Development Command Center 16 items
Developer Pro Forma & Underwriting Review Checklist
An underwriting review checklist for developers and lenders to stress-test a real estate development pro forma before committing capital.
USPAPASTM E2018
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Assumptions & Sources
- Are revenue assumptions (rents/sale prices, absorption) supported by a current market study? *
- Is the hard cost estimate supported by a GMP, bids, or a reliable cost consultant? *
- Are soft costs (design, permitting, financing, legal) fully itemized? *
- Is an appropriate contingency included for hard and soft costs? *
Capital Stack & Financing
- Is the sources-and-uses balanced with committed equity and debt? *
- Do loan-to-cost and loan-to-value ratios fall within lender parameters?
- Are interest reserve and construction loan draw assumptions realistic? *
- Is the debt service coverage ratio at stabilization acceptable? *
Returns & Feasibility
- Do the projected returns (IRR, equity multiple, yield-on-cost) meet the hurdle rate? *
- Is the untrended vs. trended yield-on-cost spread over market cap rate sufficient? *
- Is the exit/reversion cap rate supported and conservative relative to entry? *
- Is a residual land value or profit margin test performed? *
Risk & Sensitivity
- Has a sensitivity/scenario analysis been run on rent, cost, cap rate, and timing? *
- Are entitlement, environmental, and site condition risks reflected in the schedule and budget? *
- Is the development timeline (entitlement, construction, lease-up) realistic? *
- Underwriting recommendation *
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