Introduction To Real Estate Financial Analysis Using Excel (A)

HARVARD UNIVERSITY
GRADUATE SCHOOL OF DESIGN
GSD 5103: PUBLIC AND PRIVATE DEVELOPMENT

Intro to Real Estate Financial Analysis Using Excel (A)
•  Verde Lofts Outcome
•  Formatting
•  Pro Forma Architecture
•  Given & Calculated Assumptions
•  Financial Functions
•  Absolute References & Named Cells
•  X-Ray Vision Mode
© Kristen Hunter 2016
INTRODUCTION
VERDE LOFTS: REAL ESTATE FINANCIAL ANALYSIS

USING EXCEL
•  Using the Verde Lofts Excel Worksheet on Course Site:

•  Calculate Assumptions
•  Year 1 Setup
•  Year 2 Setup Adjustments
•  Reference: “Verde Lofts Excel Solution” file on Canvas
shows each completed step on a separate tab

VERDE LOFTS OUTCOME
BARTLETT SQUARE CONDOMINIUMS

VERDE LOFTS OUTCOME

VERDE LOFTS OUTCOME

FORMATTING
FORMATTING SUGGESTIONS
When Building Your Own Worksheets:

•  Columns Must Be Wide Enough to Display Numbers
•  Use Whole Dollar Amounts
•  Place Negative Numbers in Parentheses
•  Use Commas When Values ≥ 1,000

FORMATTING
PAGE SETUP
•  Orientation
•  Scale

FORMATTING
NUMERIC FORMATTING
Size column widths so all numbers are visible
PRO FORMA 0 1 2 3
GROSS INCOME
Market-Rate Apartments $249,000 ######## $264,164
Affordable Apartments $34,913 $35,960 $37,039
Retail Space $103,600 ######## $109,909
Subtotal $387,513 ######## $411,112
PRO FORMA 0 1 2 3
GROSS INCOME
Market-Rate Apartments $249,000 $256,470 $264,164
Affordable Apartments $34,913 $35,960 $37,039
Retail Space $103,600 $106,708 $109,909
Subtotal $387,513 $399,138 $411,112

FORMATTING
NUMERIC FORMATTING
Cash Flow Formatting:

•  Currency
•  0 decimal places
•  (Negative numbers)

FORMATTING
NUMERIC FORMATTING
Return Metric Formatting:

•  Percentage
•  2 decimal places

FORMATTING
NUMERIC FORMATTING
Integer Formatting:
Display commas

FORMATTING
NUMERIC FORMATTING
Rounding Functions:
ROUND
ROUNDUP =ROUND__(NUMBER, Num_Digits)
ROUNDDOWN Number Can be Equation
MROUND Up/Down Forces Direction
Useful for # Units, Parking

FORMATTING
NUMERIC FORMATTING
Rounding Functions:
ROUND
ROUNDUP
ROUNDDOWN
MROUND = (NUMBER, Multiple)
Number Can be Equation
Rounds to Nearest Multiple

FORMATTING
FORMAT PAINTING
PRO FORMA 0 1 2 3 4 5
GROSS INCOME
Market-Rate Apartments $249,000
Affordable Apartments $34,913
Retail Space $103,600
Subtotal $387,513
VACANCY
(Residential Vacancy) ($17,035)
(Retail Vacancy) ($10,360)
ADDITIONAL INCOME
Parking Fees $38,400
Effective Gross Income $398,518
Procedures:
Highlight Reference Area
Click on Format Brush in Menu Bar
Select Area to Apply Formatting
FORMATTING
PRINTING
Highlight Area to Print
Print: Selection
Select Suitable
Paper Size

FORMATTING
PRINTING
For Presentations:
•  Select Area
•  File: Save As
•  Format: PDF
•  Choose: Selection
•  Insert PDF

YEAR 1 SETUP
PRO FORMA ARCHITECTURE
OPERATING CASH FLOWS
ASSUMPTIONS
RETURN MEASURES
NET PROCEEDS
OFF-SHEET CALCULATIONS
FROM SALE

