Financial Modeling Methodology

2.1 Cost Categories

All cost categories support unlimited dynamic line items — users can add as many individual cost entries as needed within each category, each with its own basis, timing, distribution curve, and steepness.

2.2 Cost Distribution Curves

Costs are distributed over time using one of four configurable curves, each with three steepness levels (mild, standard, sharp):

All curves produce weights that sum exactly to 1.0, ensuring total cost integrity.

2.3 Construction Indexation

Costs are indexed annually using compound growth:

Indexed Cost = Base Cost × (1 + Annual Indexation Rate)^(Years Elapsed)

Years elapsed is calculated as floor((month - 1) / 12), meaning indexation steps up at the beginning of each 12-month period. Acquisition costs are not subject to construction indexation.

3.1 Pre-Sales (During Construction)

Pre-sale units are distributed across the construction timeline using the selected distribution curve. For each pre-sale tranche:

• Deposit is collected at the point of sale: Units × Sale Price × (1 – Discount%) × Deposit%
• Balance is collected at the end of construction: Units × Sale Price × (1 – Discount%) × (1 – Deposit%)
• Marketing costs are deducted: Units × Sale Price × Marketing%
• Discrete unit distribution uses Hamilton's method (Largest Remainder) for non-uniform curves. When weights are uniform (e.g., linear distribution), units are evenly spaced across the full duration to prevent clustering

3.2 Post-Sales (After Construction)

Post-sale units are distributed between a start month and end month. Price adjustments (positive or negative) are applied relative to the base sale price:

Post-Sale Price = Base Sale Price × (1 + Price Adjustment%)

3.3 Rental Income

For units that are neither pre-sold nor post-sold ("hold units"):

Gross Potential Rent = Hold Units × Monthly Rent per Unit × Rent Indexation Multiplier
Effective Rent = GPR × Occupancy Rate

Rent commencement: Rental income begins individually per building when that building's construction period ends — not when the last building completes.

3.4 Take-Up Ramp

Occupancy ramps from 0% to the target occupancy rate over the configurable take-up period. The ramp shape is configurable using any of the four distribution curves:

If month ≤ take-up duration:
    Occupancy = Target Occupancy × Curve Weight at (month / take-up duration)
Else:
    Occupancy = Target Occupancy

Where: Target Occupancy = 1 – Vacancy Rate

3.5 Independent Revenue (Grants & Subsidies)

The model supports project-level revenue streams that are not tied to any specific building — such as government grants, energy subsidies, tax incentives, or other external income.

Each independent revenue item is defined by:

Revenue is distributed across the defined time window using the same weighted-curve engine as cost items, ensuring weights sum to 1.0. Independent revenue flows directly into both levered and unlevered cash flows and is tracked separately from building-level rental or sale income.

Fixed vs. Variable Split

Each expense item has a configurable fixed-vs-variable percentage:

Adjusted Monthly OpEx = (Annual Amount × Fixed%) + (Annual Amount × Variable% × Current Occupancy)
                        ─────────────────────────────────────────────────────────────────────────
                                                        12

OpEx indexation: Fixed (annual and monthly), per-sqm, per-unit, and % of Total Cost bases are indexed annually. Percentage-based items (% of rent, % of EGI) are not indexed independently — they grow naturally as the underlying rent metric grows.

5.1 Construction Loan

The model supports two funding methods during construction:

Equity-First Solver: The equity-first method requires iterative solving because capitalized interest affects the total cost (which in turn affects the equity/debt split). The model uses a binary search algorithm (100 iterations) to converge on the correct equity quantum.

