Reading a multiplex pro forma: revenue, margin, and sensitivity
A pro forma is the financial model that answers whether a multiplex project is worth building. It sets total project cost against expected revenue and shows what is left over. The arithmetic is simple. The judgement is in the assumptions, and the single most useful thing a landowner can do with a pro forma is not read the bottom line but test how far the assumptions can move before that bottom line disappears.
Part of What it costs to build a multiplex in Metro Vancouver. Figures re-verified 2026-09-06.
Key takeaways
- A pro forma sets total project cost against expected revenue and shows the margin between them.
- Cost is the more knowable side of the model, and revenue is where assumptions carry the most risk.
- A developer margin exists to absorb the risk of the project going differently than modelled.
- Sensitivity testing, not the headline margin, is what shows whether a project is actually robust.
The structure of the model
Every multiplex pro forma has the same skeleton. On the cost side: land, hard costs, soft costs, municipal fees, financing costs, and a contingency. On the revenue side: the value of the finished units, whether realised through strata sales or through the value supported by rental income. The difference between them is the margin.
Land is entered at market value even when the landowner already owns the lot outright. This is the step homeowners most often skip, and skipping it makes every project look profitable. A lot worth $2 million contributed to a project is $2 million of capital committed to that project rather than sold or held. If the finished project returns less than the lot was worth, the project destroyed value regardless of how the cash looks at completion.
Contingency is a real line, not padding. A 5 to 10 percent contingency on hard costs reflects that some things on a construction site are discovered rather than designed. A pro forma with no contingency is incomplete, because the discovered costs arrive whether or not the model allowed for them.
| Line | Basis | Notes |
|---|---|---|
| Land | Market value | Entered even when owned outright |
| Hard costs | $/sq ft on gross area | Narrowed once drawings exist |
| Soft costs | 12 to 18% of hard costs | Mostly spent pre-permit |
| Municipal fees | Per municipality | DCL, DCC, ACC, permits |
| Financing | Capitalised interest | Grows with schedule |
| Contingency | 5 to 10% of hard costs | For discovered conditions |
| Gross revenue | Sales or income value | The assumption-heavy side |
Where the assumptions carry real risk
Cost is the more knowable side. Hard costs firm up once drawings exist, fees are published, and financing terms are quoted. Revenue is the side built on judgement, and it is where a pro forma quietly becomes fiction.
Sale price per square foot is the biggest assumption. It should be grounded in recent comparable sales of similar units in the same neighbourhood, not in a regional average and not in what the market was doing eighteen months ago. Absorption is the second: how long the finished units take to sell. Every month a completed unit sits unsold accrues financing and holding costs against the margin.
For a rental project the equivalent assumptions are achievable rent and the capitalisation rate used to convert that income into value. A change of half a percentage point in cap rate moves the finished value by a six-figure amount on a fourplex, which makes it the assumption most worth stating explicitly and testing.
Why a developer margin exists
A pro forma that shows a thin margin is often read as an efficient project. It is a fragile one. The margin is what absorbs the difference between the model and reality: a slower sales market, a longer permit review, a soil condition found after excavation, an interest rate that moves during the build.
A project modelled with a margin that disappears if sale prices fall a few percent has no capacity to absorb any of those. That project is relying on nothing going wrong across a two-year cycle.
Venture Pacific's position is that a pro forma showing no room to absorb an adverse move is a reason to decline the project rather than a reason to proceed carefully. Telling a landowner their lot does not support a viable project is a legitimate outcome of a feasibility review.
The sensitivity tests worth running
Four tests reveal more than the headline number. Drop sale price per square foot by 10 percent and see whether the margin survives. Add three months to the schedule and let the financing cost grow. Raise hard costs by 10 percent. Extend absorption so the last unit sells six months later than planned.
A project that survives all four is robust. A project that fails one of them is not automatically dead, and it does mean the specific risk needs a specific answer: a fixed-price contract to address the cost test, a rental exit to address the absorption test, a contingency sized against the schedule test.
