Is the project worth building, and how should it be financed?
Model highlights
A development model for ground-up and value-add commercial projects. It follows the project from land and hard costs through construction, lease-up and stabilization to sale or refinance, and shows what the deal returns to the equity.
What's included
Key metric
Yield on cost is the stabilized net operating income (NOI) divided by the total project cost. It is the return the finished property earns on everything it took to build, before financing. For many institutional LP investors it is the first number they check to decide whether a development deal is worth a closer look.
Compare it with the cap rate buyers pay for similar stabilized properties. The gap, called the development spread, is the value you create by building instead of buying. Developers typically want yield on cost at least 1.0 to 1.5 percentage points above the market cap rate to justify construction and lease-up risk.
In a Qualified Opportunity Zone the after-tax picture improves further: investors can defer the capital gains they roll in, and gains on the new investment can be tax-free if it is held at least 10 years. Yield on cost still has to work on its own; the tax benefit is upside, not the reason to do the deal.
Yield on cost = Stabilized NOI ÷ Total project cost
Actual Phoenix OZ deal
The project was underwritten in 2021, when comparable cap rates were in the low 5s. Use current comparable sales for your own project.
No. If you can type numbers into a spreadsheet, you can use the model. Inputs are clearly marked and the guide walks you through each step.
An Excel (.xlsx) file plus a short guide, delivered as a download after purchase.
Yes. We build custom versions and fully custom models. Email us with what you need.
DisclaimerQuigley Capital does not provide financial, investment, legal, or tax advice. All templates, calculators, and content are for informational and educational purposes only. Outputs should be independently verified before use in any real-world decision.