Real estate

Land development

Raw dirt through entitlement and horizontal development to finished lots taken down by a builder. Every phase carries its own lot count and delivery date, the A&D loan draws as costs are incurred and comes back through a release price on each lot, and the answer on top is the price you can pay for the land and still hit your return.

as entered

Assumptions

base

Site

Site and yield

Gross acresacres

Net to gross%

What is left for lots after roads, detention and open space. Usually 60% to 80%.

Densitylots per net acre

Engineered lot countlots

Overrides the ratio. Leave empty to let acreage and density set the plan.

Acquisition and entitlement

Land price$

Closing costs% of price

Entitlement periodmonths

Money out, nothing built, carry running. This is where the risk sits.

Entitlement cost$

Phasing

Phases. Each row is one phase with its lot count, the month horizontal work starts and the month its finished lots are delivered.
Phase	Lots	Start	Deliver	Remove
1
2
3

Months are counted from the land closing, which is month 0. Horizontal cost is spread evenly from the start month to the month before delivery, and the lots go into the sales pool on the delivery month.

Horizontal cost

Earthwork and grading

Wet utilities

Dry utilities

Streets and paving

Landscape

Amenity and entry

Engineering and design% of hard cost

Permits and impact fees$ per lot

Set by ordinance, so scenarios and cost sensitivities leave it alone.

Contingency% of hard cost

Developer fee% of cost

On land, closing, entitlement and horizontal. Not on itself and not on the financing.

Revenue

Finished lot price$

Price escalation% a year

Steps on each anniversary of the closing, the way a builder price list resets.

Absorptionlots a month

The takedown pace. Lots can only close once their phase has delivered.

Selling costs% of price

A&D loan

Loan to cost%

Funded pari passu: the lender takes this share of every draw as costs are incurred.

Rate% a year

Release price% of lot price

Paid to release the lien on each lot. Set above the pro rata loan so the facility retires faster than the lots sell.

Origination fee% of commitment

Interest reserve$

What the lender has budgeted. Zero skips the test rather than meaning a reserve of nothing.

Targets and tests

Residual solves for

Target%

Equity capacity$

What the sponsor can actually write. Zero skips the test.

Sensitivity grid

Model

Residual land value

$8,826,410

Margin on cost

34.78%

Levered IRR

22.49%

Peak equity

$4,263,764

The residual is the land price at which this deal returns a margin on cost of 25.00%, solved by running the whole model at each candidate price rather than by rearranging a formula. Closing costs, the developer fee and the size of the A&D loan all move with the land price, so the relationship is not linear and a closed form would be wrong.

Annual cash flow

5 years, monthly underneath

Forecast by year, Y1 to Y2 to Y3 to Y4 to Y5, containing pro forma.
Line item	Y1	Y2	Y3	Y4	Y5
Pro forma
Lots closed	0	12	72	72	54
Land and closing costs	-$7,460,250	$0	$0	$0	$0
Entitlement	-$350,000	$0	$0	$0	$0
Horizontal development	$0	-$4,533,760	-$4,533,760	-$2,266,880	$0
Developer fee	-$312,410	-$181,350	-$181,350	-$90,675	$0
Loan origination fee	-$130,265	$0	$0	$0	$0
Total project cost	-$8,252,925	-$4,715,110	-$4,715,110	-$2,357,555	$0
Gross lot revenue	$0	$1,483,200	$9,166,176	$9,441,161	$7,293,297
Less: selling costs	$0	-$29,664	-$183,324	-$188,823	-$145,866
Net revenueWorking, Y1: $0 - -$0 = $0	$0	$1,453,536	$8,982,852	$9,252,338	$7,147,431
Unlevered cash flowWorking, Y1: $0 + -$8,252,925 = -$8,252,925	-$8,252,925	-$3,261,574	$4,267,742	$6,894,783	$7,147,431
A&D loan draws	$5,364,401	$3,064,822	$3,064,822	$1,532,411	$0
Less: loan releases	$0	-$1,038,240	-$6,416,323	-$6,608,813	-$1,336,153
Levered cash flowWorking, Y1: -$8,252,925 + $5,364,401 - -$0 = -$2,888,524	-$2,888,524	-$1,234,993	$916,241	$1,818,381	$5,811,278
Cumulative levered cash flow	-$2,888,524	-$4,123,516	-$3,207,276	-$1,388,895	$4,422,383

Built monthly and rolled to years. Unlevered cash flow is the deal; levered cash flow is the deal after the A&D facility draws and its release prices. The difference between them is the financing, and peak equity is read off the levered line.

