Building a Development Pro Forma That Survives Reality

8 min read

Most pro formas fail in the same three places: the schedule is optimistic, the site work is underestimated, and the contingency is decorative. Fixing those three inputs changes the answer more than refining rent assumptions to the dollar.

Structure before precision

A pro forma has four blocks:

**Acquisition** — land or building price, closing costs, due diligence, survey, geotech, environmental
**Soft costs** — design, engineering, permits, impact fees, legal, insurance, financing, owner''s rep
**Hard costs** — site work, shell, interiors, sitework restoration, contingency
**Revenue and exit** — lease-up or sale, operating expenses, capitalization or sale price

Getting the structure right and the numbers roughly right beats a precise model with a missing category.

Soft costs are consistently underestimated

On many small and mid-size projects, soft costs run a meaningful share of total project cost, and owners often carry a placeholder that ignores half the list. Build the line items explicitly: design fees by discipline, permit and review fees, impact and tap fees, survey, geotechnical, environmental, testing, legal, title, insurance, financing fees, interest carry, and owner-side management.

Carry cost is a schedule input, not a cost input

Interest carry, general conditions, taxes, and insurance are all duration-driven. If your model assumes a permitting window that a jurisdiction cannot actually deliver, every carry line is wrong by the same percentage.

Test the model at three durations:

The optimistic schedule the team promised
The realistic schedule based on recent comparable approvals
The optimistic schedule plus six months

If the third case kills the deal, you have found the real risk.

Site work is where Lowcountry projects break

Coastal sites carry conditions that a generic cost-per-square-foot number does not contemplate: high water table, poor bearing soils, required fill, stormwater detention area, wetlands and critical area buffers, deep utility runs, and elevation requirements.

Before you finalize hard costs:

Get a geotechnical report, not a neighbor''s anecdote
Price structural fill by the yard with a real haul distance
Confirm stormwater approach and the land area it consumes
Confirm finished floor elevation requirements and what that does to fill and access
Confirm utility capacity and connection point distance

Contingency has to be sized to unknowns

Contingency is not a fixed percentage. It is a function of how much you know. Early feasibility with a concept plan warrants far more than a fully permitted project with complete drawings and a bought-out subcontractor list.

Practical approach: set contingency high at feasibility and step it down at defined milestones — schematic design, permit set, buyout complete — releasing the difference back to the model only when the underlying uncertainty is actually resolved.

Sensitivity, not certainty

Run the model against a handful of shifts and look at which single variable moves the outcome most:

Hard cost up ten percent
Schedule extended six months
Rent or sale price down five percent
Interest rate up one point

The variable with the largest swing is the one that deserves your management attention and your due diligence dollars.

The go / no-go discipline

Write down, before you are emotionally committed, the conditions under which you walk. A stated walk-away number is the only reliable defense against escalating commitment.

Next step

If a site is under consideration now, the highest-value work is verifying the site work and schedule assumptions before the due diligence period closes. Those two inputs decide most deals.