YEAR 1 SETUP
1 OPERATING CASH FLOWS
ASSUMPTIONS
RETURN MEASURES
NET PROCEEDS
FROM SALE

YEAR 1 SETUP
2 OPERATING CASH FLOWS
ASSUMPTIONS
RETURN MEASURES
NET PROCEEDS
FROM SALE

YEAR 1 SETUP
ASSUMPTIONS
RETURN MEASURES
NET PROCEEDS
FROM SALE 3 OFF-SHEET CALCULATIONS

YEAR 1 SETUP
ASSUMPTIONS
RETURN MEASURES
4
NET PROCEEDS
FROM SALE

YEAR 1 SETUP
ASSUMPTIONS
5 RETURN MEASURES
NET PROCEEDS
FROM SALE

YEAR 1 SETUP
ASSUMPTIONS OFF-SHEET CALCULATIONS
NET PROCEEDS
OPERATING CASH FLOWS FROM SALE
RETURN MEASURES

ASSUMPTIONS
ASSUMPTIONS:
DEVELOPMENT COSTS CAPITAL STRUCTURE
Development Cost/SF $150 LTV 65%
Development Cost $3,000,000 Equity $1,225,000
Land Cost $500,000 Debt $2,275,000
Total Development Cost $3,500,000
Term 30
Rate
Payment
5.40%
($154,808)
Input All Given Assumptions
PROGRAMMING INCOME
2-Bedroom Apartments 8 Market-Rate 1BR Units 5
1-Bedroom Apartments 5 Market-Rate 1BR Rent $1,750
Market-Rate 2BR Units 6
Residential Square Footage 16,300 Market-Rate 2BR Rent $2,000
Retail Square Footage 3,700
Gross Square Footage 20,000 Affordable 2BR Units 2
Area Median Income $83,125
Number of Parking Spaces 16 AMI % 70%
Affordable Income $58,188
% Income Allocated to Rent 30%
Affordable 2BR Rent $1,455
Retail Rent/SF $28

Parking Fee/Space $200
Income Growth Rate 3%
DEPRECIATION EXPENSES
Residential Dep. Basis $2,445,000 Operating Expense/SF $6.50
Residential Dep. Recovery Per. 27.5 Real Estate Taxes/SF $2.50
Residential Annual Depreciation ($88,909) Replacement Reserve/SF $1.00
Retail Depreciable Basis $555,000 Expenses Growth Rate 2.5%

Retail Dep. Recovery Per. 39.0
Retail Annual Depreciation ($14,231)
RATES
Residential Vacancy 6% Ordinary Income Tax 35%
Retail Vacancy 10% Depreciation Recapture 25%
Capital Gains 15%
Cap Rate @ Year 1 6.5%
Cap Rate @ Sale 6.9%
Sale Expenses % 5%

ASSUMPTIONS
ASSUMPTIONS:
Land Cost $500,000 Debt $2,275,000
Term 30
Rate
Payment
5.40%
($154,808)
PROGRAMMING INCOME
2-Bedroom Apartments
8
5
Market-Rate 1BR Units
Market-Rate 1BR Rent
5
$1,750
Determine & Perform Additional
Residential Square Footage
Retail Square Footage
16,300
3,700
6
$2,000 Calculations Needed
Retail Rent/SF $28


RATES
Capital Gains 15%
Sale Expenses % 5%

ASSUMPTIONS
ASSUMPTIONS:
Land Cost $500,000 Debt $2,275,000
Term 30
Rate
Payment
5.40%
($154,808)
PROGRAMMING INCOME
8
5
5
$1,750
Determine & Perform Additional
16,300
3,700
6
$2,000 Calculations Needed
Affordable 2BR Rent
Retail Rent/SF
$1,455
$28
CELLS SHADED IN YELLOW DENOTE
CALCULATED ASSUMPTIONS

