pro forma development - amazon s3 · pro forma development roger staiger, frics stage capital, llc...

Pro Forma Development

Roger Staiger, FRICS Stage Capital, LLC

(202) 640-8912 [email protected]

Disclaimer All slides in this presentation are the intellectual property of Stage Capital, LLC and Roger Staiger, FRICS. Use of these slides is only permitted when presented by Roger Staiger, FRICS or a designee of Stage Capital, LLC. Further distribution is strictly prohibited.

Roger Staiger, FRICS [email protected] 2 of 35

Shameless Self Promotion Ø Literally wrote the

book on Financial Modelling

Ø Pre-sale available on Amazon.com ($171.00)

Ø Available May 2015 Ø Publisher: Routledge


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Structure Ø  4-Part Sessions: 2-hours each

Ø  Summary Page (1st half) [Complete] Ø  Amortization Schedule (page) [Complete] Ø  Pro Forma Page Ø  Pulling it all together

Ø  Bottom half of Summary Page

Roger Staiger, FRICS [email protected]

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Pro Forma Model Ø  4-unit apartment building Ø  MS Excel 2007/10 Ø  Focused on BASIC Modeling skills Ø  Result: completed scalable, modular,

and portable pro forma model


Model Summary Ø 4-Apartment units (Pretax analysis) Ø Vacancy Rate Ø Rental Escalation Ø Equity Sourcing Ø Debt Sourcing

Ø Debt Expense, term, rate, Type (Amortizing, Interest Only)

Ø Closing Expenses Roger Staiger, FRICS [email protected] 6 of 35

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Structure/Logic Flow


Summary Page Pro Forma Page (s3)

Amortization Page (s2) Inputs Section

(s1)

Analysis (s4)

Complete (S1)

Complete (S2)

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Inputs Page


Sources 549,000 Opera,ons Units I/P Finance I/P

Equity 99,000 Unit 1 -‐ One Bedroom per mont 1,500 Tranche 1

Investor 1 80,000 Unit 2 -‐ Two Bedroom per mont 2,000 Principal 400,000

Investor 2 19,000 Unit 3 -‐ Two Bedroom per mont 2,000 Term (years) 20

Debt 450,000 Unit 4 -‐ Two Bedroom per mont 2,000 Interest Rate 8%

Tranche 1 400,000 Interest Only

Tranche 2 50,000 Vacancy 1 5.00% OriginaOon Fee 1%

Vacancy 2 5.00%

Uses 549,000 Vacancy 3 5.00% Tranche 2

Purchase Price 350,000 Vacancy 4 5.00% Principal 50,000

RenovaOon 165,000 Term (years) 20

Legal 3,500 Rental Escl 2% Interest Rate 15%

Bank 2,000 Interest Only

Personal 1,500 Management per Net Rev 5% OriginaOon Fee 1%

IDC 24,700 Repairs per Net Rev 5%

Tax Escrow 1,300 Janitor per year 2600 Valua,on I/P

Finance Cost 4,500 Heat per year 2130 Cap Rate 10.9%

Electricity per year 1000 Sales Expense 6%

Surplus/(Deficit) -‐ Water per year 1200 Discount Rate 10%

Property Tax per year 7800

Insurance per year 2600 Sales Period Year 10

Expense Escl 2%

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Inputs Page (Pro Forma)


Equity

Debt

Uses

Revenue

Expenses

Finance

Valuation/ Sale

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Pro Forma


Uses

Debt

Equity = CF0

Rev

enue

Exp

Fnan

Rev

enue

Exp

S Exp

Princ

T+1

NI

CFT

NI NI

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Amortization Page


Tranche 1 Tranche 2

Principal 400,000 Principal 50,000

Interest 8.00% Interest 15.00%

Term 20 Term 20

I/O I/O

# BoP Principal Interest Payment EoP Annual # BoP Principal Interest Payment EoP Annual

1 400,000 679 2,667 3,346 399,321 1 50,000 33 625 658 49,967

2 399,321 684 2,662 3,346 398,637 2 49,967 34 625 658 49,933

3 398,637 688 2,658 3,346 397,949 3 49,933 34 624 658 49,899

4 397,949 693 2,653 3,346 397,256 4 49,899 35 624 658 49,864

5 397,256 697 2,648 3,346 396,559 5 49,864 35 623 658 49,829

6 396,559 702 2,644 3,346 395,857 6 49,829 36 623 658 49,793

7 395,857 707 2,639 3,346 395,150 7 49,793 36 622 658 49,757

8 395,150 711 2,634 3,346 394,439 8 49,757 36 622 658 49,721

9 394,439 716 2,630 3,346 393,723 9 49,721 37 622 658 49,684

10 393,723 721 2,625 3,346 393,002 10 49,684 37 621 658 49,647

11 393,002 726 2,620 3,346 392,276 11 49,647 38 621 658 49,609

12 392,276 731 2,615 3,346 391,545 40,149 12 49,609 38 620 658 49,571 7,901

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Pro Forma Page


Periods 1 2 3 4 5 6 7 8 9 10 11 12

Revenue Year 1 1 1 1 1 1 1 1 1 1 1 1

Unit1 Rent 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500

Unit2 Rent 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

Unit3 Rent 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

Unit4 Rent 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

Total Rent 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500 7,500

Vacancy 1 75 75 75 75 75 75 75 75 75 75 75 75

Vacancy 2 100 100 100 100 100 100 100 100 100 100 100 100

Vacancy 3 100 100 100 100 100 100 100 100 100 100 100 100

Vanancy 4 100 100 100 100 100 100 100 100 100 100 100 100

Total Vacancy 375 375 375 375 375 375 375 375 375 375 375 375

Total Revenue 7,125 7,125 7,125 7,125 7,125 7,125 7,125 7,125 7,125 7,125 7,125 7,125

