MPC/HB looks at Developer as a (i) land developer, (ii) home builder, (iii) seller of Land Parcels (“LP”s) to Third Party Home Builders (“3rd PHB”s), (iv) Seller of Income Properties (“IP”s) to 3rd Party Developers, and, (v) IP developer/owner of select IPs.
The Income Property Suites Programs are designed to link to MPC/HB when selected as a part of a Project.
The permutations and combinations of debt, equity, home sales, LP and IP sales and IP income are almost infinite.
The Program has an AIR that runs in Section 14 - Golf Impact on Project Economics of Program Setup that allows User to make entries that affect the sales prices of (i) Land Parcels, and, (ii) both Developer and 3rd PHBs homes. See the discussion of " Golf Community Impact" in the Golf Module.
If any of the 12 Income Properties are incorporated in the Project, there are two steps that must be followed:
Data input for the Program is handled by offering User a guided procedure for making entries, choices and decisions. Such a procedure we refer to as an Automated Data Input Routine (“AIR”). There are 18 AIRs in the MPC/HB Program. They appear as User works through the 30 Section “Project Setup" routine (see "Contents"). Not all Sections required inputs, choices or selections.
A click on the light bulb icon will bring up a message box that tells User about the information accessed by each button on Navigator.
A click on the green question mark will open up the “What-If?” Screen.
| Program Setup - Master AIR | AIR | Skip Over | Jump To Section | |
|---|---|---|---|---|
| 1 | Setting Up | AIR | No | No |
| 2 | Land Use | AIR | No | No |
| 3 | Calendar Timing Inputs | AIR | Yes | No |
| 4 | Developer’s LPs Setup Rental Home Community |
AIR 4a AIR 4b |
Yes Yes |
No No |
| 5 | Models, Specs, S/LB, FF&E | AIR | Yes | 2 |
| 6 | Developer’s Homes Construction | AIR | Yes | 24 |
| 7 | Land Pricing | AIR | Yes | 2,24 |
| 8 | Home Builder's Design Center Setup | AIR | Yes | No |
| 9 | 3rd PHB Setup | AIR | Yes | 2 |
| 10 | Land Development - Costs & Rebates | AIR | Yes | No |
| 11 | HOA Budgets and Burden | AIR | Yes | No |
| 12 | Land Purchase Contract - Deposits | AIR | Yes | No |
| 13 | Debt Finance Setup Debt Guarator |
AIR 13a AIR 13b |
Yes | 24 No |
| 14 | Golf Impact on Project Economics | AIR | Yes | 24 |
| 15 | Equity + Land Seller JV; Developer Carried Interest; Debt Guarantor Carried Interest. |
AIR | Yes | 2,7,24 |
| 16 | Cash Distribution(s) Setup | AIR | Yes | No |
| 17 | Land Cost Allocations to LPs | Confirmation | Auto-Prompts for input | |
| 18 | Income Property Links Ck | Confirmation | Display Linked Files | |
| 19 | Income Property Selections Chart | Chart showing Acreage allocation to all Land Uses | ||
| 20 | Income Property Uses Display | On-Screen run down of all Income Property Types and Status in the Project | ||
| 21 | Retail Center Setup Ck | Alerts if any settings are needed. | ||
| 22 | Report: Equity Provided by Project to Developed Income Properties | Report – Only shows when Project is developed with one or more IP(s) | ||
| 23 | Commercial LPs Lease Rate Auto Adjust | Report - AUTO resets any Commercial LP lease rate that results in less than Targeted ROI | ||
| 24 | A "post data input" AIR allowing User to fine-tune IRR. See “What-If” Analysis. | AIR | User works through different LJL setups to see IRR results | |
| 25 | Display Cash Flow Summary | Option to view Consolidated Cash Flow Statement | ||
| 26 | IRR Report and Equity Charts | Option: view each Equity Class's Contributions and Distributions, by month. | ||
| 27 | Go/No-Go Routine & Go See Screen with Issues | Option to view automated review of all input screens status w/ go-to any w/ issues | ||
| 28 | Developer’s Home Sales Chart | Chart showing Developer’s Home Sales closings, by month, by LP, by UT | ||
| 29 | Tour Input Screens | Auto guided tour to each DI Screen to view setups | ||
| 30 | Program Wrap-up & Close | AUTO routine that displays alerts by any Input screen’s marker that has an issue | ||
"What If" is essentially a KPI What-If? Analysis tool. It allows the User to manipulate and measure four major Project Economic Elements which in aggregate have the greatest effect on determining the feasibility of a Project.
After all data input is provided to the Program via Sections 1 through 16, User has the opportunity to test key decisions that have the greatest impact on IRR.
Section 24 of Program Setup has an option to play the WHAT-IF? game.
