FIGURE 8.

4: LAND DEVELOPMENT PRO FORMA BUDGET FORMAT

SALES Units Price/unit Amount

Product #1 [e.g., conventional single family lots]* #Lots average lot size or marketable front feet per lot. units x p/u
Product #2 [e.g., townhouse site] #Sites/du/site $/acre based on density units x p/u
Total Sales # $ Linked to Cash Flow
*Classify similar products together. This facilitates changes to the budget if unit prices change
REVENUES
Sales Revenues [sm] $ Sum
RE Commission plus other Costs of Sale* RE Com negotiated % of selling price. $ Linked to Cash Flow
Net Sales Revenue $ Linked to Cash Flow
*Legal costs, registration at land titles, discharge of financing, and transfer of title
LAND COSTS
Land Purchase* acres, sq ft or m $/ unit $
Sales Commission negotiated com expressed as % of LP $
Other Acquisition Costs usually fulfilling a vendor request $
Total Land Costs $/unit* $ Linked to Cash Flow
*This is an important number for comparsion with other comparable sales
CONSTRUCTION COSTS
Offsite work [roads, shoring, utility connections, trunk lines, sewage plant improvements, etc.,] may $ Linked to Cash Flow
or may not be required at the frontend, referred to as a frontend expense. Offsite works are unique costs—no rule of thumb
Access roads metres $/metre [may or may not include u/g utilities] $
Trunk utilities m $/metre $
Water reservoir cubic metres $/cubic metre $
Pumping Station
Onsite work $ Linked to Cash Flow
Site preparation [ tree cutting, grubing, stream protection, blasting,rough grading, filling, compacting, etc.] $
Rock work [If extensive, include as separate item] site preparation and rock work covered by separate contracts $
Road work [covered by separate contract with road builder] $/m $
Sanitary m $/m $
Drainage m $/m $
Waterworks [sanitary, drainage, and water covered in one underground utility contract] $
Hydro, tel, gas–u/g civic works [ each utility has own contract] $
Streetlighting [separate contract or part of Hydro] $
Layout/as constructed [engineering design, working, and as built drawings] $
Survey [subdivision survey by registered land surveyor and plan registration costs] $
Landscaping [ Contract for Front entrances, boulevards, parks and playgrounds] $
Contingency [expressed as a % of construction costs; varies with perceived risk: normal–10%; high–20%] $
$
Total Construction Costs $ Linked to Cash Flow

OTHER DEVELOPMENT COST

Fees
Planning &Engineering [engineering fee usually partitioned into design and construction supervision] $
Fees vary but are in the order of 10-15%
Design control [architectural control] Project or Dwelling unit $
Marketing/advertising & PR [costs based on marketing plan; could have several subcontractors, each with a separate contract] $
Legal [Land purchase contract, mortgage and sales administration] $
Landscape consultant [involved in subdivision design, landscaping design for designated areas, and contract management] $
Management [project management (5% of construction cost)] $
Financing [financier's financing fees and miscellaneous costs] $
Municipal [application fees] $
Development cost charges [for public infrastructure related to the development project] $
Taxes
Property Purchase Tax [in BC paid by vendor] 1–2% $
Property Tax [note in a development project, the property taxes could be shared between seller and buyer. Assessed property $
value based on status of project at the time of assessment]
GST [2% of development costs is a good approximation] $
Interest Cost
Development Interest [this is the interest incurred in the construction of a project.] $
Interest on land inventory [this is the interest needed to carry the project when the project experiences a negative cash flow $ Linked to Interest in Cash Flow
or deficit. It is calculated in the cash flow]
TOTAL DEVELOPMENT COST $ Linked to Cash Flow

PROFIT $ Linked to Cash Flow

RESIDUAL LAND VALUE* $ Linked to Cash Flow

PROFIT MARGIN $ Linked to Cash Flow Expected Estimated

Profit/Cost 20%
Profit/Revenue 15%

*If you are calculating the residual land value your results can either be placed
in the land category or below as residual land value
FIGURE 8.6: RENTAL BUILDING DEVELOPMENT PRO FORMA BUDGET FORMAT

Project Date
Location Prepared by
Project Type H. O. Approval
File No.

FINANCIAL SUMMARY [building pro forma budgets tend to be longer; hence a summary is helpful]

Project for Sale Total

Development Cost (DC) (page 2) $
Net Revenue (NR) (page 1) $
Economic Value based on Capitalization Rate [EV = NOI ÷ CR] % [Capitalization Rate] $
Potential Profit (EV-DC) $
Profit Margin [profit ÷ development cost] %

Project to Hold
Estimated Mortgage (M) @ % of Economic Value $
Equity Required (DC-M) $
Debt Service (DS) Mortgage @ % for years $
DS Constant (to determine effective annual % rate) # (if compounding period different from annual;
Cash Flow (NR-DS) e.g., Canadian Mortgage–semi-annual) $
Yield (Cash Flow over Equity) %

