[Spencer Burton]

5 years ago in reply to: Leasing Commission Methodology #2926

Hi Ozzie,

Thanks for the question. You’re correct, the leasing commissions calculation is based on base year rent exclusive of any escalations. This isn’t a bug, insofar as I was aware of this limitation when I wrote the formula. So in one way, the methodology is overly aggressive since it charges less leasing commissions to the deal then may actually be paid. On the flip side, this methodology may be conservative given that sometimes leasing commissions are paid out over time or on a falling scale.

This gets to a broader point about the limitations of any Excel-based alternative attempting to model the nuances of long-term leases. Namely, that many of the methodologies are approximations, with the formulas written either to reduce processor load or to accommodate an imperfect tool.

With that said, I’ll look into altering the leasing commissions calculation to include rent escalations. I don’t recall why I opted not to initially, other than I believe I thought it was overly complex and the impact of greater precision was de minimis. But I’ll look at it again nonetheless.

Thanks for the comment!

Spencer

[Spencer Burton]

5 years, 2 months ago in reply to: Variable Interest Rate #3006

Following up on this. I’m putting the final touches on v0.71, and I’ve added the option to use a variable interest rate for the construction loan, permanent loan, and mezz/secondary loan. This version should roll out in the next few days.

Spencer

[Spencer Burton]

5 years, 2 months ago in reply to: Variable Interest Rate #3004

Great suggestion. This is a fairly easy add. I’ll work to include it in our next update.

Spencer

[Spencer Burton]

5 years, 2 months ago in reply to: MF Development Stabilized Year & Reversion #3302

Hi Andrew,

Would you mind shooting me your model. You can send it to [email protected]. I’ll take a look and provide a response. More than likely it’s just a matter of manually overriding the ‘Stabilization Date’ (cell M17 of the Summary tab) but I want to make sure there’s not more to it.

Looking forward to it,

Spencer

[Spencer Burton]

5 years, 2 months ago in reply to: NPV #3300

Hey Hamish,

Great question. In the United States at least, it is common practice to perform all projections on a before-tax basis. This is because no two real estate investors’ tax situation is the same, and so to properly make apples-to-apples comparisons we look at opportunites pre-tax. This is also why when using PV to value real estate, it is done on unlevered cash flows. Because no two investors’ financing structures are exactly the same.

With all of that said. We have included a basic ‘After-Tax’ returns module in the All-in-One. It’s not great, but for those who want to try to estimate returns post-tax, it’s there.

Hope this was helpful!

Spencer

[Spencer Burton]

5 years, 2 months ago in reply to: All-in-One Mezz piece for development loan #3294

Hey Cooper,

Unfortunately there is not a way to model mezz during development in the current version of the Ai1. Believe it or not adding a third tranche to the capital stack during development is a pretty heavy lift. It’s much simpler during operation.

I’ll add this to our feature request list though and so what I can’t do at some point.

Best,

Spencer

[Spencer Burton]

5 years, 2 months ago in reply to: Industrial Acquisition – General vs Actual Vacancy #3292

Sorry for the delayed response here!

This is a great observation. I would suggest still using some General Vacancy, as it’s a reflection of the credit loss risk at the property. Nevertheless, I understand the conundrum about hitting the deal too hard with a General Vacancy.

With that said, the ORI module will apply downtime between leases. So if you have seven leases, when each lease expires there will be down months when occupancy will drop. This is determined by the 1st generation lease terms (ORI-RR – columsn I and J), future generation lease length (column BK) future generation renewal probability (column BJ), and future generation downtime (column BL).

You can then go to row 56 of the ORI-OpSt tab and track the physical occupancy at the property.

If you want more granularity and the above isn’t enough. You can manually restrict max occupancy using the ‘Available Space %’ row (row 55 on ORI-OpSt) tab. So you could manually max income out at say 95% during certain periods.

Hope this was helpful!

[Spencer Burton]

5 years, 2 months ago in reply to: Base Year – Expense Recovery #3290

Sorry for the delayed response here – February has been a very busy month for me!

Modeling leases with a base stop lacks precision with the All-in-One. Nonetheless, you can approach a decent approximation using columsn AG:AU of the ORI-RR tab.

To model a Base Year stop. First, set the expense reimbursement ‘Detail’ to ‘Yes’ in column AG. Adjust the ‘Pro Rata Share of OpEx’ in column AH if necessary. Then in columns AK:AU, approximate what percentage of the reimbursable operating expenses the tenant would likely reimburse in each year. If the tenant begins it’s lease in year 1 and the expense stop is a base year stop, the reimb % in year 1 would be 0%. Then, if operating expenses are set to grow at 2% per year (on the ORI-OpSt tab), then set year 2 to 2%, year 3 to 4%, year 4 to 6%, and so forth.

