Mitch Hale’s Post

An entire commercial property degree fits in a single spreadsheet. Comment for the Excel. 7 topics 1. Building design and massing Enter the site dimensions and the planning requirements like: - Maximum height - Floor space ratio (FSR) Add in your setbacks. And you have your gross and net area calculation. 2. Market research The point of this section is: - Justify rents with comparables - Prove up cap rates with recent sales - Understand tenant demand through a location analysis 3. Tenancy schedule This is where all your revenue assumptions go. Commercial properties look at revenue on a tenant-by-tenant basis. Gross rent - outgoings = net rent Net rent/cap rate = end value 4. Feasibility analysis Once we have quantified all the data we need, it's time to figure out if the project makes money. Main principals: - Programme - Revenue - Costs - Financing - Cash Flow - Waterfall 5. Valuation After we know the project works today as a development, we need to figure out the returns if we hold onto it. Key parts: - Assumptions - Discounted Cash Flow - Outputs (Value as of today) - Cash flow - Returns 6. Scenario analysis It's important to understand the returns of your project given likely future scenarios. Construction costs and interest rates are going up. Make sure you model these scenarios to understand your future equity requirements and that you raise that equity now. Two types of scenario analysis: - Sensitivity analysis - Break-even analysis 7. Performance summary and outputs This section compares your assumptions vs the comparables. Evaluate the project performance (Revenue - costs = profit) Calculate your IRR (annual profit) And figures out how much your rent needs to fall before you break even (lose your profit) --- Credit:Mitch Hale

Commercial Real Estate Excel model which generates the cash flows of the project as well as for equity investors and calculates the relevant metrics (debt yield, debt service coverage ratio, cap rates, and interest coverage ratio). The model structure is as follows: Manual: main conventions used in the model. Inputs (in yellow whatever can be amended as an assumption): detailed inputs for inflation, occupancy rates, new tenants and leases expiry, property management fees, annual operating expenses, taxes, capital expenditures, improvements, brokers commissions, cap rates, selling costs, loan to value ratios, loan issuance fees, etc… Calculations: This is where all calculations are performed. Maximum potential gross revenue is calculated followed by gross income, expenses, capital expenditures and improvements, debt schedule amortization, and sources and uses of funds. Outputs: everything is aggregated here into the relevant cash flow projections for the property, the project, and the equity shareholders. Ratios & Charts: on the ratios tab you will find all the relevant KPIs summarized and on the charts tab the most important metrics are displayed through graphs. Checks: A dedicated worksheet that makes sure that everything is working as it should! Maximize returns in the commercial real estate market with this comprehensive Excel model template. Forecast financial performance, analyze investment opportunities, and optimize strategies for success in commercial real estate investments. 🏬📈💼 #CommercialRealEstate #Investment #FinancialModel

Commercial Real Estate Excel model which generates the cash flows of the project as well as for equity investors and calculates the relevant metrics (debt yield, debt service coverage ratio, cap rates, and interest coverage ratio). The model structure is as follows: Manual: main conventions used in the model. Inputs (in yellow whatever can be amended as an assumption): detailed inputs for inflation, occupancy rates, new tenants and leases expiry, property management fees, annual operating expenses, taxes, capital expenditures, improvements, brokers commissions, cap rates, selling costs, loan to value ratios, loan issuance fees, etc… Calculations: This is where all calculations are performed. Maximum potential gross revenue is calculated followed by gross income, expenses, capital expenditures and improvements, debt schedule amortization, and sources and uses of funds. Outputs: everything is aggregated here into the relevant cash flow projections for the property, the project, and the equity shareholders. Ratios & Charts: on the ratios tab you will find all the relevant KPIs summarized and on the charts tab the most important metrics are displayed through graphs.

Revenue recognition in the real estate industry can be complex due to the nature of long-term contracts, the timing of revenue recognition, and the variability in project completion. Generally, revenue recognition occurs over time as the project progresses, and control of the real estate asset transfers to the buyer. Here are key considerations: 1. Percentage of Completion Method (POC):This method recognizes revenue proportionate to the degree of completion of the project. Revenue is recognized based on the percentage of costs incurred to date compared to the total estimated costs of the project. 2. Completion of Performance Obligations:Revenue is recognized when control of the property transfers to the buyer, typically upon completion and delivery of the property. This may involve milestones such as obtaining regulatory approvals or substantial completion of construction. 3. Sales of Units/Spaces:Revenue from the sale of individual units or spaces within a real estate development is recognized when control transfers to the buyer. This could occur at different stages of the project, depending on contractual terms and the level of customization. 4. Variable Consideration:Consideration such as incentives, penalties, or contingent payments may impact the timing or amount of revenue recognized. These should be estimated and included in the transaction price when determining revenue recognition. 5. Financing Component:If the buyer receives financing from the developer, the consideration received may include a financing component. This component should be separated from the sale price and recognized over time using the effective interest method. 6. Disclosure Requirements:Real estate developers are typically required to provide extensive disclosures about the nature of their contracts, significant judgments and estimates, and the impact of revenue recognition on financial statements. Given the complexities involved, real estate companies need to carefully assess their contracts, consider the specific guidance provided by accounting standards (such as Ind AS 115 or IFRS 15), and ensure compliance with applicable regulations and industry practices. Additionally, professional judgment and ongoing monitoring are essential to accurately recognize revenue and provide transparent financial reporting.