By selecting this option, User is taken to the “What-If” Screen. Here, User is offered two ways to play:
Random - User works in any order through the four elements of data input:At any point User may call for an IRR computation to test the new setup.
Guided - User is taken sequentially through the four elements of data inputs and offered IRR updates at the end of each element.
On-Screen charts and graphs assist User in understanding the dynamics of each setup. An optional printout of the Screen gives User a report for future reference.
To view a further explanation of how What-If ties in to the evaluation of Program IRR results, click on tab “Input Flows”.
In order for the Project to resolve the cash requirements of a linked IP, the MPC/HB Program receives the following three sets of linked data from the IP Program:
| Sources of Funds | ||
| Cash (Equity Investment from Parent) | 1 | $4,500,000 |
| Uses Of Funds | ||
| Operating Cash Distributions to Parent | 2 | $1,750,000 |
| Liquidation Distribution to Parent | 3 | $7,200,000 |
| Sources of Funds | ||
| Operating Cash Distributions from Hotel | 2 | $1,750,000 |
| Liquidation Distribution from Hotel | 3 | $7,200,000 |
| Uses Of Funds | ||
| Cash (Equity Investment in Hotel) | 1 | $4,500,000 |
| Nav Button | Screen Name | AIR | On-Screen | Setup Section |
|---|---|---|---|---|
| CA | Land Fully Absorbed Costs – Allocation to Uses1 | N | X | |
| CD | Equity-Holders’ Priorities, Preferences & IRRs | Y | 16 | |
| D | Debt Financing | Y | 13,24 | |
| DC | Design Center | Y | 8 | |
| E | Equity Financing | Y | 15,24 | |
| HOA | Home Owners Associations | Y | X | 11 |
| L | Land Price | Y | 7,24 | |
| L | Land Seller JV | Y | 15,24 | |
| L | Developer’s LPs Setup | Y | 4 | |
| L2 | Acres Allocations; LPs; IPs; Streets; Setbacks | Y | 2 | |
| Lc | Land Purchase Contract Deposits | Y | 12 | |
| LT | Land Parcel Disposition Finance Transactions | N | X | |
| M | Project Timing; Home Construction | Y | 3,6 | |
| MS | Models, Specs, S/LB, FF&E setup | Y | 5 | |
| NL | Names & Labels | N | ||
| S-1 | Development Costs; Developer’s Overhead | Y | 10 | |
| S-2 | Professionals; Amenities; Real Estate Taxes; Economic Development Incentives | Y | 10 |
When the election is made to employ Developer's LP-1 as a rental home community, User will be taken through a series of inputs that are designed to facilitate:
When the Rental Home Community Option is elected, the Program eliminates any Models and Specs otherwise designated for LP-1. In the Rental mode, the Program remains unaffected as to the following:
NOTE! A Screen M alert will appear on Screen L. That will be for ''Low Profit'' for Home Sales in LP-1. This results from Sales and Retro-fit Expense absorbed in the month of Liquidation.
All Rental Homes are sold in the last month of the Project's Program Calendar.
At the end of the Rental Homes setup routine, User is shown a comparative analysis of:
WIP as of 10-12-2017:
The Program Calendar extends for 120 months (10 years). Program events are timed into the Program Calendar by either numerical or date formats. Data Input Screens report events in both (i) Program Months and (ii) Calendar Months. Here is an example:
Note: In the Beta version of MPC/HB and all IP Suites Members, the Program Calendar will be 240 months.
Program On-Screen alerts notify User during setup when a density Program Constraint is violated and ques User as to an acceptable entry.
A strong contributor to a profitable Master Planned Community is the sale of residential land parcels to 3rd PHBs. In that regard, MPC/HB allows up to 40 Land Parcels to be designated for residential subdivisions. There are three abbreviations associated with residential LPs: (i) LP for all LPs, (ii) DLP for Developer’s land parcels; and, (iii) 3rd PHB LP for third party homebuilder land parcels. Program design constraints impose the following limits for a Project:
If Developer elects less than 8 LPs, the maximum number of LPs for the Project is 32 plus the number of LPs allocated to Developer. The AIR in Section 9 - Acreage Setup, guides User in handling the LP setup. The 3rd PHB LP setup can be handled in one of two modes, either (i) Manual or (ii) Auto.
Givens - Based on the setup of Total LPs, Developer LPs and Acres allocated to Developer LPs, the Program determines the number of (i) LPs; and, (ii) Acres for assignment to 3rd PHBs.
Land Price is one of the most significant variables in the financial structure of a real estate development. In this AIR, User is given the opportunity to test the impact on Project IRR while making the Land Price decision.
