Real Estate Financial Analysis as Decision-Making reframes financial modeling not as a technical exercise, but as a disciplined process for evaluating risk, returns, and capital allocation decisions. Rather than focusing solely on how to build a model, this book emphasizes how investors and lenders interpret results, test assumptions, and make investment decisions in real-world contexts.
Organized around a structured, phase-based framework, the book guides readers from defining the investment question and strategic alternatives, through model construction and validation, and ultimately to interpretation, scenario analysis, and defensible investment recommendations. The case study approach mirrors institutional underwriting workflows, integrating Argus Enterprise and Excel while maintaining a clear separation between calculation and judgment.
This text is designed for graduate students, analysts, and practitioners who want to move beyond the mechanics of the pro forma and develop the ability to think critically about cash flows, capital structure, and downside risk. By focusing on decision context, sensitivity, and uncertainty, the book prepares readers to communicate effectively with investment committees, lenders, and capital partners—and to understand not just what the model says, but what it means.
Upon successful completion of this book, readers will be able to:
Investment Framing & Strategy
- Define a clear investment question and distinguish it from valuation or optimization exercises.
- Identify feasible strategic alternatives based on property characteristics, market conditions, and investor objectives.
- Explain how decision context (equity vs. debt, return targets, hold period) shapes underwriting assumptions.
Financial Model Construction
- Prepare a property-level cash flow model using Argus Enterprise and Excel that accurately reflects lease structure, operating assumptions, capital expenditures, and exit timing.
- Verify internal consistency across revenue, expense, debt, and equity schedules.
- Identify and correct common modeling errors related to timing, references, and assumptions.
Interpretation & Risk Evaluation
- Interpret unlevered and levered returns in the context of risk, capital intensity, and execution complexity.
- Explain why projected returns occur, not just what they are.
- Identify periods of heightened capital exposure and inflection points in the investment lifecycle.
Scenario & Sensitivity Analysis
- Evaluate downside risk through structured scenario analysis rather than reliance on a single base case.
- Assess how changes in key assumptions—such as leasing pace, exit cap rate, or hold period—impact value and returns.
- Determine whether projected returns adequately compensate for identified risks.
Decision Support & Communication
- Formulate a defensible investment recommendation grounded in cash flow analysis and risk assessment.
- Communicate findings clearly and professionally to investors and lenders.
- Identify conditions under which an investment recommendation would change.