Morning Missile: Financial Modeling You’re looking at the feasibility of developing a (100) unit ground-up construction multifamily project to be built in Anywhere, USA. Now you must use a financial model to analyze expected outcomes of the project in order to ascertain the risks and opportunities: -Base rent revenue: Are you anticipating you’ll deliver the product into a strong market where the vacancy rate will be very low, or a weak one in which you’ll have to provide several months of free rent and other concessions to attract tenants? -Will you have any ancillary income such as parking, health club, dog wash, bike lockers, etc.? -Your initial operating expenses should be relatively stable for the first several years due to all new HVAC system, elevators, roof, plumbing, etc., but as these items age, you need to account for capital expenditures for repairs. What about increasing taxes, insurance, and utilities? What about paint and carpet as tenants come and go? -How long do you anticipate you’ll hold onto the building before selling? Do you need do prepare a pro forma that’s 3, 5, or 10 years of projections?

Are outdated Excel sheets holding your projects back? Discover how builders can streamline lease management by ensuring lease data extraction accuracy and avoid costly errors. Read how CRE Lease Matrix can transform your lease management approach- https://bit.ly/4dE5gmb #CRELeaseMatrix #LeaseManagement #LeaseManagementIndia #Lease #Data #Blog #Builders #Developers #CommercialRealEstate #India #LeaseManagementSoftware #LeaseManagement

Understanding Markup vs. Margin: The Key to Boosting Your Construction Project's Cash Flow Most real estate investors know the pain of poor cash flow all too well. But did you know that a deeper understanding of markup and margin in your construction projects could be the game-changer you need? Markup: Your Pricing Strategy Markup refers to the percentage added to your project's costs to determine the selling price. It's calculated by dividing the profit by the cost. A higher markup means higher revenue, but be cautious — set it too high, and you might price yourself out of the market. Margin: Your Profitability Indicator Margin, on the other hand, is the percentage of the selling price that is your profit. It's a clear indicator of your project's financial health. Understanding your margin is crucial for making informed decisions about pricing and discounts. Why It Matters: Improved Cash Flow: Knowing your markup helps in setting prices that cover costs and generate profit, leading to better cash flow. Better Decision Making: Understanding margin allows for better budgeting and financial planning, ensuring projects are profitable and sustainable. Strategic Pricing: Balancing markup and margin helps in competitive pricing, ensuring you're attractive to buyers without sacrificing profit. Remember, it's not just about increasing numbers; it's about understanding them to make strategic decisions that boost your project's profitability and cash flow. Question for you: How do you currently manage markup and margin in your projects, and how has it impacted your cash flow?

- The Construction and Development Financial Model is a comprehensive tool for analyzing construction projects. - It allows for detailed financial projections, including project costs, revenue sources, and financing options. - With this model, users can easily assess the financial viability of their construction project and make informed decisions. - The model includes customizable inputs for various construction cost categories, revenue streams, and debt and equity financing options. - It is ideal for real estate developers, construction companies, and investors looking to evaluate construction projects. - #construction #development #financialmodeling #realestate #investment #constructioncosts #projectrevenue #financingoptions

- The Construction and Development Financial Model is a comprehensive tool for analyzing construction projects. - It allows for detailed financial projections, including project costs, revenue sources, and financing options. - With this model, users can easily assess the financial viability of their construction project and make informed decisions. - The model includes customizable inputs for various construction cost categories, revenue streams, and debt and equity financing options. - It is ideal for real estate developers, construction companies, and investors looking to evaluate construction projects. - #construction #development #financialmodeling #realestate #investment #constructioncosts #projectrevenue #financingoptions

A recent survey from the Federation of Master Builders (FMB) found that only 12% of members had a ‘high degree of certainty’ in the planning process. Insufficient resourcing and poor communication in planning departments were cited as major contributors for slowing down the planning system and leading to additional expense. Read the full article over on PBC Today & BIM Today: https://bit.ly/3RoF4Cn #UKConstruction #BuildingWarranty