Level 7

Level 7 will look at combining our last 2 schedules and forming the basis of a full appraisal. We’ll stick to the result format we are familiar with so far, I will revisit this format later on down the line but lets keep it simple for now.

When it comes to appraisals, I personally like to try and have as many of the most important inputs on the results sheet that I can. There are 2 main reasons for this; 1. It allows for others unfamiliar with modelling technical to play around with numbers and see how results may look and 2. It makes it easier for further analysis when we start to use excel tools like Goal Seek, Data Tables and Solver (which I will show you later on).

If you look at our senior development loan on the results summary, we can see our debt figures get somewhat skewed in a large multiphase development such as this. The reason being is that the Loan-to-cost (LTC) is based off the total construction cost and not the maximum equity exposure. Your maximum equity spent in a 0% loan environment is not going to reach the levels of the total project cost. The reason for this is capital injections such as Investment finance (take it out and watch your interest cost shoot through the roof), Part V early sales and rental income, all contributing to paying down senior debt. Due to this you will never reach your max level draw on dev finance. Hopefully at this stage you understand how the debt schedule works and further understand why this is an issue. In these scenarios you just have to take a further look at your cash flow and program your LTC to suit whatever levels of debt percentage you want to take on in a project (The 67.25% I have issued here works out to more like 50% LTC on this example).

Overall cash flow layout will change depending on your company and fund structure, you will just have to go with the flow (excuse the pun) on this. All I have provided is a simple layout that is easily followed. Whenever I was working with other companies/partners the majority of them would use their own assumptions in my models and then copy and paste the cash flow into their own cash flow analysis modules.