Lao Lei.
Closer to home, now Lao Lei is not calm, and he is starting to make tricks: Look, the risk in the city center is very low, 12% don't need it, I want 10%. The narrative of the film now returns to the preview of the pre-negotiation team.
Eagle: Lao Lei must bite the 10% Cap Rate. We absolutely can’t agree to it. He also wants a 25% premium. And other expenses, prompting sellers to trade, but 25% is really high). But you have to let the negotiations continue, so I want you to remember the valuation under the 10.5% Cap Rate, but the 25% acquisition premium is still super high.
At this time, the little blue beast's brain was not enough, and Falcon directly helped him calculate it. The calculation is as follows. The figures in the movie should erase a fraction of the valuation. According to 1,317,000, the purchase price is 1,646,250.
Since the price is still high, the Falcon design finally asked the little blue beast to give Lao Lei a multiple choice question (Neo: come again?).
Lan: If you must put this building under the 10% Cap Rate valuation, the market is so good now, we can earn 12% elsewhere, then we definitely can’t let you take the 25% premium directly Go home happily. Well, I’ll give you two paths. 11% Cap Rate gives you a 25% premium, or 10.5% Cap Rate but you can’t get 25% anymore. You can only give you an 18% premium. Pick one. Eh! You can’t let your buddy do it for you, otherwise it’s boring, knowing that you can’t do it for a while, you just choose it directly, it’s the heartbeat! (Actually, I can't count Lao Tzu. I cheated and memorized it beforehand.)
Because the little blue beast here has played with the yin and didn't report the number directly, I used the model to calculate the final purchase price of the two options as follows:
Through calculation, it is obvious that the former is more expensive and more beneficial to Lao Lei, but it is a pity that Lao Lei can't count it. He made a wrong bet and chose the latter.
Lan: You took 17,000 less.
Lao Lei still admired him, although he didn't know that the little blue beast actually cheated, so he asked what the valuation he chose, and answered 1,554,060. Again, if the internal valuation is calculated by Falcon and the fraction is erased, that is, calculated at 1,317,000, the purchase price figures are consistent.
Finally put on a big table, perfect!
At this point, this transaction is basically over. The movie performed very well in this trading link. There were confrontations in the business field, the tip of the needle against the magnificence, and the secret tricks of careful thinking, which made people stunned. We can see that behind the success of various transactions, efforts are needed to obtain sufficient information, such as the basic elements of accurate rent and vacancy rate, and targeted tricks on the spot. For example, both parties must catch Cap Rate. This is the key to the valuation impact. Finally, I also hope that this analysis of mine can bring more understanding and aftertaste to movie viewers.
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