Cost and revenue build

every line

Calculation build. Each row is one step of the workings, the arithmetic that produced it where there is any, and its value.
Gross acres	100
Net acres70% net to gross100 x net to gross = 70	70
Lotsplan says 210sum of the phase lot counts	210
Lots per gross acre	2.100
Land price	$7,350,000
Land price per lot	$35,000
Closing costs1.5% of price	$110,250
Entitlement cost12 months	$350,000
Earthwork and grading$17,500 per gross acre	$1,750,000
Wet utilities$14,000 per lot	$2,940,000
Dry utilities$5,000 per lot	$1,050,000
Streets and paving$11,000 per lot	$2,310,000
Landscape$3,000 per lot	$630,000
Amenity and entry$1,500 per lot	$315,000
Hard cost	$8,995,000
Engineering and design7% of hard cost	$629,650
Permits and impact fees$6,000 per lot	$1,260,000
Contingency5% of hard cost	$449,750
Horizontal development cost$8,995,000 + $629,650 + $1,260,000 + $449,750 = $11,334,400	$11,334,400
Horizontal cost per lot	$53,973
Developer fee4% of cost	$765,786
Total cost before financing$7,350,000 + $110,250 + $350,000 + $11,334,400 + $765,786 = $19,910,436	$19,910,436
Total cost per lot	$94,812
Loan origination fee1% of commitment	$130,265
Capitalised interest9.5% a year	$2,373,074
Total cost, financed$19,910,436 + $130,265 + $2,373,074 = $22,413,774	$22,413,774
Gross lot revenue210 lots	$27,383,834
Revenue per lot$27,383,834 / 210 = $130,399	$130,399
Less: selling costs2% of price	-$547,677
Net revenue$27,383,834 - $547,677 = $26,836,158	$26,836,158
Net profit, unlevered$26,836,158 - $19,910,436 = $6,925,722	$6,925,722
Margin on cost$6,925,722 / $19,910,436 = 34.78%	34.78%
Margin on revenue$6,925,722 / $27,383,834 = 25.29%	25.29%
Development cost, share of revenueexcludes land	44.38%
A&D loan commitment65% of cost	$13,026,455
Facility size$13,026,455 + $2,373,074 = $15,399,529	$15,399,529
Loan to cost, all inorigination fee and interest reserve on both sides	68.71%
Loan per lot, pro rata	$73,331
Release price per lot70% of the lot price at the first closing	$86,520
Release price per lot, last closing3% a year escalation	$94,543
Release coverage1.289x at the last closing$86,520 / $73,331 = 1.18x	1.18x
Peak loan balancemonth 21	$9,001,196
Loan repaidmonth index	50
Peak equity, unlevered	$12,051,919
Peak equitymonth 21	$4,263,764
Net profit, levered	$4,422,383
Equity multiple	2.04x
Unlevered IRR	16.01%
Levered IRR	22.49%
First closingmonth index	22
Months to selloutabsorption alone: 35	35
Project durationmonths from closing	57
Residual land valuemargin on cost of 25%	$8,826,410
Residual land value per lot	$42,031
Residual against asking price$8,826,410 - $7,350,000 = $1,476,410	$1,476,410

Sensitivity

absorption, lots a month × finished lot price

Sensitivity table. Rows vary Absorption, lots a month, columns vary Finished lot price. The base case cell is marked "base case".
Absorption, lots a month downFinished lot price across	$108,000	$114,000	$120,000	$126,000	$132,000
3.6	3.03%	8.81%	13.49%	17.54%	21.17%
4.8	6.53%	12.91%	18.33%	23.14%	27.52%
6	9.21%	16.33%	22.49% base case	28.02%	33.09%
7.2	11.29%	19.03%	25.79%	31.89%	37.49%
8.4	11.87%	19.80%	26.73%	32.97%	38.70%

Cells are levered IRR, not margin, because margin is not time weighted and a slower takedown barely moves it. The marked cell is the model above. Impact fees do not move on the cost axis: a city publishes them and a contractor does not.