Most projects look fine at year three. The question lenders are actually asking lives in years five through ten.
A five-year pro forma ends precisely where the interesting risks begin. The replacement-capital cycle on equipment-heavy assets — car wash tunnels, RV park infrastructure, hotel FF&E — arrives in years six through nine. Rate resets and balloon maturities on conventional structures land in the same window. Lease rollover on anchored projects, the second competitor’s opening in a saturating category, the depreciation shield’s decay against rising taxable income: all of it is invisible in a projection that stops at sixty months.
This is why Wert-Berater builds every study on a ten-year pro forma, with the early ramp modeled at monthly or quarterly resolution where the asset class demands it and the out-years carrying explicit reserve funding, escalation differentials between revenue and expense lines, and the debt schedule’s actual amortization rather than a level-payment approximation.
Extending the horizon forces assumptions a short pro forma lets you dodge. What is the mature growth rate after stabilization — and is it above or below the expense inflation you assumed? When does the market reach saturation, and does your capture rate hold once it does? What does the facility look like at year ten without the reserve spending you modeled — and would a buyer or refinancing lender accept it? Each question has a defensible answer; the ten-year frame simply refuses to let the analyst skip them.
For sell-out projects the same logic applies to absorption: the conventional condominium engagement is not a ten-year operation but a multi-year closing schedule, and the honest version models the slow case — because the carry cost of eighteen extra months of absorption is the difference between a feasible deal and a capital call.
President, Wert-Berater, Inc. — independent feasibility study consultants since 1998. More than 4,000 feasibility studies completed across all 50 states and internationally, evaluating $40.2 billion in project value for SBA, USDA, EB-5, conventional, and institutional financing decisions. Fiduciary duty runs to the lender and agency in every engagement.
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