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Development & Construction Model presents the case where a property with multiple residential units is constructed and subsequently rented for several years before the property is sold. The model generates cash flows and a project and equity basis and also calculates the relevant metrics (cash on cash, Internal Rate of Return, net present value, loan to value, debt yield, coverage ratio, and DSCR). The financing options for the project include equity funding from investors and an amortizing loan.
So, a quick overview of the model, in the contents tab you can see the structure of the model, and by clicking on any of the headlines to be redirected to the relevant worksheet.
On the manual tab, you can feed the general information for the model such as model name, responsible, a timeline of the model and date, and currency conventions.
Additionally, there is a description of the color-coding of the model in the same tab. Inputs are always depicted with a yellow fill and blue letters, call up (that is direct links from other cells) are filled in light blue with blue letters while calculations are depicted with white fill and black characters.
There is also a color coding for the various tabs of the model. Yellow tabs are mostly assumptions tabs, grey tabs are calculations tabs, blue tabs are outputs tabs (that is effectively results or graphs) and finally, light blue tabs are admin tabs (for example the cover page, contents, and checks).
Moving on to the inputs tab, you can adjust the various assumptions of the model based on the specifications and requirements of your business (in yellow whatever can be amended as an assumption). So effectively you can adjust a set of inputs such as construction costs (Land & Related Costs, Administrative Costs, Permits, and Other, Hard Costs, Building Operations, Closing Costs, Finance Costs), along with debt and equity financing, monthly rental revenue for each unit, percentage vacancy per unit, rent escalation rates, management expenses, refurbishments, utilities, and insurance, as well as property taxes. Afterward, you can set debt financing assumptions (interest rates, tenor in years, loan type, and debt issuance costs), and valuation assumptions such as the exit year when the property will be sold, the exit cap rate and selling costs, as well as the discount rates, used (project and equity).
On the calculation tab, all calculations are performed. The calculations follow the same logical flow as in the inputs tab. As already mentioned, no inputs from the user are needed here, as all the inputs are fed in the yellow cells on the inputs tab mainly. So, in this tab revenues, expenses, financing flows, and free cash flows are calculated.
On the Outputs tab, everything is aggregated into a cash flow statement, together with free cash flow on a project basis as well as on an equity basis. The same is done on a yearly basis on the next Output tab.
The most important investment metrics are presented on the ratios tab where you will find all the relevant KPIs summarized.
Additionally, on the charts tab, a series of charts are presented: sources and uses, construction costs, revenues, expenses, net operating income, debt service, debt balance, debt service coverage ratio, debt yield, internal rate of returns, net present values, cash on cash and cap rate evolution.
Finally, the checks tab where the most critical checks are aggregated. Whenever you see an error message on any page, you should consult this page to see where the error is coming from.
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Source: Best Practices in Integrated Financial Model, Real Estate Excel: Construction / Development Financial Model Excel (XLSX) Spreadsheet, Big4WallStreet
ABOUT THE AUTHOR: BIG4WALLSTREET
We help small and midsize businesses' leaders with their strategic problems by creating or improving financial models, implementing tools to drive efficiency, performance, and better decision making.
With over a decade of experience in Financial & Business Modeling / Planning, Performance & Analysis, we have developed strong business understanding across diverse industries (Energy, Shipping, Manufacturing, Retail, Oil & Gas, Infrastructure, Food & Beverages, Agriculture, Healthcare, Telecoms, Real Estate, Construction & Hospitality), as well as strong capabilities across a range of financial modeling solutions.
We are one of the few financial modelers to be certified from both the Corporate Finance Institute (Financial Modeling & Valuation Analyst, Business Intelligence and Data Analyst), and the Financial Modeling Institute (Advanced Financial Modeler, Certified Financial Modeler). We build integrity and trust by providing high-quality tailor-made solutions to our clients.
Furthermore all these models can be tailor made upon your request in order to meet any special requirements for your projects should you not find something that suits you.
Big4WallStreet has published 38 additional documents on Flevy.
This business document is categorized under the function(s): Integrated Financial Model
It applies to Real Estate
File Size: 703.3 KB
Related Topic(s): Integrated Financial Model Real Estate
Purchase includes lifetime product updates. After your purchase, you will receive an email to download this document.
Initial upload date (first version): Nov 11, 2022
Most recent version published: Nov 11, 2022
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