Notes and Recommendations

(identify benefits, costs, and risks of particular project)

REVENUE

Gross Revenue
Unit #1 (sq ft or sq m) @ Net Area** $/sq ft or sq m (tripple net [all operating and $
Unit #2 maintenance costs, property taxes, and fees $
Unit #3 paid by tenant] $
Inside Parking stalls x per month fee $
Outside Parking $
Total Revenue $

Expenses
Vacancy Allowance based on local market conditions–arround 5% $
Management Fee negotiatable usually around 5% $
Land Rent if land is leased $
Reserve for Repairs not covered by triple net lease–landlord responsibility $
Total Expenses $

Revenue Summary
Gross Revenue $
Expenses $
Net Revenue $
DEVELOPMENT COSTS

Land Cost
Land Purchase $
Acquisition Costs $
Carrying Cost for months (interest) % $
Total Land Costs $

Construction Costs
Building sq ft or sq m @ Gross Area** unit price $
Parking unit price $
Basement unit price $
Tenant Allowance unit price [developer's construction allowance for $
Offsite Servicing the tenant–amount varies with market supply $
Municipal Assessments and demand for similar space] $
Site Servicing $
Landscaping $
Subtotal $
Contingency % The contingency is reduced as construction $
Total Construction Cost advances–perceived risk reduces $
Other Development Cost (page 3) $
Total Development Cost $

Other Development Cost

Fees fees vary considerably with the complexity of the project–
perhaps 1% of construction fr an often-repeated design
to 10% from major shopping centre renovation.
Architectural % $
Engineering, HVAC % $
Engineering, Site % [clearing, excavating, grading, piling, hoarding, signs $
Legal preparation of land purchase or lease contract, tenant leases, $
Survey [interior and exterior] joint-venture contracts, project sale contract $
Permits, Development $
Insurance $
Mortgage % $
Mortgage Insurance $

Taxes
Building according to municipal formula $
Land for duration of ownership, annualized $

Interest
Interim on Land amount x interest rate ÷ 12 x months $
Interim on Building amount x interest rate ÷ 12 x months × 50% $

Other
Utilities for the use of utilities during construction and
Promotion other marketing expenses
Leasing Net Revenue × 5% × 1 yr + NR × 3% × 4yrs $
Revenue Loss (Rent Rate ÷ 12 × Area × % not leased $
(Capitalized Vacancy Loss) × months to lease × 50%)
Subtotal $
Overhead developer's allocated administrative costs $
Total Other Development Cost $

**Note the difference between gross and net area in calculating construction costs and revenues.
Gross area is the total building area. Net area is leaseable area in a commercial building
or the saleable area in a residential condominium.
FIGURE 8.5: CONDOMINIUM DEVELOPMENT PRO FORMA BUDGET FORMAT

SALES Units Price/unit Amount

Condominium Apartments # $ units times price per unit

Total Sales #

REVENUES
Sales Revenues [sm]
RE Commission plus other Costs 5%
Net Sales Revenue

LAND COSTS
Land Purchase* acres, sq ft, or sq m $ units times price per unit
Sales Commission negotiated com expressed as % of LP $
Other Acquisition Costs usually fulfilling a vendor request $
Total Land Costs $/unit* $
*This is an important number for comparsion with other comparable sales

CONSTRUCTION COSTS
Div 1 - General $
Div 2 - Site Work $
Div 3 - Concrete $
Div 4 - Masonary $
Div 5 - Steel $
Div 6 - Wood $
Div 7 - Thermal and Moisture Protection $
Div 8 - Doors and Windows $
Div 9 - Finishes $
Div 10 - Specialities $
Div 11 - Equipment $
Div 12 - Furnishings $
Div 14 - Elevators $
Div 15 - Mechanical $
Div 16 - Electrical $
5% Contingnecy $
$
Total Construction Costs $

OTHER DEVELOPMENT COSTS

Professional fees and charges
Architectural $
Engineering (structural, mechanical, electrical, civil, geotechnical, building envelope) $
Environmental report $
Legal $
Survey $
Development Permits $
Development Cost Charges $
Service Connections $
Insurance $
Loan Fee 0.75% $
Mortgage Insurance $
Appraisal/Market Study $
Total Professional fees and charges $

Property Taxes
Building according to municipal formula $
Land for duration of ownership, annualized
Property Purchase Tax [in BC paid by vendor] 1 – 2% $
Property Tax [Note: in a development project, the property taxes could be shared between seller and buyer. $
Assessed value based on status of project at the time of assessment]
GST [2% of development costs is a good approximation] $
Interest Cost
Development Interest [from cash flow] $

TOTAL DEVELOPMENT COST $

PROFIT $

RESIDUAL LAND VALUE* $ Linked to Cash Flow

PROFIT MARGIN $ Linked to Cash Flow Expected Estimated

Profit/Cost 20%
Profit/Revenue 15%

* If you are calculating the residual land value your results can either be placed
in the land category or below as residual land value
** The construction costs are organized in divisions related to the categories