RATES
Capital Gains 15%
Sale Expenses % 5%

ASSUMPTIONS
DEVELOPMENT COSTS
Development Cost/SF $150
CAPITAL STRUCTURE
LTV 65% HOW TO ADD IN EXCEL:
Land Cost $500,000 Debt $2,275,000
Term 30 = SUM (Cell1: Cell2) RANGE
Rate 5.40%
Payment ($154,808)
PROGRAMMING
2-Bedroom Apartments 8
INCOME
= SUM (Cell1,Cell2)

5
16,300
$1,750
6
$2,000
= SUM (Cell1 + Cell2) ITEMIZED
Gross Square Footage
3,700
20,000 Affordable 2BR Units
Area Median Income
2
$83,125
= Cell1 + Cell2
Retail Rent/SF $28


RATES
Capital Gains 15%
Sale Expenses % 5%

ASSUMPTIONS
DEVELOPMENT COSTS
CAPITAL STRUCTURE
Land Cost $500,000 Debt $2,275,000
Rate 5.40%
Payment ($154,808)
PROGRAMMING
INCOME
= SUM (Cell1,Cell2)

5
16,300
$1,750
6
$2,000
3,700
Area Median Income
2
$83,125
= Cell1 + Cell2
HOW TO MULTIPLY IN EXCEL:
Retail Rent/SF $28
Income Growth Rate 3% = Cell1 * Cell2


RATES
Capital Gains 15%
Sale Expenses % 5%

ASSUMPTIONS
DEVELOPMENT COSTS
CAPITAL STRUCTURE
Land Cost $500,000 Debt $2,275,000
Rate 5.40%
Payment ($154,808)
PROGRAMMING
INCOME
= SUM (Cell1,Cell2)

5
16,300
$1,750
6
$2,000
3,700
Area Median Income
2
$83,125
= Cell1 + Cell2
Retail Rent/SF $28

Residential Dep. Recovery Per.
Residential Annual Depreciation

27.5
($88,909)
Real Estate Taxes/SF
Replacement Reserve/SF
$2.50
$1.00
HOW TO DIVIDE IN EXCEL:
Retail Depreciable Basis
Retail Dep. Recovery Per.
$555,000
39.0
Expenses Growth Rate 2.5%
= Cell1 / Cell2
RATES
Capital Gains 15%
Sale Expenses % 5%

ASSUMPTIONS
DEVELOPMENT COSTS
CAPITAL STRUCTURE
Land Cost $500,000 Debt $2,275,000
Rate 5.40%
Payment ($154,808)
PROGRAMMING
INCOME
= SUM (Cell1,Cell2)

5
16,300
$1,750
6
$2,000
3,700
Area Median Income
2
$83,125
= Cell1 + Cell2
Retail Rent/SF $28

Residential Dep. Recovery Per.
Residential Annual Depreciation

27.5
($88,909)
Real Estate Taxes/SF
Replacement Reserve/SF
$2.50
$1.00
HOW TO DIVIDE IN EXCEL:
Retail Depreciable Basis
Retail Dep. Recovery Per.
$555,000
39.0
Expenses Growth Rate 2.5%
= Cell1 / Cell2
RATES
HOW TO USE EXPONENTS IN EXCEL:
Capital Gains 15%
= Cell1 ^ n
Sale Expenses % 5%

ASSUMPTIONS
CAPITAL STRUCTURE PMT FUNCTION:

LTV 65%
Equity
Debt
= PMT (RATE, NPER, PV, FV, TYPE)
Term 30
Rate 5.40%
Payment
RATE = Interest Rate
NPER = Number of Periods (Loan Term)
CAPITAL STRUCTURE PV = Present Value (Loan Amount)
LTV 65%
Equity $1,225,000
Debt $2,275,000
Term 30
Rate 5.40%
Payment ($154,808)

ASSUMPTIONS

LTV 65%
Equity
Debt
Term 30
Rate 5.40%
Payment
FV = Future Value
Not needed unless the mortgage loan is
CAPITAL STRUCTURE
not fully amortizing
LTV 65%
Equity $1,225,000
Debt $2,275,000
Term 30
Rate 5.40%
Payment ($154,808)