Pre-Sale Treatment

5.2 Financing Paths After Construction

5.3 Mezzanine Loan

• Separate LTV and interest rate
• PIK (Payment-in-Kind) interest: Interest is capitalized onto the mezzanine balance rather than paid in cash
• Mezzanine balance is fully repaid at permanent loan conversion or exit

5.4 Permanent Loan

5.5 Rate Indexation (Permanent Loan)

The permanent loan interest rate can be indexed annually using compound growth:

Indexed Rate = Base Rate × (1 + Indexation Rate)^(Years Since Conversion)

Amortization payment is recalculated at each year boundary using:
  • The adjusted rate for the current year
  • Remaining loan balance
  • Remaining term

5.6 Flip Scenario (No Permanent Loan)

When the project exit month falls at or before the end of construction, the model treats this as a "flip" scenario:

• Permanent loan conversion, amortization, and refinancing are entirely skipped
• The construction loan balance is paid off directly at exit
• All permanent loan fees and debt service are zero

This handles build-and-sell projects where there is no operating period.

5.7 Loan Fees

Each loan (construction, mezzanine, permanent) can have multiple fee items:

6.1 Construction Period Interest

Interest is calculated monthly using the mid-month convention:

Monthly Interest = (Beginning Balance + Current Month Draw / 2) × Annual Rate / 12

This convention assumes, on average, draws occur at the midpoint of each month — a standard institutional approach.

6.2 Capitalized vs. Cash-Pay Interest

6.3 Undrawn Commitment Fee

Monthly Fee = (Total Facility Size – Current Balance) × Undrawn Fee Rate / 12

Paid from equity. Applies only during the construction period on the undrawn portion of the committed facility.

6.4 Permanent Loan Amortization

Standard mortgage amortization formula:

Monthly Payment = Principal × (r × (1 + r)^n) / ((1 + r)^n - 1)

Where:
    r = Annual Rate / 12
    n = Loan Term in Years × 12

Interest and principal components are tracked separately for P&L and balance sheet purposes.

7.1 Direct Capitalization (Exit Valuation)

Exit Value = Stabilized Annual NOI / Exit Cap Rate
Net Proceeds = Exit Value – Selling Costs – Loan Payoff – Exit Fees

Stabilized NOI at exit is calculated using indexed rents and indexed OpEx based on the number of operating years elapsed.

7.2 Discounted Cash Flow (DCF) Analysis

The DCF module provides an alternative valuation metric:

DCF Property Value = NPV of Operating Cash Flows + Discounted Terminal Value

The DCF output includes: NPV of operating cash flows, discounted terminal value, DCF property value and value per sq.m, premium vs. PV of cap-rate exit (apples-to-apples), and premium vs. total development cost.

9.1 Profit & Loss

• Revenue: Rental income, sale proceeds
• Operating Expenses: Per building, indexed
• EBITDA and NOI
• Depreciation: Straight-line, commences only after construction completion
• Interest expense
• Tax loss carryforward: Losses in one year reduce taxable income in subsequent years

9.2 Balance Sheet

The balance sheet is dynamically balanced at every period:

Assets = Liabilities + Equity

Where:
    Assets:      Property Value (at cost) + Cash (plug)
    Liabilities: Outstanding Loan Balances
    Equity:      Cumulative Equity Invested + Retained Earnings

Cash is calculated as the balancing plug to ensure A = L + E at every period.

9.3 Annual Cash Flow

Monthly data is aggregated into annual summaries showing: gross revenue, vacancy loss, effective gross income, operating expenses by category, Net Operating Income, debt service (interest + principal), and levered and unlevered cash flows.

Distribution Hierarchy

Preferred Return Accrual

Hurdle Rate Types

Cash Reserve

The engine looks ahead at future negative cash flow months and reserves sufficient cash to cover them, preventing premature distributions that would require capital calls.

Tax & Regional Conventions

Tax calculations in OneStopReal are simplified for general financial modeling. Property taxes, transfer taxes, and related fiscal items are modeled as flat Operating Expense or Soft Cost line items with standard annual indexation. Users should adjust these items to account for jurisdiction-specific taxes such as VAT, transfer taxes, stamp duties, or reassessment rules applicable in their market.