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Hello, I’m working through the Accelerator and in the process I’m also attempting to model out a real life hotel development project. My background is more in multifamily, but we have an interesting opportunity to bring a hospitality development and I’m wondering if there is a difference in the way that you would calculate the development cash flows…? My instinct is that you model out the unlevered portion first, similar to multifamily, and then you can use the same (straight line or s-curve) loan method to determine leveraged financials.
ALSO, do you happen to have a hotel development model? I didn’t see it in the list of hotel options, only acquisition, value add, etc…
Hi Brett,
Thanks for the question. You are correct in that you would model it the same way you would a multifamily or any other development deal; as the goal of building out a development cash flow for any asset, hotel or otherwise, is to try to mimic the anticipated development schedule, and thus, the funding requirements over time. In that respect, there is no real difference to how we would model hotel development cash flows. There are, however, unique budget line items and considerations for hotels, which is a different question.
And if you are using debt, you will likewise build out a draw schedule the same as you would for any other asset type to properly allocate these costs between equity and debt (draw schedules are covered in Section 7 – Intro to Real Estate Debt).
To answer your second question, we unfortunately do not have a hotel development model, yet. In the queue…
Hope that answers your question and best of luck with this opportunity!
MB
Sounds good Michael, really appreciate it! The course that you guys designed is very helpful by the way. I’m learning some nuances to more robust modeling that I’m able to apply to our prospective deals as we speak. Thanks again! Look forward to watching the queue…
And just as a quick follow-up, would you recommend using the Apartment Development model and adding hotel specific operating tabs and details, OR should I use the Hotel Acquisition model and try to layer in development cash flows in Years 1-2, then push back Operating cash flows to Years 3 and beyond?
Conceptually, I have some idea of how either of these might work, BUT the reason that I’m asking is because I’m noticing that if I start moving things around, the links get messed up. I’m just hoping that you may have a better sense of the right approach specifically using your models.
The apartment model is more intuitive from my viewpoint, for what that’s worth!
Hi Brett,
I can’t speak to the apartment development model as that is Spencer’s and I am not as familiar with it. As for the hotel acquisition model, I don’t believe that is a great place to start for a customization to a development model mainly because there are a ton of Macros in it that would make customizing it in this way difficult, plus there is probably a bit too much optionality in it with regards to operating detail that may be overkill for building a brand new hotel. The model was really built to give a user the ability to work through a repositioning.
Spencer will have to chime in on his thoughts about his apartment model.
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