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Ground-Up Development

Model an S-curve construction draw schedule with capitalized interest, defend the stabilized NOI from its leasing drivers, value the finished asset, then refinance the construction loan with a permanent takeout and solve for yield-on-cost, development profit, equity multiple and levered development IRR. Every line must be linked, not pasted.

REPE · Advanced · about 95 minutes · 26 guided steps

Lesson outline

Capitalization

  1. Step 1: Cost Basis
  2. Step 2: Construction Loan
  3. Step 3: Developer Equity

Construction Schedule

  1. Step 4: Total Draw $
  2. Step 5: Loan Draw $
  3. Step 6: Equity Draw $
  4. Step 7: Loan: Opening Balance
  5. Step 8: Loan: Capitalized Interest
  6. Step 9: Loan: Ending Balance

Stabilized NOI Build

  1. Step 10: Potential Gross Rent
  2. Step 11: Effective Gross Income
  3. Step 12: Operating Expenses
  4. Step 13: Stabilized NOI

Stabilization & Profit

  1. Step 14: Total Capitalized Interest
  2. Step 15: Total Development Cost
  3. Step 16: Stabilized Value
  4. Step 17: Yield on Cost
  5. Step 18: Development Profit
  6. Step 19: Profit Margin on Cost

Permanent Loan Takeout

  1. Step 20: Permanent (Takeout) Loan
  2. Step 21: Construction Loan Payoff
  3. Step 22: Net Refinance Proceeds
  4. Step 23: Residual Equity Value

Equity Returns

  1. Step 24: Equity Cash Flow
  2. Step 25: Equity Multiple
  3. Step 26: Levered Development IRR