Property Cash Flow (Rental/Lease)

This use case explains how to model rental and lease cashflows for income producing real estate in Model Reef.

You will:

• Represent each property or asset as its own branch.

• Model rent schedules, indexation, lease up and vacancy.

• Add operating expenses, outgoings and capex.

• Layer in debt service and produce a full property level cashflow and Cash Waterfall.

Model Reef is not a property management system. It is a driver based forecasting engine that consumes summary assumptions for rent, occupancy, expenses and financing and converts them into three statement outputs.

When to use this pattern

Use this pattern when:

• You own or manage income producing properties.

• You want a forward view of rental income, net operating income and cash.

• You need to see the impact of changes in occupancy, rent levels or funding costs.

• You want a property level view that can also roll into a portfolio model.

You will typically combine this with:

• Multi Property Portfolio Reporting

• Loan or Interest Sensitivity Planning

• Development Feasibility Model for assets under development.

Architecture overview

The property cashflow model uses four layers. Use the following to design the overall structure and data inputs for each property.

1

Structure

• One branch per property or per building.

• Optional sub branches per major tenant or space type.

• A portfolio branch above to consolidate.

2

Rental income drivers

• Rent per square metre or per unit by tenant or space.

• Lease terms, start dates and expiries.

• Indexation and rent review assumptions.

• Vacancy, lease up and free period assumptions.

3

Operating cost drivers

• Outgoings, repairs and maintenance, utilities, insurance and rates.

• Recoverable versus non recoverable expenses where needed.

4

Financing and capex

• Debt balances, interest and amortisation.

• Property capex, refurbishments and tenant incentives.

• Equity flows at acquisition, refinance or sale.

All of this flows into the standard P&L, Balance Sheet, Cashflow and Cash Waterfall outputs.

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1

Set up branches per property

In the branch tree, create a structure such as:

• Portfolio

  • Property - Office A

  • Property - Retail B

  • Property - Industrial C

  • Central Overheads (if relevant)

Each property branch will hold rent, operating costs, capex and debt for that asset. The portfolio branch is used for consolidated reporting.

If you have many small assets, you can group them into buckets such as Small Residential and model them as a pooled asset.

2

Build rental income drivers

For each property, define rental income using drivers in the Data Library, for example:

• Net Lettable Area or number of units.

• Rent per Square Metre per Year or rent per unit.

• Occupancy Rate or leased area percentage.

• Vacancy Loss Percentage for structural vacancy or downtime between leases.

You can either:

• Model at tenant level with explicit leases, or

• Model at property level using average rent and vacancy.

Example revenue variables in a property branch:

• Revenue - Base Rent - Office A.

• Revenue - Car Parking Income - Office A.

• Revenue - Other Income - Office A (signage, storage, etc.).

Formulas might be:

• Base Rent = Net Lettable Area × Rent per Square Metre × Occupancy Rate.

• Vacancy Loss = Potential Rent × Vacancy Loss Percentage.

• Net Rent = Base Rent minus Vacancy Loss.

Set these variables as type Revenue so they flow into P&L and cash.

3

Add indexation, rent reviews and free periods

To reflect common lease structures, create drivers for:

• Annual Indexation Rate (for example CPI or fixed percentage).

• Market Review Years or specific review dates.

• Rent Free Periods at the start of leases or on renewal.

Implement this with:

• Indexation drivers that step up rent each year or according to schedule.

• Schedules that reduce rent in specific periods for rent free incentives.

• Optional separate variables for incentives that are amortised over the lease for internal analysis.

The level of detail can be adjusted:

• Simple indexation and vacancy only for a quick view.

• Full lease by lease schedules for a single asset transaction model.

4

Model property operating expenses and outgoings

In each property branch, create Opex variables for:

• Opex - Repairs and Maintenance.

• Opex - Utilities.

• Opex - Insurance.

• Opex - Council Rates.

• Opex - Property Management Fees.

• Opex - Cleaning and Security.

Link these to drivers such as:

• Cost per square metre.

• Percentage of rent.

• Fixed cost per period with occasional steps for known increases.

If some outgoings are recoverable from tenants:

• Either net them into rent by using net rent assumptions, or

• Represent recoveries as separate Revenue variables (for example Revenue - Outgoings Recovery) and keep the gross cost visible in Opex.

Set timing to reflect actual billing and payment cycles so cash outflows and payables are realistic.

5

Add capex, tenant incentives and refurbishment

Use Asset variables to represent major property investments, for example:

• Assets - Base Building Capex - Office A.

• Assets - Refurbishment - Office A.

• Assets - Tenant Incentives - Office A where incentives are capitalised.

Define:

• Capex amounts and timing.

• Useful lives and depreciation rules where appropriate.

• Any residual value assumptions if you want to approximate book values.

Capex will drive:

• Investing cash outflows in the Cashflow Statement and Cash Waterfall.

• Depreciation in the P&L where relevant.

• Asset balances on the Balance Sheet.

This allows you to see how planned refurbishments and fit outs affect cash and profit.

6

Layer in debt and financing

If the property is funded by debt, create Liability variables such as:

• Debt - Senior Loan - Office A.

• Debt - Mezzanine Facility - Office A if applicable.

Specify:

• Opening balance if already drawn.

• Drawdown schedule if funding acquisition or capex.

• Interest rate assumptions (fixed, floating or blended).

• Amortisation or interest only periods.

• Covenants you wish to monitor (typically done in valuation or reporting views).

Because Model Reef handles debt using standard Liability logic:

• Interest will appear in P&L.

• Loan balances will appear on the Balance Sheet.

• Drawdowns and repayments will be visible in the Cashflow Statement and Cash Waterfall.

7

Build property level dashboards and metrics

Create dashboards at the property branch level showing:

• Gross rent, vacancy loss and net rent.

• Operating expenses and net operating income.

• Debt service, net cashflow before and after financing.

• Key metrics such as net yield, interest cover and cashflow coverage.

• Capex timing and impact.

At the portfolio branch, you can see:

• Total rental income and NOI across all assets.

• Aggregate capex and debt service.

• Cashflow capacity for distributions or further investment.

8

Use scenarios for rent, vacancy and financing changes

Clone the model into scenario models to test assumptions such as:

• Higher or lower rent growth.

• Changes in vacancy and lease up periods.

• Alternative capex and refurbishment strategies.

• Different interest rate paths or refinancing structures.

• Disposal or acquisition of properties in the portfolio.

Adjust the relevant drivers and variables in each scenario and compare using:

• Property level and portfolio level P&L.

• Cashflow capacity under different cases.

• Debt service metrics.

• Valuation outputs from the Valuation Engine.

Check your work

• Rent levels, vacancy and expense ratios match recent evidence when the model is calibrated.

• Lease structures and indexation behaviour are captured at an appropriate level of detail.

• Debt terms and covenants reflect actual or proposed financing documents.

• Property level results aggregate logically into portfolio views.

Troubleshooting

Net operating income looks inconsistent with history

Check occupancy, rent per square metre and expense assumptions. Reconcile against historical statements and adjust drivers accordingly.

Cashflow is too volatile or too smooth

Refine timing of rent receipts, expense payments and capex, and check that you are not double counting or omitting large items such as incentives.

Too many minor tenants or small properties to model individually

Aggregate into representative groups or pooled assets and only model major assets or anchor tenants individually.

Related guides

• Build a Live Actuals Model Using Xero

• Build a Machine Readable Model for Automation

• EBITDA Logic

• Scenario Toggle Behaviour