Reading a Development Pro Forma Like an Investor

Every development pro forma tells a story, and most of the story sits in five lines: absorption pace, exit capitalisation rate, construction contingency, financing cost, and the timing of the first dollar of revenue.

Sponsors rarely misrepresent these deliberately. More often the assumptions were set eighteen months ago and never revisited as conditions moved. Ask when each assumption was last updated and what source supports it.

The most useful stress test is simple: hold the exit cap rate constant and extend the schedule by six months. Projects that survive that test tend to survive the market.