Annual vs Monthly IRR in Development

I have a question about standard practice for reporting IRR in development deals. I have seen development OMs, investor presentations, feasibility studies etc report IRR on an annual basis as opposed to monthly. However, in the first year of construction, since all/most of the equity is being deployed in the first month/few months, a monthly IRR calculation will yield a lower percentage.

If this is indeed the case, are the materials I've seen doing this "in the wrong"? Is there some understanding amongst the industry that if you broke out equity cash flow monthly, the IRR would be less?

 
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It won't let me post links here yet I guess, I checked to make sure all of the IRRs being quoted matched the annual representation

rocherealtors. com/inversiones/2017/01/RIVERFRONT-Investment_Summary_Financial .pdf pg.40

ci.mooresville. nc .us /DocumentCenter/View/2846/100-North-Church-Street-Development?bidId= pg. 19

greenhillcompanies. com/user/themes/greenhill/images/NAIOP%20Presentation%20(Legacy%20Point). pdf pg.21
(This one seems to be a masters project but should still adhere to best practices no?)

cityclerk.kcmo. org /LiveWeb/Documents/ViewAttachment.aspx?q=mI5fvqgKmWaB79Oi%2BiVgd27PAzK2bNrTc2eGnSxOX6pIZ89D%2BQvS11fCiBL6gnCDKfZiegEjp7KKyL53rDeyOvOaviTxlHXUnOcPxeTyWXk%3D pg. 13

I have also recently seen at least one other developer pitch an annual IRR to an investor. It was not rolled up.

I am inclined to think you are right, so in the above cases, are these definitely deviations from standard practice?

 

yeah i don't think anyone underwrites that way in the real world other than a gut check. Generally speaking it wouldn't make a huge difference in how you calculate IRR. but when everyone is trying "fuck the money" you get as technical as you can in calculating returns. The LP is trying to see how they can get the highest rate of return to reach the promote on their fund investors, the GP is trying to see how they can get the highest rate of return to get the promote on the LP and potentially double promote on their GP investors, and the bullwhip effect can be significant as you go further down the line.

 

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