This is the analysis a lender performs before committing, so a landowner who has already run it arrives at the financing conversation prepared rather than being told the answer.
Frequently asked questions
What is a multiplex pro forma?
A pro forma is the financial model that sets total project cost against expected revenue to show whether a multiplex is worth building. Cost covers land, hard costs, soft costs, municipal fees, financing, and contingency. Revenue is the value of the finished units, realised either through strata sales or through the value supported by rental income. The difference between the two is the project margin.
Should I include my land in the pro forma if I already own it?
Yes, at market value. A lot worth $2 million contributed to a project is $2 million of capital committed to that project rather than sold or held. Leaving it out makes every project look profitable and hides whether the development actually beats simply selling the lot. Entering land at market value is the step homeowners most often skip and the one that most changes the conclusion.
Which pro forma assumption carries the most risk?
Sale price per square foot on the revenue side. Costs firm up as drawings develop, fees are published, and financing terms are quoted, so the cost side is the more knowable half of the model. Sale price should be grounded in recent comparable sales of similar units in the same neighbourhood rather than a regional average or a figure from a market eighteen months old.
What is a contingency and how large should it be?
A contingency is a budgeted allowance for conditions discovered rather than designed, typically 5 to 10 percent of hard costs on a Metro Vancouver multiplex. Excavation reveals soil, demolition reveals servicing, and neither is fully knowable from drawings. A pro forma carrying no contingency is incomplete rather than aggressive, because the discovered costs still arrive whether or not the model allowed for them.
What sensitivity tests should I run on a pro forma?
Four are worth running: drop sale price per square foot by 10 percent, add three months to the schedule so financing costs grow, raise hard costs by 10 percent, and extend absorption so the final unit sells six months later than planned. A project that survives all four is robust. A project that fails one needs a specific answer to that specific risk rather than a general assurance.
Why does a developer margin need to be more than a few percent?
The margin absorbs the gap between the model and what actually happens: a slower sales market, a longer permit review, a soil condition found after excavation, or an interest rate that moves during the build. A margin that disappears when sale prices fall a few percent leaves no capacity for any of those across a two-year cycle. Venture Pacific treats that as a reason to decline a project rather than to proceed carefully.
How does a rental pro forma differ from a strata pro forma?
The revenue side changes entirely. A strata pro forma models sale price per unit and absorption over a sales period. A rental pro forma models achievable monthly rent and applies a capitalisation rate to convert that income into a finished building value. Cap rate is the sensitive input, since a change of half a percentage point moves the finished value by a six-figure amount on a fourplex, so it should be stated explicitly and tested rather than assumed.
What does absorption mean in a multiplex pro forma?
Absorption is how long the finished units take to sell after completion. It matters because every month a completed unit sits unsold accrues financing interest, property tax, insurance, and maintenance against the margin. A fourplex that sells out in two months and one that takes ten months can have identical construction costs and materially different returns to the owners.
Will a lender run its own version of this analysis?
Yes. A lender assesses the project, the borrower, the builder, and the repayment path, and it stress-tests the revenue assumptions before committing funds. A landowner who has already run the sensitivity tests arrives at that conversation prepared rather than receiving the conclusion from the lender. It also surfaces problems while they can still be designed around.
What happens if the pro forma shows the project does not work?
That is a legitimate and useful outcome. Not every Metro Vancouver lot supports a profitable multiplex, and the constraint is usually specific: a footprint too small after setbacks, servicing capacity that is not available, or a land value too high relative to what the finished units would fetch. Venture Pacific reports that plainly, and holding the property or pursuing a renovation instead can be the better decision.
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Sources and references
Rate and regulation figures on this page were re-verified on 2026-09-06. Construction cost ranges come from Venture Pacific's own Metro Vancouver projects and are described as such wherever they appear.
- Small-Scale Multi-Unit Housing (Bill 44, Housing Statutes (Residential Development) Amendment Act)Province of British Columbia. Act passed November 2023, in force 30 June 2024. Accessed 6 September 2026.
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