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.

2.4 Construction Contingency

Each building supports a configurable contingency percentage applied proportionally to hard cost draws:

Monthly Contingency = Hard Cost Draw(month) × Contingency%
Total Contingency = Σ Monthly Contingency (over construction period)

Contingency is distributed in proportion to the hard cost draw curve, ensuring it follows the same timing pattern as physical construction expenditure.

2.5 Acquisition Cost Allocation

For multi-building projects, acquisition costs can be allocated by percentage across buildings. If no allocation is specified, 100% is assigned to the first building by default. This affects per-building cost metrics and capitalization.

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 Sale Price Indexation

Both pre-sale and post-sale revenue are subject to annual sale price indexation:

Indexed Sale Price = Base Price × (1 + Annual Sale Price Indexation)^(Years Elapsed)

This applies to deposits, balances, and post-sale proceeds, reflecting property value appreciation over the project lifecycle.

3.4 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.

3.5 Commercial Lease Rollover

For commercial spaces relying on standard tenancy assumptions, the model applies probability-weighted Lease Rollover mechanics:

To ensure an accurate exit valuation via direct capitalization, the defined Stabilized NOI intentionally ignores the temporary drag of periodic downtime and concessions.

3.6 Hospitality Revenue

Units typed as hospitality use a specialized revenue model based on hotel industry metrics. Instead of a flat monthly rent, revenue is driven by a 12-month seasonality schedule specifying:

Monthly Revenue = Rooms × ADR × Days in Month × Occupancy%

The seasonality array is aligned to actual calendar months using the project start date, so seasonal patterns (high/low season) are anchored to the correct time of year. Hospitality units bypass the take-up ramp - their occupancy is controlled entirely by the seasonality schedule.

3.7 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

Hospitality units are excluded from the take-up ramp - their occupancy is driven entirely by their seasonality schedule.

3.8 Revenue Sharing (Operator Agreements)

Buildings can operate under a tiered revenue-sharing model where gross operating revenue is split between the landlord and an operator (e.g., hotel management company):

Independent revenue items flagged as "subject to revenue share" are routed through the same tiered split. The landlord's net rent after the split flows into project cash flows; the operator's share is tracked separately.

3.9 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. Recurring items (fixed-monthly, fixed-annual) are distributed evenly rather than via weighted curves. Only recurring items are capitalized into the exit NOI for valuation purposes.

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)
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                                                        12

Variable expenses scale with actual occupancy relative to stabilized occupancy (EGI Ratio = Actual EGI / Stabilized EGI). For hospitality units, the stabilized baseline uses nominal full occupancy rather than seasonal rates, ensuring variable expenses properly scale down during off-season.

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 Dynamic Loan Tranches

5.2 Construction Draw Funding

During periods where costs exceed revenue, the model draws from equity and active loans. Funding can follow two methods:

Multi-Building Master Facility: The platform enforces exactly 1 primary Construction/Acquisition loan. If a project has multiple buildings starting at different times, this single facility stays open and dynamically draws down to fund all subsequent buildings (acting as a Master Development Facility). Users cannot originate a second, separate draw-down construction loan later in the timeline.

Iterative TDC Solver: Because capitalized interest affects total development cost (which in turn affects the equity/debt split), the model uses an iterative solver (converging to within $1) to determine the correct equity quantum. A second re-estimation pass runs on actual cost arrays to ensure monthly parity.

5.3 Pre-Sale Treatment

Pre-sale revenue generated during construction can be applied in four ways:

Pre-sale offsets are managed through a pooling mechanism with a forward-looking smart release system. Excess pre-sale revenue beyond what future months will consume is released immediately rather than held in reserve.

5.4 Rate Indexation

Loan interest rates can be indexed annually using compound growth:

Indexed Rate = Base Rate × (1 + Indexation Rate)^(Years Since Start)
 
Amortization payment is recalculated at each year boundary using:
  • The adjusted rate for the current year
  • Remaining loan balance
  • Remaining term

5.5 Loan Fees & Penalties

Each loan can have multiple fee items and a year-based prepayment penalty schedule (up to 5 years):

5.6 Value-Add Renovation Financing

For existing building projects, renovation costs can be partially funded by active loans:

Debt-Funded Renovation = Monthly Renovation Draw × Renovation Funding %
Equity-Funded Renovation = Monthly Renovation Draw × (1 - Renovation Funding %)

6.1 Construction Period Interest

Interest each month is computed against the loan balance after that month's draw has been added, using an end-of-month convention:

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

This is a conservative approximation that treats new draws as accruing a full month of interest in the month they are funded. Real construction loans typically accrue interest daily; this convention slightly overstates capitalized interest vs daily accrual, which is a deliberate conservative bias for underwriting purposes.

6.2 Capitalized vs. Cash-Pay Interest

In equity-first mode with capitalized interest, interest is first allocated to equity while the equity budget has room, with any excess allocated to debt. This prevents over-drawing debt beyond the target LTV.

6.3 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. Payment is recalculated at each year boundary when rate indexation is active.

7.1 Direct Capitalization (Exit Valuation)

Exit NOI = Stabilized Annual NOI + Recurring Independent Revenue (annualized)
Exit Value = Exit NOI / Exit Cap Rate
Net Proceeds = Exit Value - Selling Costs - Loan Payoff - Exit Fees - Prepayment Penalties

Stabilized NOI at exit is calculated using indexed rents and indexed OpEx based on the number of operating years elapsed. Only recurring independent revenue items (fixed-monthly, fixed-annual) that are still active at exit are capitalized into the exit NOI - one-time grants are excluded.

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.

7.3 Residual Land Value

The model calculates the maximum land/purchase price that achieves a target levered IRR using binary search (60 iterations):

Binary Search: adjust Purchase Price until Equity IRR ≈ Target IRR
Search Range: [0, 2 × Exit Value]
Convergence: ≈ $1 precision after 60 iterations

This is computed lazily (on demand) rather than on every input change, since each iteration runs a full proforma recalculation.

9.1 Profit & Loss

• Revenue: Rental income, sale proceeds, independent revenue
• 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.

10.1 Standard Tiered Waterfall

Distributes project cash flows between General Partner (GP) and Limited Partner (LP) investors using the following cascade:

10.2 Bifurcated Waterfall

Separates project cash flows into two independent streams, each with its own distribution logic:

Surplus operating cash above the monthly target is swept into a retained earnings reserve. At a capital event (sale or refinance), the reserve is released and merged into the capital event pool. If operating cash falls short of the target, the reserve is drawn down to cover the deficit.

10.3 Preferred Return Accrual

10.4 Hurdle Rate Types

10.5 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. A configurable lookahead window limits how far ahead the reserve looks.

10.6 GP Co-Investment

GP can contribute equity alongside LPs with configurable options:

• Subordinated: GP capital and preferred return is recovered after all LP classes are made whole
• Pari-Passu: GP capital is treated with equal priority to LP classes
• GP Preferred Return: Configurable rate independent of LP preferred return

11.1 Dynamic Capital Pooling

• Sequential Funding: The net cash-out from a refinance event in Project A flows upstream to fund the required equity injection for Project B.
• Timeline Normalization: Projects are temporally aligned to a master timeline. A project's start date is strictly determined by the exact month the prerequisite refinance event triggers.
• Cross-Collateralization: The engine tracks portfolio-wide unspent cash surpluses and shortfalls, highlighting broken chains where refi proceeds are insufficient to fund the next deal without out-of-pocket investor injections.

11.2 Portfolio Analytics

A consolidated master P&L aligns the discrete cash flows of every project onto a single calendar grid.

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.