Expenses

Management 356 356 356 356 356 356 356 356 356 356 356 356

Repairs 356 356 356 356 356 356 356 356 356 356 356 356

Janitor 217 217 217 218 218 218 219 219 220 220 220 221

Heat 178 178 178 178 179 179 179 180 180 180 180 181

Electricity 83 83 84 84 84 84 84 84 84 85 85 85

Water 100 100 100 101 101 101 101 101 101 102 102 102

Property Tax 650 651 652 653 654 655 657 658 659 660 661 662

Insurance 217 217 217 218 218 218 219 219 220 220 220 221

Total Expenses 2,157 2,159 2,161 2,164 2,166 2,169 2,171 2,174 2,176 2,178 2,181 2,183

Net Opera,ng Income 4,968 4,966 4,964 4,961 4,959 4,956 4,954 4,951 4,949 4,947 4,944 4,942

Pro Forma Page Completed (Bottom Section)


Debt

Tranch 1 3,346 3,346 3,346 3,346 3,346 3,346 3,346 3,346 3,346 3,346 3,346 3,346

Tranch 2 658 658 658 658 658 658 658 658 658 658 658 658

Tranche 1 4,004 4,004 4,004 4,004 4,004 4,004 4,004 4,004 4,004 4,004 4,004 4,004

Sales Proceeds

Sales Price -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐

Sales Expense -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐

Principal Repay -‐ Tranche 1 -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐

Principal Repay -‐

Tranche 2 -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐

Net Sales Proceeds -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐

Reversion FCF -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐

Opera,ng FCF 964 962 959 957 955 952 950 947 945 942 940 937

Total FCF (99,000) 964 962 959 957 955 952 950 947 945 942 940 937

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Analysis/Valuation


Valua,on: Year 1 2 3 4 5 6 7 8 9 10

Revenue Rental 90,000 91,800 93,636 95,509 97,419 99,367 101,355 103,382 105,449 107,558 Vacancy 4,500 4,590 4,682 4,775 4,871 4,968 5,068 5,169 5,272 5,378

Total Revenue 85,500 87,210 88,954 90,733 92,548 94,399 96,287 98,213 100,177 102,180

Expense Management 4,275 4,361 4,448 4,537 4,627 4,720 4,814 4,911 5,009 5,109 Repairs 4,275 4,361 4,448 4,537 4,627 4,720 4,814 4,911 5,009 5,109 Janitor 2,624 2,677 2,731 2,786 2,842 2,900 2,958 3,018 3,079 3,141 Heat 2,150 2,193 2,237 2,282 2,329 2,376 2,423 2,472 2,522 2,573 Electricity 1,009 1,030 1,050 1,072 1,093 1,115 1,138 1,161 1,184 1,208 Water 1,211 1,236 1,260 1,286 1,312 1,338 1,365 1,393 1,421 1,450 Property Tax 7,872 8,031 8,193 8,358 8,527 8,699 8,875 9,054 9,237 9,423

Insurance 2,624 2,677 2,731 2,786 2,842 2,900 2,958 3,018 3,079 3,141

Total Expenses 26,040 26,564 27,098 27,644 28,200 28,767 29,346 29,937 30,539 31,154

Net Opera,ng Income 59,460 60,646 61,856 63,090 64,348 65,631 66,941 68,276 69,638 71,026

Debt Tranche 1 40,149 40,149 40,149 40,149 40,149 40,149 40,149 40,149 40,149 40,149 Tranche 2 7,901 7,901 7,901 7,901 7,901 7,901 7,901 7,901 7,901 7,901

Total Debt 48,050 48,050 48,050 48,050 48,050 48,050 48,050 48,050 48,050 48,050

Net Sales Proceeds -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ 308,167

Reversion FCF -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ -‐ 308,167 Opera,ng FCF 11,410 12,596 13,806 15,040 16,298 17,582 18,891 20,226 21,588 22,977

Total FCF (99,000) 11,410 12,596 13,806 15,040 16,298 17,582 18,891 20,226 21,588 331,144

DSCR 1.24 1.26 1.29 1.31 1.34 1.37 1.39 1.42 1.45 1.48 Minimum 1.24

Cash-‐on-‐Cash 11.53% 12.72% 13.95% 15.19% 16.46% 17.76% 19.08% 20.43% 21.81% 23.21% Minimum 11.53%

PV Reversion 118,812 54.64% PV Opera,ng 98,616 45.36% Total 217,428 CF0 99,000 NPV 118,428 IRR 22.42%

