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Thread: Resources for proforma applications in planning?

  1. #1
    Cyburbian kalimotxo's avatar
    Feb 2009
    The Old Dominion

    Resources for proforma applications in planning?

    This semester I'll be working with a professor to design a one-credit module dedicated to proforma analyses and their applications in planning. The basic idea is to introduce interested MURP students to proforma, give them a "so what" explanation of the topic, and do some exercises working with a basic 10 or 15-year discounted cashflow model. The module will take the form of three sessions of 3-4 hours apiece so time is limited and I'm looking to enable students to get the most out of what we're offering. Therefore, I'm looking for advice from teh Throbbing Brain concerning the following:

    1. For those of you in the professional world, what are some salient aspects of proforma covered (or that you wish were covered) in your planning program? What do planning students need to know about financial feasibility to deal with public-private ventures, hold their own against developers that may not have their best interest in mind, etc, etc?

    2. Are there any books or other resources out there that provide a solid but easily understood overview of proforma applications in planning?

    Any suggestions or comments would be greatly appreciated!
    Process and dismissal. Shelter and location. Everybody wants somewhere.

  2. #2
    Cyburbian The District's avatar
    Nov 2005
    New Hampshire Seacoast
    The biggest misunderstanding I have found among my planner clients is an underestimation of the amount of sensitivity to even small changes in investment factors like rates of return, cap rates, and inflation. Changes in rents, sale prices, and operating expenses don't have much of an impact, but the accelerating/cumulative effect of cap rates, rates of return, and inflation are such that even fractions of a percent can change a project's profitability by tens of millions of dollars. Therefore, I'd recommend you talk to your students about sensitivity and its significance in a pro forma model.

    For a one credit module, I would shy away from a textbook or website and simply take students through a simple pro forma in class. There are very few SIMPLE and SHORT explanations out there.

  3. #3
    Sep 2010
    Quad Cities, IA/IL
    That sounds like a tall order for a one-credit class. I agree with District... minor changes in the discount rate will make a significant diference on the end result. A sensitivity analysis would be a good approach and can show a best and worst case scenario and this could bring about good discussions about what is a realistic expectation, especially in the current ecomonic environment. The further out you go, the more error is introduced to the pro forma because markets change, laws change, and therefore your assumptions must change in your pro forma over time.

  4. #4
    Sep 2010
    Austin, Texas

    Give 'em a spreadsheet

    We had a great spreadsheet that we used for feasibility analysis when I processed Tax Credit applications for multi-family housing developments. I would recommend putting your hands on one of those, and using that to show the students how sensitive it all is to the factors mentioned in the other two posts. Just by playing a sensitivity analysis with it, you can show what happens when you change any of the factors mentioned in the other two posts.

    As for where to find such a spreadsheet, I'm not sure, but if you contact Ben Shepherd, at the Texas Dept. of Housing and Community Affairs, he can probably email you one. Just tell him I sent you. I am pretty sure it's not proprietary, so just ask him. It's the Excell proforma spreadsheet, and he can send a blank one or maybe one that has some real numbers in it.

    The lesson would be a good demonstration of really how sensitive the pro-forma is to each of these variables.

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