Allow me to share my Industrial Development Model in Excel. Over the past year, I’ve been working to add more specialty real estate models to our library. While our All-in-One model certainly has its place, oftentimes really digging into the underwriting of a deal takes a hyper-focused tool.
This model fits the definition of a hyper-focused tool. It’s specifically built to analyze merchant-build, ground-up industrial development opportunities. It includes an expandable budgeting and development cash flow module, robust rent roll and operating cash flow module, and the ability to model complex partnership waterfall structures.
Since this model was originally released, it has gone through numerous versions and updates. Most recently, in version 1.2, I added Steady Growth and Steady Decline options to the development forecast method options. The model continues to be reviewed and updated regularly, so if you have a feature request or you spot a bug, please let me know and I’ll look to include it in a subsequent version of the model.
Are you an Accelerator member? Review the Industrial Income Statement course to get the most out of this model. Not yet an Accelerator member? Consider joining the real estate financial modeling training program used by top real estate companies and elite universities to train the next generation of CRE professionals.
When to Use the Industrial Development Model over the All-in-One Model?
So the first question you might have is, in what scenario is it best to use this model? And when is it better to use the All-in-One model?
This model is meant to be used in scenarios where you intend to develop, lease-up, and then sell an industrial property. The inputs are best suited for warehouse and distribution facilities, although other industrial subproperty types are also compatible.
The model is not well-suited for build-to-core scenarios (i.e. develop, lease-up, and hold). It includes the option to incorporate construction financing and various forms of equity, but the model assumes that financing is paid off at sale.
If you are looking to model scenarios where you intend to hold the property long-term, the All-in-One model is a better fit.
What’s Under the Hood – The A.CRE Industrial Development Model
So what’s included in the Industrial Development Model? The model is structured similar to my Apartment Development and Self Storage Development models. So if you’ve used either of those models, you’ll be very comfortable using this model.
The main differences between the aforementioned models and this model, is in the Operating Period Cash Flow section. Given the nature of the tenant is different, the operating cash flow section is quite different. Otherwise, the other sections of the model are quite similar.
This model likely still contains errors. If you spot an error, have a feature request, or would like to make a suggestion to improve the model, please let me know.
Version Tab (Visible by default)
The model opens initially to this tab so you can see what changes have been made in the most recent version of the model. On this tab you can also find links to model tutorials, guides, support, and other information.
Underwriting Tab (Visible by default)
The Underwriting tab is where all of your primary inputs are entered. The tab is broken up into six sections, built from top to bottom. The sections can be accessed either by scrolling down to each or using the buttons along the top of the screen. The six sections are ‘Description’, ‘Development’, ‘Operations’, ‘Reversion (Sale)’, ‘Returns’, and ‘Sensitivity’.
Summary Tab (Visible by default)
While the return metrics levered IRR, levered EMx, and Development Spread are shown shown along the top of the Underwriting tab, the bulk of the risk and return metrics are shown/visualized on the Summary tab. The summary tab also includes six charts, a strengths/weaknesses section, a frame to include a picture/map, and a summary of the investment. The Summary tab is meant to be printed, and as such the view mode is set to Print Preview by default.
Annual Cash Flows (Hidden by default)
The Annual Cash Flows tab rolls up the monthly cash flows to annual periods, so you can view high-level cash flows on one page. The report is printable. You can access the report by pressing the ‘Show’ toggle on the Summary tab within the Property Cash Flow section.
Data Tab (Hidden by default)
Some basic backend settings are housed in a Data tab. These settings are related to the s-curve development cash flow forecasting module, date and period headers, data validation lists, and may include other settings as the model evolves.
Guides and Tutorials for Using the Industrial Development Model
Below find a video for how to use the model. This walk through is based on the initial release version of the model. I’ll follow-up with additional videos as new features are added to the model.
This version of the model is only compatible with Excel 2013, Excel 2016, and Excel 365.
Download the A.CRE Industrial Development Model
To make this model accessible to everyone, it is offered on a “Pay What You’re Able” basis with no minimum (enter $0 if you’d like) or maximum (your support helps keep the content coming – typical real estate development models sell for $100 – $300+ per license). Just enter a price together with an email address to send the download link to, and then click ‘Continue’. If you have any questions about our “Pay What You’re Able” program or why we offer our models on this basis, please reach out to either Mike or Spencer.
We regularly update the model (see version notes). Paid contributors to the model receive a new download link via email each time the model is updated.
- Added Steady Growth option to development cash flow forecast method
- Updated drop-down menu in cells F24:F42 to include ‘Steady Growth’ option
- Created ‘Steady Growth’ backend section starting in column JZ
- Updated formulas in cells L24:EN42 to accommodate the Steady Growth option
- Added Steady Decline option to development cash flow forecast method
- Updated drop-down menu in cells F24:F42 to include ‘Steady Decline’ option
- Created ‘Steady Decline’ backend section starting in column JZ
- Updated formulas in cells L24:EN42 to accommodate the Steady Decline option
- Added IFERROR logic to General Partner return metrics to accommodate 0% contribution by GP
- Fixed header on Annual Cash Flow tab – “ANALYSIS START” (cell R4) output was not dynamic
- Minor update to dummy input values
- Replaced ‘Analysis Date’ with ‘Period Ending’ label on ‘Annual Cash Flow’ tab
- Added input (F48) to choose percentage of lease-up income to use for interest; unpaid construction interest accrues to interest reserve
- Removed the beta label
- Fixed issue where in certain cases the Add Tenant macro would error out
- Added Leasing Cost, CapEx Reserve, and Total CapEx as percentage of NOI metric
- Fixed issue where Rentable/SF(M2) metric wasn’t calculating correctly
- Misc. formatting enhancements
- Fixed header on Summary tab (‘Analysis Month’ changed to ‘Analysis Year’)
- Added variability to expense line items
- % Fixed assumption added to each expense line item
- 100% fixed means expenses are static, regardless of occupancy; 0% Fixed means expenses are tied to occupancy
- Added option to “phase-in” taxes
- Updated Property Tax calculation to use % by year, rather than occupancy % to determine tax amount
- Added ‘PROPERTY TAX PHASE IN (% OF FULL TAX BY OPERATING YEAR)’ assumptions in cells F72:I74
- Misc. formatting enhancements and fixes
- Fixed issue where GP2 was not appearing when Dbl. Promote was toggled
- Removed ‘Units’ from Summary tab; replaced with # of Buildings
- Minor changes to dummy values
- Misc. formatting enhancements
- Fixed ‘/NRA/YR’ calculation for Management Fee in Operating Period Cash Flow section
- Fixed mislabeling of CapEx Reserve in Reversion Pro Forma
- Added mill rate metric to Operating Period Cash Flow and Reversion Cash Flow sections
- Misc. updates to dummy values
- Misc. formatting updates and enhancements
- Initial release