For 1st generation tenants, you can get a pretty close approximation. 2nd generation tenants become more problematic, and so my recommendation is to set future generation tenants to NNN (i.e. 100% Reimb. %) and adjust the market rent accordingly.

Hope this (belated) response is helpful!

Spencer

[Spencer Burton]

5 years, 2 months ago in reply to: Gross reversion value in Property CF #2922

Thanks for the comment. Row 64 on the Property CF tab simply outputs the Gross Reversion Value in the proper period. So the formula asks, is the current period the ‘Analysis End Month’, in which case if it is it outputs the Gross Reversion value. Otherwise, it outputs a 0. Cell F64 is the first formula in that sequence (time 0) and will always output 0 since time 0 can never be the analysis end month. You’ll notice that same formula is copied from there to the right out until the end of the total available periods (120).

The Unlevered Cash Flow, in row 66, sums in each period the Cash Flow From Operation (row 61), Total Investment Costs (row 63), Gross Reversion Value (row 64), and Selling Costs @ Reversion (row 65) in each period.

I think the confusion lies in what you understand cell F64 to be. It is not meant to sum the total Gross Reversion Value in the entire hold, but is one cell in a row that tracks when Gross Reversion Value occurs and then outputs it in the proper period.

Hope that helps!

[Spencer Burton]

5 years, 2 months ago in reply to: Bug in Construction Model of latest Ai1 Beta v0.7 #2916

Sorry for the late response here!

A new version of the model was rolled out in early January that fixed this bug.

Thanks for pointing it out!

[Spencer Burton]

5 years, 4 months ago in reply to: Expense Reimbursement Error in ORI-Calc tab when changing Recovery % of OpEx #2914

Oz,

I apologize but I had added this to my list of fixes last month but missed it with my early December update. As it turned out, when I changed the ORI rent growth calculation methodology a few updates ago, the expense reimbursement calculation for future generation leases in the ORI module stopped working properly. I’ve made the fix in beta version 0.7 and will push the new version out tomorrow (12/31/2018).

Note that beta version 0.7 also includes the option to refinance the initial senior debt mid-hold.

Thanks for your contribution here!

Spencer

[Spencer Burton]

5 years, 6 months ago in reply to: Refi Loan #3286

The short answer is no. With that said, you could use the construction module, set the operation begin date to month 1, and set the stabilization date (when the construction loan is taken out by perm) to some point in year five. This would effectively make the construction loan your bridge loan, with the take out in year five your perm loan.

With all of that said, admittedly the Ai1 is weak when the user intends to refi from one perm loan to another mid-hold. My suggestion, would be to perform your analysis as if you were to sell in year six rather than a refi. This would tell you what returns you’re getting out of the value-add period (years 1-5).

[Spencer Burton]

5 years, 6 months ago in reply to: Post Appraisal Development Tracking #3002

To forecast within the bounds of the Ai1’s current functionality,my suggestion would be to to change the forecasting method on the ‘Budget’ tab for each budget item to ‘Manual Input’, and then manually enter the actuals followed by manually forecasting the going forward cash flows.

Forecasting the going forward cash flows in a straight-line fashion is simple. What’s difficult is if you want to continue an s-curve going forward. I wrote a blog post and shared a model that offers one solution to the actual+forecast s-curve conundrum: https://www.adventuresincre.com/actual-forecast-construction-draw-schedule-with-s-curve/

[Spencer Burton]

5 years, 6 months ago in reply to: Mgmt Fee % EGI? #3284

Thanks for the question! Unfortunately, for now, the answer is no. This is a feature request that several people have asked for, so eventually I’ll likely add it. However, adding this functionality will require a macro to avoid creating a circular reference, plus will require updating the existing ‘Set Construction Loan Amount’ macro.

[Spencer Burton]

5 years, 6 months ago in reply to: For sale module #2996

Great question. I do not plan to add a for-sale module to the Ai1. With that said, you can find various for-sale models on our website that we’ve built:

Residential land development: https://www.adventuresincre.com/residential-land-development-model/
Single-family home construction: https://www.adventuresincre.com/new-sf-home-construction-pro-forma-excel/
Condo development: https://www.adventuresincre.com/condominium-development-model/