What are the KPIs for BTR? Recently created a model for a development project and was unsure of what return metrics to show. I ultimately reported levered and unlevered cash flow yields…maybe I can bake in a recap after 10 years for illustrative IRR…open to suggestions.
Based on the most helpful WSO content, when analyzing a Build-to-Rent (BTR) project, there are several key performance indicators (KPIs) you might want to consider:
Levered and Unlevered Cash Flow Yields: You're on the right track with these. They provide a measure of the cash return you're getting on your investment.
Incremental Profit Margins: This can help you understand how much additional profit you can expect as you increase your revenue.
Return on Invested Capital (ROIC): This is a measure of how efficiently you're using your capital to generate profits.
Revenue Growth: This gives an indication of how much and how fast the project can grow.
EBITDA: This is a measure of the project's operational profitability before accounting for interest, taxes, depreciation, and amortization.
Debt Levels: This can give you an idea of the project's financial risk.
Capex: This is a measure of the investment required to maintain or grow the project.
Remember, the goal is to get an idea of what the cash flow would be like. All these financial metrics are driven towards that end. And as you suggested, you might want to consider a recap after 10 years for illustrative IRR. That could provide a long-term view of the project's potential returns.
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Make sure to add avg in-place tenant depression metric, which roughly tracks to interest rates and home price affordability.
What is that? A Google search doesn’t turn up anything useful when I search it.
Edit: lol
Based on the most helpful WSO content, when analyzing a Build-to-Rent (BTR) project, there are several key performance indicators (KPIs) you might want to consider:
Levered and Unlevered Cash Flow Yields: You're on the right track with these. They provide a measure of the cash return you're getting on your investment.
Incremental Profit Margins: This can help you understand how much additional profit you can expect as you increase your revenue.
Return on Invested Capital (ROIC): This is a measure of how efficiently you're using your capital to generate profits.
Revenue Growth: This gives an indication of how much and how fast the project can grow.
EBITDA: This is a measure of the project's operational profitability before accounting for interest, taxes, depreciation, and amortization.
Debt Levels: This can give you an idea of the project's financial risk.
Capex: This is a measure of the investment required to maintain or grow the project.
Remember, the goal is to get an idea of what the cash flow would be like. All these financial metrics are driven towards that end. And as you suggested, you might want to consider a recap after 10 years for illustrative IRR. That could provide a long-term view of the project's potential returns.
Sources: https://www.wallstreetoasis.com/forum/private-equity/thinking-like-an-investor-the-key-financial-metrics?customgpt=1, How to break into Real Estate Private Equity (w/ 0 RE Knowledge), Best way to read a CIM?
Fugit quaerat distinctio quod nostrum aliquid sed dolor. Enim sequi et quo. Recusandae a nam perspiciatis suscipit molestiae omnis et qui. Est id ea vero sapiente reprehenderit eveniet tempore.
Quia reiciendis aspernatur eaque qui perspiciatis aperiam voluptas. Atque suscipit ut iste est omnis quo. Fuga tenetur impedit eveniet aut expedita quam alias et. Qui ea ut dolorum excepturi ipsa quia voluptas. Odit quos inventore quia nisi fugit. Qui quia et facilis suscipit sint. Recusandae provident sunt molestias quasi repellendus.
Et vel velit tempore ducimus autem blanditiis. A ipsam fuga omnis voluptatem dolorem rerum. In sequi amet quasi laudantium ut ipsum consequatur.
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