Hi Reader,

Over the last couple of weeks, we ran our first Toronto Multiplex Feasibility Workshop.

In two sessions, we built a sample multiplex pro forma from the ground up—and then tried to break it.

I did not want this to become an Excel workshop. The spreadsheet is useful, but the real question we kept coming back to was:

Does this project actually make sense as an investment—and can the owner carry it?

A few key takeaways.

1. A pro forma is not a prediction tool.

It is a planning and risk-management tool. Its job is not to prove that the project works. Its job is to show us what needs to be true for it to work—and what could cause it not to.

2. Development is the process. The investment is what you own at the end.

The building still needs to operate after the architects, engineers and contractors have moved on.

The decisions we make about unit mix, sound control, storage, parking, finishes and building systems eventually show up in rents, vacancy, operating costs and tenant turnover.

3. A good-looking project is not necessarily a financeable project.

You might have a model that works on paper, but the lender is also looking at the borrower.

Do you have enough net worth and liquidity? Can you support the project at peak equity? Do you have the right experience and team around you?

At the end of the day, the project and the borrower both need to qualify.

4. Your rent assumption decides the deal.

That number affects value, debt capacity, the equity left in the project, annual cash flow and eventual returns. This is why the rent assumption cannot simply be whatever number makes the spreadsheet work.

You need to understand what tenants in that location will actually pay—and what they will not.

5. HST and ownership structure cannot be dealt with at the end.

The HST treatment, potential rebates, timing of payments and the legal structure between partners can all affect how much cash the project needs and who carries the risk.

These are not lines we should add to the model after everything else has already been decided.

The purpose of the pro forma is to help us get closer to one of three decisions:

Proceed. Revise. Or walk away.

Thanks to our guest contributors: Mike Zavershnik - 17A Properties, Hamia Aghaiemeybodi - TopDot Architects, Abtin Nikeghbali - Canada ICI, Rami Miransky and Mostafa Hosseini - BeeEquity for sharing their experience with the group.

We are now planning the next workshop.

If you own a property—or are actively evaluating one—and would like to receive the next dates and early-access information, you can join the waitlist below.

Best,

Payam Noursalehi

330 Highway 7 E, Richmond Hill, ON L4B 3P8
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