User has three land purchase pricing methods from which to select:
The resulting Land Purchase Price is compared to Appraised Value (“AV”), which is a User input. If User’s price is over or under AV, User will receive an alert and a suggested price which User may elect to have the Program employ or User may elect to keep the existing setup.
Later in the Project Setup routine, in Section 24, User has the opportunity to change both Land Price and the Equity setup (including the “JV with Land Seller” option) to evaluate effects on Project IRR.
This accommodates the Land Seller contributing all or a portion of the Land Purchase Price to the Project. The JV decision is made in an AIR that occurs in Section 15 of Program Setup.
Land Seller JV Decision – User makes an entry during the AIR that tells the Program if there is a JV between Land Seller and the Project. If there is a decision for a JV, the second entry will be queried. If a JV is not elected in the first step, there will be no query for the second entry.
JV Elected – The percentage of Land Price contributed to Project as Land Seller’s Equity will be requested. This entry sets the percentage of the Land Purchase Price that will be contributed to the Project by Land Seller. Class E-7 is reserved for Land Seller’s Equity account. The percentage data entry is validation controlled in a range of 10% to 100% of the Land Purchase Price.
Timing of Land Seller’s Capital Contribution - When a Land Seller JV is elected, Land Seller’s capital contribution occurs in the month of the Land Purchase closing.
| Gross Acres acquired | 1200 | ||||||||
Acreage Allocation for non-development purposes:
|
200 | ||||||||
| Acres for Developer’s DLPs | 600 | ||||||||
| Total acres allocated to IP’s selected as part of the Project (individual IP’s selected and acres allocated) | 80 | ||||||||
| Remaining acres are assigned to 3rd PHB LPs. (under “Suites Release Schedule”, see "Suite Members") | 320 |
Golf Course Information: Golf Module
Acres allocated for an IP have two usage options:
The AIR in this Section of Program Setup takes User through the Acres acquired, Acreage allocation, IP selections and Density setup. Inputs subject to Program Design Constraints have a validation component in the AIR.
A maximum Project configuration would consist of:
An AIR is being developed for this data input section.
The Program is engineered to accommodate up to seven equity classes if used in a manual setup mode and six classes when used in the Program Setup mode.
A minimum number of equity classes would be one, two or three, as follows:
Cash Distributions are handled in Section 16 in Program Setup. Each Equity Class is set up in an AIR that employs a DI Form, as shown in the following:
| Available for Project | Y/N | Note: There is a Table for each Equity Class, 1 through 5 | |||
|---|---|---|---|---|---|
| Eligible | Rate | CUM | ROC | IRR Term | |
| Preferred | Y/N | % | Y/N | Y/N | % |
| 1st Priority | Y/N | % | Y/N | Y/N | % |
| 2nd Priority | Y/N | % | Y/N | Y/N | % |
| 3rd Priority | Y/N | % | Y/N | Y/N | % |
Options for cost allocation methods for Off-Site Cost Items include:
Note: Regarding the Off-Site Development budget, a potential significant one-time cost factor pertains to dry utility providers. Most dry utility providers require full payment in advance of construction. This means they will not schedule your project for construction until full payment and the signed contract have been received. The service provider must also be provided with a recorded final plat and necessary easements.
User has two choices as to the scope of detail to provide for the Site Development Cost section:
For the purpose of a Project’s feasibility analysis, the Home Construction Cost component of the MPC/HB Program provides User with several “big picture” tools and procedures to use in developing home construction cost and revenue factors. These tools and procedures are described below:
User Guided Input Routine – User is guided in the setup by an AIR that runs in Section 5 of Program Setup. The AIR offers a flexible approach to setting up each of the four sub-sections as follows:
User navigates to the HOA DI Screen and with On-Screen inputs completes the HOA budget.
HOA funding is handled, as follows:Home Buyers progressively take on a larger share of the HOA operating cost to a point where they, and the IP owners (inlcuding Developer), relieve Developer and 3rd PHBs of the HOA burden.
The MPC/HB software currently has a capability of one master HOA. Multiple HOAs will be accommodated in the Beta Test version.
This is more of an internal computational schedule than a DI Screen. The process conducted by the algorithms in this schedule assures that the Land Purchase Price is allocated on a Per Acre basis across all Land Uses.
Generally, User is not called on for input. Certain Commercial Center elections require User to make an input. In any such event, User receives an On-Screen alert as to specific action to undertake.