ASSUMPTIONS

LTV 65%
Equity
Debt
Term 30
Rate 5.40%
Payment
TYPE = When Payments are Made:
(1) Beginning of Period
CAPITAL STRUCTURE (0) End of Period is the default setting
LTV 65%
no input is required
Equity $1,225,000
Debt $2,275,000
Term 30
Rate 5.40%
Payment ($154,808)

ASSUMPTIONS
PRACTICE EXERCISE:
CAPITAL STRUCTURE
LTV 65%
DEBT SERVICE PAID MONTHLY
Equity $1,225,000
Debt $2,275,000 = PMT (RATE / 12, NPER * 12, PV)
Term 30
Rate 5.40%
Payment ($12,775)
DEBT SERVICE: MONTHLY PAYMENT SCHEDULE
If Debt Service is paid monthly, how much is the payment? ($12,775)
How much will you pay in Debt Service annually?
What will the Outstanding Principal be at the End of Year 1?
What is the new Amortization amount at the End of Year 1?

ASSUMPTIONS
PRACTICE EXERCISE:
CAPITAL STRUCTURE
LTV 65%
DEBT SERVICE PAID MONTHLY
Equity $1,225,000
Debt $2,275,000 = PMT (RATE / 12, NPER * 12, PV)
Term 30
Rate 5.40% Annual Debt Service = PMT * 12
Payment ($12,775)
How much will you pay in Debt Service annually? ($153,298)
What will the Outstanding Principal be at the End of Year 1?

YEAR 1 SETUP
PRO FORMA 1 GROSS INCOME

GROSS INCOME
Market-Rate Apartments
Affordable Apartments
$249,000
$34,913
Residential = # OF UNITS * RENT * 12
Subtotal $387,513 Retail = SF * Rent
VACANCY
Subtotal = SUM (Market-Rate Apartments :
ADDITIONAL INCOME
Parking Fees $38,400 Retail Space)
EXPENSES
(Operating Expenses) ($105,950)
(Real Estate Taxes) ($40,750)
(Replacement Reserve) ($20,000)
(Total Expenses) ($166,700)
NET OPERATING INCOME $231,818
Debt Service ($154,808)
CASH FLOW AFTER FINANCING $77,010

YEAR 1 SETUP
PRO FORMA 1 VACANCY

GROSS INCOME
$249,000
$34,913
= Gross Income * — Vacancy Rate
Retail Space
Subtotal
$103,600
$387,513
To anchor reference to Vacancy %,
after clicking on cell reference:
VACANCY
MAC ⌘+T
Windows F4
ADDITIONAL INCOME
Effective Gross Income $398,518 ABSOLUTE VS. RELATIVE ⌫
CELL REFERENCES:
EXPENSES
(Real Estate Taxes) ($40,750) Relative: Excel will automatically adjust
references by row & column when you
cut and paste

Absolute: Use $ to anchor a reference
to a particular cell, column, or row

YEAR 1 SETUP
PRO FORMA 1 VACANCY

GROSS INCOME
$249,000
$34,913
Retail Space
Subtotal
$103,600
$387,513
VACANCY
MAC ⌘+T
Windows F4
ADDITIONAL INCOME
Anchoring References: ⌫
EXPENSES
(Real Estate Taxes) ($40,750) Named Cells
Designates a Cell by Chosen Name
Rather than Column/Row Address

Has the Same Effect as Using $

YEAR 1 SETUP
PRO FORMA 1 VACANCY

GROSS INCOME
$249,000
$34,913
Retail Space
Subtotal
$103,600
$387,513
VACANCY
MAC ⌘+T
Windows F4
ADDITIONAL INCOME
Anchoring References: ⌫
EXPENSES
(Real Estate Taxes) ($40,750) Named Cells
Use Unique Names for Cell
Addresses, No Spaces or Special
Debt Service ($154,808) Characters

YEAR 1 SETUP
PRO FORMA 1 VACANCY

GROSS INCOME
$249,000
$34,913
Subtotal $387,513 Anchoring References: ⌫
VACANCY
(Residential Vacancy) ($17,035) Named Cells
ADDITIONAL INCOME
EXPENSES
DEVELOPMENT COSTS
Development Cost $3,000,000
Debt Service ($154,808) Land Cost $500,000
CASH FLOW AFTER FINANCING $77,010 Total Development Cost $3,500,000

YEAR 1 SETUP
PRO FORMA 1 VACANCY

GROSS INCOME
$249,000
$34,913
Subtotal $387,513 Anchoring References: ⌫
VACANCY
(Residential Vacancy) ($17,035) Named Cell
ADDITIONAL INCOME
EXPENSES
If You There is an Error in the Cell Name
Click on the Insert Menu è Select Name
è Select Define è Delete or Edit Name

YEAR 1 SETUP
PRO FORMA 1 EFFECTIVE GROSS INCOME

GROSS INCOME
Retail Space
$34,913
$103,600
= Gross Income Subtotal + (Vacancy)
Subtotal $387,513 + Additional Income
VACANCY
ADDITIONAL INCOME
EXPENSES

YEAR 1 SETUP
PRO FORMA 1 EXPENSES

GROSS INCOME
$249,000
$34,913
= Residential SF * — $ Operating Expense
Subtotal $387,513 = Residential SF * — $ Real Estate Taxes
VACANCY
= GSF * — $ Replacement Reserve
ADDITIONAL INCOME
Effective Gross Income $398,518 TOTAL EXPENSES = SUM (Operating
EXPENSES
Expenses : Replacement Reserve)

YEAR 1 SETUP
PRO FORMA 1 NET OPERATING INCOME

GROSS INCOME
Affordable Apartments $34,913
Retail Space $103,600 = Effective Gross Income + (Total Expenses)
Subtotal $387,513
VACANCY
ADDITIONAL INCOME
EXPENSES

YEAR 1 SETUP
PRO FORMA 1 DEBT SERVICE

GROSS INCOME
Affordable Apartments $34,913 = Payment Calculated in Assumptions
Subtotal $387,513
VACANCY
To anchor reference, after clicking on
(Retail Vacancy) ($10,360) cell reference:
ADDITIONAL INCOME
MAC ⌘+T
Windows F4
EXPENSES

YEAR 1 SETUP
PRO FORMA 1 CASH FLOW AFTER FINANCING (CFAF)

GROSS INCOME
$249,000
$34,913
= NOI + (Debt Service)
Subtotal $387,513
VACANCY
ADDITIONAL INCOME
EXPENSES

YEAR 1 SETUP
OFF-SHEET CALCULATIONS:
AMORTIZATION
AMORTIZATION 1
Beginning of Year Outstanding Principal $2,275,000 When Debt Service is Paid Annually
End of Year Outstanding Principal ($2,243,042)
we can easily compute the Interest and
Amortization, but this becomes more
Amortization $31,958
labor-intensive when Debt Service is
paid monthly.

YEAR 1 SETUP
AMORTIZATION
AMORTIZATION 1
Beginning of Year Outstanding Principal $2,275,000 When Debt Service is Paid Annually
we can easily compute the Interest and
Amortization, but this becomes more
labor-intensive when Debt Service is
paid monthly.
We can simplify this process by using

the FV (Future Value) Function to
automatically compute Outstanding
Principal.

YEAR 1 SETUP
AMORTIZATION
AMORTIZATION 1
Beginning of Year Outstanding Principal $2,275,000 End of Year Outstanding Principal =

FV (RATE, NPER, PMT, PV, TYPE)
RATE = Interest Rate in Assumptions

(Anchor Reference)
NPER = Number of Payments to Date
PMT = Payment Calculated in
Assumptions (Anchor
Reference)
PV = Loan Amount Calculated in
Assumptions (Anchor Reference)

YEAR 1 SETUP
AMORTIZATION
AMORTIZATION 1
Beginning of Year Outstanding Principal $2,275,000 End of Year Outstanding Principal =

FV (RATE, NPER, PMT, PV, TYPE)
NPER = Number of Payments to Date
Reference the Year Number at the top

of the column as the NPER to allow the
Number of Payments to adjust
automatically each year

YEAR 1 SETUP
AMORTIZATION
AMORTIZATION 1
Beginning of Year Outstanding Principal $2,275,000 AMORTIZATION =

Difference Between Beginning of Year
and End of Year Outstanding Principal

YEAR 1 SETUP
CAPITAL STRUCTURE
PRACTICE EXERCISE:
LTV 65% DEBT SERVICE PAID MONTHLY
Equity $1,225,000
Debt $2,275,000
= PMT (RATE / 12, NPER * 12, PV)
Term 30
Rate 5.40%
Payment ($12,775)
= FV (RATE / 12, NPER * 12, PMT, PV)
AMORTIZATION
Beginning of Year Outstanding Principal
1
$2,275,000
NPER = Years to Date
What will the Outstanding Principal be at the End of Year 1? ($2,243,787)

YEAR 1 SETUP
CAPITAL STRUCTURE
PRACTICE EXERCISE:
LTV 65% DEBT SERVICE PAID MONTHLY
Equity $1,225,000
Debt $2,275,000
= PMT (RATE / 12, NPER * 12, PV)
Term 30
Rate 5.40%
Payment ($12,775)
= FV (RATE / 12, NPER * 12, PMT, PV)
AMORTIZATION
Beginning of Year Outstanding Principal
1
$2,275,000
NPER = Years to Date
What will the Outstanding Principal be at the End of Year 1? ($2,243,787)
What is the new Amortization amount at the End of Year 1? $31,213

YEAR 1 SETUP
TAXABLE INCOME
TAXABLE INCOME
Cash Flow After Financing $77,010
Amortization $31,958 CASH FLOW AFTER FINANCING =

Replacement Reserve $20,000 CFAF Calculated Above
Depreciation ($103,140)
AMORTIZATION = Amortization
Taxable Income $25,828
Calculated Above
REPLACEMENT RESERVE =
— Replacement Reserve calculated in
Expenses

YEAR 1 SETUP
TAXABLE INCOME
TAXABLE INCOME
Amortization $31,958 DEPRECIATION = (Residential

Replacement Reserve $20,000 Depreciation) + (Retail Depreciation)
Calculated in Assumptions
(Anchor References)
DEPRECIATION To anchor reference, after clicking

Residential Dep. Basis $2,445,000 on cell reference:
Residential Dep. Recovery Per. 27.5
Residential Annual Depreciation ($88,909) MAC ⌘+T
Windows F4
Retail Depreciable Basis $555,000

YEAR 1 SETUP
TAXABLE INCOME
TAXABLE INCOME
Amortization $31,958 TAXABLE INCOME =

Replacement Reserve $20,000 SUM (CFAF : Depreciation)

YEAR 1 SETUP
NET OPERATING INCOME $231,818 TAX PAYMENT =
Debt Service ($154,808) = Taxable Income (Off-Sheet)

CASH FLOW AFTER FINANCING $77,010 * — Ordinary Income Tax Rate
(in Assumptions, ANCHOR)
Tax Payment ($9,040)
Formula Automatically Adjusts for Applied

CASH FLOW AFTER TAXES $67,970
Passive Losses
TAXABLE INCOME
Ordinary Income Tax 35%

Depreciation Recapture 25%
Capital Gains 15%

Replacement Reserve $20,000

YEAR 1 SETUP
NET OPERATING INCOME $231,818 CASH FLOW AFTER TAXES (CFAT)
Debt Service ($154,808) = CFAF + (Tax Payment)


YEAR 1 SETUP
RETURN ON TOTAL ASSETS (ROTA)

RETURN MEASURES 0
= NOI Year 1 (Above) / TDC (Assumptions)

RETURN ON TOTAL ASSETS (ROTA) 6.6%
RETURN ON EQUITY (ROE) 5.5%

YEAR 1 SETUP
AFTER-TAX RETURN ON EQUITY (ROE)

RETURN MEASURES 0
= CFAT Year 1 (Above)

RETURN ON TOTAL ASSETS (ROTA) 6.6% / Equity Invested (Assumptions)
RETURN ON EQUITY (ROE) 5.5%

YEAR 1 SETUP
CAPITALIZED VALUE
$3,566,427 YEAR 1 CAPITALIZED VALUE
= NOI Year 1 (Above)
/ Cap Rate @ Year 1 (Assumptions)
How does this differ from ROTA?

YEAR 2 SETUP
PRO FORMA 1 INCOME & EXPENSES

GROSS INCOME
$249,000
$34,913
= YEAR 1 VALUE * (1 + GROWTH RATE)
Subtotal $387,513
VACANCY
To anchor growth rate reference to
(Retail Vacancy) ($10,360) Assumptions, after clicking on cell
ADDITIONAL INCOME reference:
MAC ⌘+T
EXPENSES Windows F4

YEAR 2 SETUP
PRO FORMA 1 INCOME & EXPENSES

GROSS INCOME
$249,000
$34,913
= YEAR 1 VALUE * (1 + GROWTH RATE)
Subtotal $387,513
VACANCY
Formula Consistency:
To Avoid Year 2 Adjustments
ADDITIONAL INCOME
Effective Gross Income $398,518 Base Amount * (1 + Escalation) ^ Year — 1
EXPENSES

YEAR 2 SETUP
INCOME & EXPENSES
AMORTIZATION 1 2
Beginning of Year Outstanding Principal $2,275,000 $2,243,042
End of Year Outstanding Principal ($2,243,042) ($2,209,359) YEAR 2 BEGINNING OF YEAR
Amortization $31,958 $33,683 OUTSTANDING PRINCIPAL =
— End of Year Outstanding
Principal Year 1

YEAR 2 SETUP
PRO FORMA 0 1 2
ALL OTHER ITEMS CAN BE COPIED
GROSS INCOME
Market-Rate Apartments $249,000 $256,470
& PASTED FROM YEAR 1 WITHOUT
Retail Space
$34,913
$103,600
$35,960
$106,708
ADJUSTMENT
Subtotal $387,513 $399,138
VACANCY
(Residential Vacancy) ($17,035) ($17,546)
(Retail Vacancy) ($10,360) ($10,671)
ADDITIONAL INCOME
Parking Fees $38,400 $39,552
Effective Gross Income $398,518 $410,473
EXPENSES
(Operating Expenses) ($105,950) ($108,599)
AMORTIZATION 1 2
(Real Estate Taxes) ($40,750) ($41,769) Beginning of Year Outstanding Principal $2,275,000 $2,243,042
(Replacement Reserve) ($20,000) ($20,500) End of Year Outstanding Principal ($2,243,042) ($2,209,359)
(Total Expenses) ($166,700) ($170,868)
Amortization $31,958 $33,683
NET OPERATING INCOME $231,818 $239,606
TAXABLE INCOME
Debt Service ($154,808) ($154,808) Cash Flow After Financing $77,010 $84,798
Amortization $31,958 $33,683
CASH FLOW AFTER FINANCING $77,010 $84,798
Replacement Reserve $20,000 $20,500
Tax Payment ($9,040) ($12,545) Depreciation ($103,140) ($103,140)
Taxable Income $25,828 $35,842
CASH FLOW AFTER TAXES $67,970 $72,254