Inputs Ø Sources

Ø Equity Ø Investor 1 Ø Investor 2

Ø Debt Ø Tranche 1 (source) Ø Tranche 2 (source)


Inputs (cont’d) Ø Uses

Ø Purchase Price Ø Renovation Cost Ø Legal Expense

Ø Bank Ø Personal

Ø Interest During Construction (IDC) Ø Tax Escrow Ø Finance Cost


Inputs - Operations Ø Units 1 – 4 Ø Vacancy 1 – 4 Ø Rental Escalation Ø Expenses

Ø Management, Repairs, Janitor, Heat, Electricity, Water, Property Tax, Insurance

Ø Expense Escalation


Inputs - Finance Tranche 1 Ø Principal Ø  Term(years) Ø  Interest Rate Ø  Interest Only Ø Origination Fee

Tranche 2 Ø Principal Ø  Term(years) Ø  Interest Rate Ø  Interest Only Ø Origination Fee


Inputs - Valuation Ø Capitalization Rate Ø Sales Expense Ø Discount Rate Ø Sale Period (timing)


Scalability

The benefit(s) of successful pro forma modeling

Scalability (Incorporating the Waterfall)


Ø Separation of cash flows according to owners’ agreement

Ø Separation of cash flows by yield, NOT by order Ø Order: Bank vanilla example

Ø “Pref” Rate: Preference Rate Ø Generally provided to Investor Ø Acts as a coupon rate, e.g. Preferred Equity

Waterfall Diagram


Pari Passu

“Pref” Rate15% good proxy for “Pref”1st Tier

Non Pari Passu split

2nd Tier 2nd Tier rate

N # Tiers

Nth Tier rate

Final Tier

Nth Tier

Example – Final DistributionX % to Promote to Sponsor(1-‐X%) distribution Pari Passu

Waterfall Logic


15% IRR

20% IRR

20% + IRR

Sponsor10%

Sponsor20%

PromoteSponsor40%

Investor90%

Investor80%

Investor90%

Sponsor10%

Waterfall Addition (100% Scalable)


Summary Page

Pro Forma Page (s3)

Amortization Page (s2)

Inputs Section (s1)

Analysis (Project) (s4)

Waterfall Page (Investor) (s5)

Stochastic – Monte Carlo (100% Scalable)


Summary Page

Pro Forma Page (s3)


Inputs Section (s1)



Stochastic Page (s6)

Assumptions Section

Forecast Section

Forecast – Distribution (Stochastic)


Construction Draw Page (100% Scalable)


Summary Page

Pro Forma Page (s3)


Inputs Section (s1)




Assumptions Section

Forecast Section

Construction Draw Page (s7)

1.  Construction costs (Renovation) in “Uses” 2.  IDC (Interest During Construction) in “Uses”

Construction Draw Page (100% Scalable) (cont’d)

Ø Draw Page Ø Purchase Ø Hard Costs Ø Soft Costs Ø Interest During Construction (IDC)

Ø Circular Reference?

Ø Cash In/Cash out Section


Construction Draw Page (100% Scalable) (cont’d)

Ø Tranche 1 Ø Construction Loan

Ø Loan-to-Value Ø Loan-to-Cost

Ø Tranche 2 Ø Permanent Loan Ø Value Ø Loan-to-Value Ø Date


Unit Characteristics (“n” Units) (100% Scalable)


Summary Page

Pro Forma Page (s3)

Amortization Page (s2) Inputs Section (s1)




Assumptions Section

Forecast Section


Unit Characteristics page (s8)

1.  List of “n” units, e.g. one-, two-bedroom 2.  Rent Roll 3.  Summarized on (S1)

Unit Characteristics (“n” Units) (100% Scalable)

Ø Rent Roll Ø Individual Unit information Ø Input Page (main pro forma)

Ø Summary by unit Ø Studio: 10; Avg SF 800; Avg Rent/SF 2.00 Ø One-Bedroom: 20; Avg SF 950; Avg Rent/SF 2.05


Portfolio Analysis (100% Applicable!!!)


Summary Page

Pro Forma Page (s3)

Amortization Page (s2) Inputs Section (s1)




Assumptions Section

Forecast Section


Unit Characteristics page (s8) Pro Forma 1

(File 1)

Portfolio Input Page (s9)

Portfolio Analysis (100% Applicable!!!)



Assumptions Section

Forecast Section

Pro Forma 1 Portfolio Input Page

Pro Forma 2

Pro Forma 3

Pro Forma “n”

Consolidated Output for

Portfolio

ULI – Staiger (Upcoming Seminars)

1)  Four part 2-hour series: How to build a pro forma model (Current Pro Forma Webinar)

2)  Two part 2-hour series: How to develop a waterfall

3)  Four part 2-hour series: Advanced Pro Forma Development (Part Deux)

4)  Four part 2-hour series: Hotel Pro Forma Design and Development


Questions?

Let’s Begin (see memorandum for detailed steps of

process at conclusion)

pro forma development - amazon s3 · pro forma development roger staiger, frics stage capital, llc...

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