Hotel Pro Forma Development for the Beginner: ULI Online Live Workshop

Held over four sessions, this new online workshop will guide students step-by-step through the construction of a development pro forma for a mid-size hotel property. Beginning with a blank spreadsheet, the program will take students through the entire project from development through sale. Students will be instructed in the basic differences between a hotel pro forma model and other asset classes such as office or multifamily and the corresponding inputs and structure. At the end of the last session, participants will have completed their own hotel pro forma that will actively link to a cash flow page, allowing students to understand the basic valuation of a hotel and how investment decisions are made.
Each session of the workshop is designed to build on the previous one with each participant having a completed pro forma model at the conclusion. Participants will use learned skills to independently build individual sections and maintain the pace of the workshop. However, to avoid the possibility of anyone falling behind, the completed stages will be distributed the evening of each completed workshop. At the conclusion of the workshop, the instructor’s copy will be distributed, which will provide, at a minimum, a working hotel pro forma model for each participant.

The program is designed to be interactive. The instructor will be available by e-mail between sessions to assist participants. Registrants will have access to the recordings of each of the four sessions.

Session 1: March 19, 2013 1:30-3:30 p.m. ET

The class will begin with a blank spreadsheet. Students will assign cell colors and design borders to separate areas, and create sections for the inputs for the basic hotel model. The amortization page will be provided and reviewed as part of this session.

Session Highlights
  • Understanding the basic hotel model to be developed
  • Understanding of the basic difference between a hotel model and other asset classes, e.g. multifamily and office
  • Understanding of the pro forma overview (structural overview) with the development piece
  • Understanding for developing input and amortization page
  • Major sections for inputs --sources/uses, revenue per available room (RevPAR), expenses, financing structure, operating/finance concerns

Session 2: March 21, 2013 1:30-3:30 p.m. ET

Starting with the completed structure from the first session, participants will develop the Construction Draw Page and Development Budget. Participants will understand the general structure of a development budget and how to spread/allocate costs.

Session Highlights

  • Structuring development budget
    • Components of development and methodology of how to model development timing, i.e. draw page
  • Basic functions, “sum”, “subtotal”, “product”, and the use of arrays
  • Cost allocation and distribution by percentage
    • Ability to identify critical path items which impact budget and schedule

Session 3: March 26, 2013 1:30 – 3:30 p.m. ET

In this session participants will develop the pro forma income page for the hotel project down to net income.  Participants will understand how to link assumptions and escalate costs over time, and understand basic functions and functionality, such as linking, adding/subtracting, and the subtotal function.

Session Highlights
  • Linking cells directly and through naming convention
  • Structuring cash flow for a project, e.g. revenue, expense
    • Understanding how cash flows enter and exit hotel model, i.e. inflow/outflow understanding
  • Determining cash flow before debt service
  • Determining cash position at points in time throughout the project
    • Development, lease-up and operations

Session 4: March 28, 2013 1:30 – 3:30 p.m. ET

In the final session participants will create a cash flow page for the entire project, i.e. development through sale.  Pulling it all together, participants will be valuing the cash flows for investment decisions. Linking the pro forma page to the bottom of the input/summary page and valuing cash flows, students will understanding basic valuation of a hotel and how investment decisions are made.

Session Highlights
  • Valuation (Debt Service Coverage Ratio; Cash-on-Cash; Debt Yield)
  • Cash Uses (Draw down and recovery)
  • Net Present Value (NPV function)
  • Internal Rate of Return (IRR function)
    • Levered and Unlevered
  • Modified Internal Rate of Return (MIRR function)
  • Advanced Valuation functions (XIRR, XNPV)
  • Bifurcation of cash flows (Operations versus Reversion)
  • How to present the data to a lender and/or equity partner
  • Analyze hotel economics and how RevPar is key component

Roger P. Staiger
Managing Director
Stage Capital, LLC

Roger Staiger is managing director for Stage Capital LLC, an international real estate advisory firm providing expertise to clients in areas of global portfolio management and asset repositioning. Staiger, through Stage Capital, has successfully repositioned over $500 million in distressed and inefficient real estate projects globally.

During his 20-year career, Staiger has worked in a number of industries at senior levels. He was managing director for Constellation Energy’s retail commodity division, CFO for Caruso Homes, and a portfolio manager for a large commingled pension fund in New York.

Staiger holds multiple degrees, including a BS in electrical engineering, an MBA in investments, an MA in international transactions, and an MS in finance. Currently, he holds faculty positions in the real estate departments at Georgetown University and Johns Hopkins University.

Staiger makes numerous capital market and economic presentations to organizations internationally. He also appears regularly on television and is often quoted in national periodicals and local newspapers.

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