Financial analysis tools help brokers compete in today's challenging market.
As a rule, today's clients generally assume that their
real estate advisers and brokers have access to the most current software
available that will provide them with prompt, concise, and accurate solutions
to their individual investment objectives. While that perspective is good in
theory, most commercial real estate professionals probably would agree with
media mogul Ted Turner's assessment: "It ain't as easy as it looks."
And most probably know the frustration, time, and expense of trying to seek out
and learn the programs that allow them to create financial analyses for complex
developments and transactions. Finding the right fit for your business needs
can be challenging.
Most commercial real estate assignments require some form
of financial projection or pro forma. The CCIM templates are valuable for a
wide range of projects, but some of today's investments include challenging
mixes of commercial real estate product that require specialized analyses.
While the following list of software applications is by no means exhaustive,
this sampling of tools can help brokers meet the increasingly complex needs of
CircleDeveloper creates financial models for multiphase,
mixed-used developments that involve any real estate product combination. The
program's timescale and phasing features allow an unlimited number of phases to
combine in various groupings. These functions provide for highest-and-best-use
analyses along with timed multiyear cash flows without the risk of spreadsheet
CircleDeveloper was the primary analytical tool used to
create a master plan for a large mixed-use development in Virginia Beach, Va.
The project included condominiums, retail, office, apartments, and the sale of
a hotel pad site. All of the site work and infrastructure costs needed to be
allocated among the various components on a contribution margin basis.
Rather than creating several dozen individual financial
models and consolidating them into a combined model, CircleDeveloper allowed me
to create one financial model that calculated the common cost allocations
automatically and easily determined the most favorable mix of property types,
thus maximizing my client's returns.
Argus is an asset valuation and cash-flow projection tool
for analyzing stabilized properties in one or more portfolios, any single
property type, or a portfolio of property types. Argus also offers a unit-sales
module for analyzing condominium or single-family development projects. Argus
12 is the most recent program version.
The OpenArgus feature and a new Excel-based report writer
lets users create custom reports and perform specialized analysis without
disrupting the underlying model. OpenArgus allows users to import to and export
from analyses using open database connectivity, which means different programs
can access the same database. Once data is exported to an ODBC database, it can
be imported by a variety of programs including Excel and Word. OpenArgus is
particularly helpful for performing portfolio analysis, incorporating data into
accounting or property management systems, and combining data into reports that
pull data from more than one source.
Realty RiskPro is a relational database application that
monitors property performance. It generates a variety of informative reports,
including perpetual debt service coverage and loan-to-value ratios using an
integrated discounted cash flow valuation engine, impairment analysis, tenant
exposure analysis, equity sensitivity analysis, new loan sizing, historical and
prospective cash flow analysis, lease-by-lease analysis, and lease expiration
For example, in a commercial mortgage backed securities
lawsuit, the plaintiff argued that the original underwriting had been too
aggressive and that the assigned rating did not adequately reflect the mortgage
portfolio's credit risk. I used Realty RiskPro to import the data for
approximately 600 loans, create a valuation model that reflected current market
conditions, and generate a clear, concise risk profile of the CMBS portfolio.
Real Estate Investment Analysis is a useful tool for
single-property investment analysis, especially when a program such as Argus
might be considered too complicated. The On Schedule - Subdivision and
Condominium Development module produces a month-by-month estimate of
subdivision or condominium project construction and development costs,
development loan utilization and repayment, project absorption, and partnership
Commercial/Industrial Development performs high-level
preliminary analysis on development projects and is ideal for answering the
"go/no go" question that is often the first step prior to a more-complicated analysis.
Mother's Business Analysis System
Mother's Business Analysis System version 4.0 is a
nominally priced, comprehensive set of Excel workbooks, Word documents, and
For example, the conversion of an existing resort hotel
to condominium-hotel included numerous entertainment components, such as
restaurants, nightclubs, and two conference centers. The revenue generated from
these operating entities represented a fairly significant portion of the net
operating income. Using this program, I created financial models for each
component, which eventually served as the basis for their business plans.
On a separate assignment, I created a comprehensive
tenant credit analysis for a multi-property industrial portfolio, where three
tenants represented approximately 70 percent of the revenue generated for the
This Web site offers Real Estate Investment Analysis 5.0,
which analyzes existing income-producing properties, and Real Estate
Development Analysis 1.0, which analyzes fairly straightforward, single-phase
development projects. Both programs produce Excel-based workbooks, which can be
e-mailed to clients without sending the underlying analysis and risking
compromising the base model's integrity.