I’ve been doing straight acquisitions for about 3.5 years now (value add, core+, some debt originations) and want to transition to a developer that looks at almost everything product type wise (industrial, condos, multi, office). How different (if at all) is modeling from regular LP acquisitions to development modeling? I’ve also never seen a development model, are there any resources as to where I can find some online to run through?
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You can think about the development model in three parts imo - the construction period, the lease up period, and stabilized period/exit. The last two parts you are probably familiar with. The first part will be new - you need to come up with a construction budget/timeline and model that out for the first 12-24mo or whatever. After the construction is done you’ll have revenue start flowing in. Costs during construction are typically capitalized into the budget.
My Brief Comment, is that it can be as complicated or as simple as you want. They are typically broken down into 2 types, just the cash flow and proforma, or the budget to actual model layered into the proforma. Now this kind of model can be a 5-6 tab to 30 tab. I’ve personally seen Toll Broa models and they have a tab here development GL Code.
It will ultimately depend on what use you need it for.
Do you work for a developer? What would a model test of yours look like in terms of on the spectrum of complexity you outlined
I'm a few years removed from dvelopment, I'm now on the debt side as development slowed during COVID in NYC. I would just assume a standard 10 year DCF with debt draws. so you just want to make sure you understand how debt and equity draws down on construction costs. Other than that standard model, probably not equity waterfalls.
I work at an Institutional shop where we are mostly the LP on development deals. We have a standard internal development model that is rather simple. Really the only specific “construction/development” parts, are a more streamlined hard/soft budget tab and then a high level construction timeline. A developers model is going to be way more granular in costs and schedule tracking.
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