Here is an example of User electing 5 UTs for one of the DLPs. The Program’s selection of which 5 UT’s is based on Users choice of Low, Middle or High:
| UT# | SF | Cost/SF | SP/SF | Low | Mid | High |
|---|---|---|---|---|---|---|
| 1 | 1700 | $100 | $250 | X1 | ||
| 2 | 1800 | 105 | 255 | X2 | ||
| 3 | 1900 | 110 | 260 | X3 | ||
| 4 | 2000 | 115 | 265 | X4 | X1 | |
| 5 | 2100 | 120 | 270 | X5 | X2 | |
| 6 | 2200 | 125 | 275 | X3 | ||
| 7 | 2300 | 130 | 280 | X4 | X1 | |
| 8 | 2400 | 135 | 285 | X5 | X2 | |
| 9 | 2500 | 140 | 290 | X3 | ||
| 10 | 2600 | 145 | 295 | X4 | ||
| 11 | 2700 | 150 | 300 | X5 |
(SF-Square feet, CC/SF-Construction Cost per SF, SP/SF-Sales Price per SF)
Fully Applied Land Cost (“FALC”) is determined by adding to the Land Purchase Price all Project costs.
The Program is preset as to these methods of FALC allocation but User may change the setup.
Design Center is the Master Planned Community’s marketing center. It’s where visitors arrive and is the portal to the Project itself. It is the Project’s show-pony.
A well-conceived Design Center contains a common area which features the master plan topographical table model showing the layout of the streets, amenities, land uses and golf route (where the MPC is a golf community). Each residential subdivision is featured as are the income property land parcels. Ideally artist conceptual renderings of the built-out MPC will be on display.
As the residential land parcels are sold to 3rd PHBs, they will occupy their own area in the Design Center where models and renderings of their homes, floor plans and upgrade options are displayed.
In Section 8 of Program Setup, an AIR queries User to determine the size of the Design Center, the acreage required and the cost of (i) the Design Center building, (ii) FF&E; (iii) landscaping; and, (iv) development fees. A Debt financing option for the Design Center costs is included in the AIR.
Home Construction Loan Facility (“HCLF”) – Where Developer is also a Home Builder, the Program offers three classes of Construction Loans:
In that the HCLF may be from either the same or different sources for the three classes of homes (Models, Specs and Production), the Program offers three facilities.
This facilitates a User Option to select (i) unique terms and conditions; or, (ii) set up all three classes the same.
Setup inputs include:If Developer elects not to sell the Models under a S/LB, FF&E financing is an option.
This routine runs in Section 5 (Models and Specs) in Program Setup.
Finished Lot Sale & Repurchase Agreement1 (“FLS/RA”) – A FLS/RA transaction with a Land Banker may be the Land Loan Replacement source, in which case:
Where Developer elects to develop and own an IP, Debt financing is set up in the Income Property’s program. Note: The Project handles all Equity requirements for Project owned IPs.
Loan costs will be financed in the Replacement Loan. The Replacement Lender will be the A&D Lender.
is a User input. It sets Developer’s sharing in Cash Distributions after payments of Priorities and Preferences to the other Equity Classes.
are listed in the Debt and Equity DI Screens and consist of capital costs eligible for Debt and Equity financing.
Before the point in time where the Property has operating cash sources (Land Parcel sales, Home Sales, Sharing in 3rd PHB Homes Sales Revenue and Net Cash Flow from Developer owned IPs), to the extent Debt proceeds do not cover costs, the remainder will be funded by one or more classes of Equity.
Once the property is on a “cash flowing” footing, net cash flows relieve Equity of Cost Item funding(s).
During the Operating Cash Flow period, for a number of reasons, negative cash flows may occur. Equity Class 3’s role is to fund any such monthly negative cash requirements.
User inputs are required to establish the parameters of the Cash Distribution Waterfall. At User option, the following distribution steps may be employed for each participating Equity Class:
|
Rate of Return (NA if Class not eligible for the event) |
||||
|---|---|---|---|---|
| Equity Class | Pref. Rate | 1st Priority | 2nd Priority | 3rd Priority |
| E-1 | ||||
| E-2 | ||||
| E-3 | ||||
| E-4 | ||||
| E-5 | ||||
| E-6 | ||||
| E-7 | ||||
| ROC1 Y/N | ||||
1 ROC – Return of Capital - Used in the Cash Distributions setup to classify each cash distribution step as an event that does or does not reduce Equityholders’ capital account balances. This effects the burn-off of Priority Rights in the Cash Distribution Waterfall.
Alerts and Messages to assist User.
When the IRR routine is initially called during the Section 23 AIR, User is queried for an “increment of change” input for the IRR calculation. Otherwise, the IRR routines are computed in an algorithm that requires no action on the part of User. IRRs are determined for each Equity Class and for the Project.
Each of these topics, and many others, are covered in the Master Users Guide and in Topical User Guides accessed via On-Screen button clicks. User Guide documents open in a separate window making two screen or split screen operation preferable while learning the Staircase MPC/HB software. As of August 1, 2017, Topics include:
