I recently received an email from one of our readers asking how to create a dynamic revenue row for a pro forma that can capture rent changes for multiple tenants. I thought that this would make a great post for the site and would be a good piece of information to share with our readers. What makes this a bit challenging to figure out is that all the tenants will most likely have rent increases at different time periods and the rent for each tenant will also increase at different rates. The way many people may begin to approach this problem is by asking themselves ‘how can I create a formula that will capture everything I need to capture in one row and with one formula?’ This question in itself presents the first road block to conquering this challenging problem as well as other complex excel problems you may face when modeling for real estate deals. Of course, it is almost always possible to use brute force and hammer out a 20-line formula that may take you a few hours and may or may not contain errors, but is this really the best way?

Also in this Post:
  • In Depth Explanation of the INDEX MATCH function
  • Excel Modeling Philosophy for Complicated Scenarios

Breaking It Down

Multiple Tenant LeasesI’d like to offer a different way to think about complex modeling challenges that was imparted on both Spencer and I in our early days of grad school by Professor Daniel Lebret. One of the most valuable takeaways from his teachings was to think about how to break out these complex problems in to simpler components. Essentially, solve the pieces to your total problem individually and then link them back together once they are solved. If this means creating a few external tables in your model, then so be it. In fact, it is preferable. Although we might feel great when and if we get that 20-line formula to work, the last thing a third party wants to do when trying to understand your financial underwriting is click on a cell and have to decipher an insanely long and confusing formula.

It is in that spirit that this exercise was created. The essential components to figure out this issue are all broken out in the Excel sheet and then linked together in the revenue row with one simple formula. To clarify, each tenant’s essential rent information is laid out in individual tables and the dates are displayed above the revenue row. Then they are all linked in the revenue row with a simple formula.

The downloadable excel file below along with the video guide will walk you through how to go about modeling this. The exercise contains inputs for two tenants, both have a rent start date and two rent bump dates. You should be able to easily add additional tenants to this model if you so desire and I mention how to do this towards the end of the video.

The INDEX MATCH Function

The exercise should be fairly simple to understand and primarily takes advantage of the INDEX MATCH formula. The INDEX MATCH function works much in the same way as VLOOKUP, but is a great alternative and worth mastering. If you want to understand why this formula is preferable over VLOOKUP, check out what ExcelUser & mbaexcel say about it.

Additionally, if you are new to INDEX MATCH, I explain it thoroughly in the video with regards to how it works within this particular model. However, there is additional information that is important to understand about INDEX MATCH, so I decided to create a second video that goes in depth with how INDEX MATCH works, which is also included within this post.

The excel file in this post contains two sheets. The first sheet is the dynamic revenue exercise and the second sheet explains in detail how INDEX MATCH works. The file and two corresponding videos are below.

Download and Videos

Dynamic Revenue Row

This excel file includes

  • how to model for multiple tenant leases and calculate them together in the revenue row of your proforma
  • an in depth understanding of the INDEX MATCH function.


Capturing Multiple Leases In a Revenue Row

Understanding INDEX MATCH

I hope you find this post valuable and as always, contact me with any questions or comments.

About the Author: Michael has spent a decade managing, consulting, and working in various capacities on more than $7BN worth of real estate opportunities. Most recently, he worked at Hines managing large-scale development projects in San Francisco. Michael is currently the Chief Operating Officer and member of the founding team at Stablewood Properties. Michael has both an MBA and Master in Real Estate with a concentration in Real Estate Finance from Cornell University.