X-RAY VISION MODE
CONTROL + ~
PRO FORMA 0 1 2 3
GROSS INCOME
Market-Rate Apartments =(F13*F14*12)+(F15*F16*12) =J6*(1+$F$28) =K6*(1+$F$28)
Affordable Apartments =F18*F23*12 =J7*(1+$F$28) =K7*(1+$F$28)
Retail Space =C17*F25 =J8*(1+$F$28) =K8*(1+$F$28)
Subtotal =SUM(J6:J8) =SUM(K6:K8) =SUM(L6:L8)
VACANCY
(Residential Vacancy) =(J6+J7)*-$C$40 =(K6+K7)*-$C$40 =(L6+L7)*-$C$40
(Retail Vacancy) =J8*-$C$41 =K8*-$C$41 =L8*-$C$41
ADDITIONAL INCOME
Parking Fees =C20*F26*12 =J16*(1+$F$28) =K16*(1+$F$28)
Effective Gross Income =J9+J12+J13+J16 =K9+K12+K13+K16 =L9+L12+L13+L16
EXPENSES
(Operating Expenses) =C16*-F31 =J20*(1+$F$35) =K20*(1+$F$35)
(Real Estate Taxes) =C16*-F32 =J21*(1+$F$35) =K21*(1+$F$35)
(Replacement Reserve) =C18*-F33 =J22*(1+$F$35) =K22*(1+$F$35)
(Total Expenses) =SUM(J20:J22) =SUM(K20:K22) =SUM(L20:L22)
NET OPERATING INCOME =J17+J23 =K17+K23 =L17+L23
Debt Service =$F$10 =$F$10 =$F$10
CASH FLOW AFTER FINANCING =J25+J27 =K25+K27 =L25+L27
Tax Payment =J71*-$F$40 =K71*-$F$40 =L71*-$F$40
CASH FLOW AFTER TAXES =J29+J31 =K29+K31 =L29+L31
To Restore Original Display: CONTROL + ~


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HARVARD UNIVERSITY

GRADUATE SCHOOL OF DESIGN

GSD 5103: PUBLIC AND PRIVATE DEVELOPMENT

VERDE LOFTS: REAL ESTATE FINANCIAL ANALYSIS

• Using the Verde Lofts Excel Worksheet on Course Site:

© Kristen Hunter 2016

BARTLETT SQUARE CONDOMINIUMS

© Kristen Hunter 2016

BARTLETT SQUARE CONDOMINIUMS

© Kristen Hunter 2016

BARTLETT SQUARE CONDOMINIUMS

© Kristen Hunter 2016

When Building Your Own Worksheets:

© Kristen Hunter 2016

© Kristen Hunter 2016

© Kristen Hunter 2016

Cash Flow Formatting:

© Kristen Hunter 2016

Return Metric Formatting:

© Kristen Hunter 2016

© Kristen Hunter 2016

© Kristen Hunter 2016

© Kristen Hunter 2016

Highlight Area to Print

© Kristen Hunter 2016

© Kristen Hunter 2016

PRO FORMA ARCHITECTURE

OPERATING CASH FLOWS

© Kristen Hunter 2016

PRO FORMA ARCHITECTURE

1 OPERATING CASH FLOWS

© Kristen Hunter 2016

PRO FORMA ARCHITECTURE

2 OPERATING CASH FLOWS

© Kristen Hunter 2016

PRO FORMA ARCHITECTURE

OPERATING CASH FLOWS

© Kristen Hunter 2016

PRO FORMA ARCHITECTURE

OPERATING CASH FLOWS

© Kristen Hunter 2016

PRO FORMA ARCHITECTURE

OPERATING CASH FLOWS

© Kristen Hunter 2016

PRO FORMA ARCHITECTURE

ASSUMPTIONS OFF-SHEET CALCULATIONS

© Kristen Hunter 2016

Retail Rent/SF $28

Income Growth Rate 3%

Residential Annual Depreciation ($88,909) Replacement Reserve/SF $1.00

Retail Depreciable Basis $555,000 Expenses Growth Rate 2.5%

© Kristen Hunter 2016

Retail Rent/SF $28

Income Growth Rate 3%

Residential Annual Depreciation ($88,909) Replacement Reserve/SF $1.00

Retail Depreciable Basis $555,000 Expenses Growth Rate 2.5%

© Kristen Hunter 2016

Residential Annual Depreciation ($88,909) Replacement Reserve/SF $1.00

Retail Depreciable Basis $555,000 Expenses Growth Rate 2.5%

© Kristen Hunter 2016

Residential Square Footage

Retail Rent/SF $28

Income Growth Rate 3%

•  Using the Verde Lofts Excel Worksheet on Course Site: