Reading a multiplex pro forma: the numbers that matter

We were once handed a pro forma for a Mount Pleasant fourplex that showed a beautiful result on the last line. The revenue assumed every unit sold at the very top of the neighbourhood's range. The construction budget was a round number that hadn't been priced against a single real trade. And the contingency was so thin it would have evaporated the first time the excavation hit anything unexpected. The bottom line was confident. Everything feeding it was wishful.

That's the thing about a pro forma. It's a financial model that estimates whether a multiplex will be profitable before anyone breaks ground, and because it's built from assumptions, it can be made to say almost anything. Reading one well means ignoring the seductive number at the bottom and interrogating the estimates that produce it. Here's how to read every major line.

Read the land line first

Before revenue, before construction, there's usually the land. In most multiplex pro formas it's the first major input, the cost of the lot the project sits on, whether it's being bought outright or contributed by a landowner as equity. In Metro Vancouver and the Fraser Valley it's frequently the single largest number on the page, so how the model handles it colours everything underneath.

Watch for two things. If the land is being purchased, is the value grounded in what comparable lots actually trade for, or in a hopeful figure that makes the rest of the deal pencil? If the land is being contributed as equity by the owner, does the model treat it as the real, valuable stake it is, or quietly undercount it to flatter the return? A pro forma that gets the land line wrong is wrong from the top, and no amount of tidy arithmetic below fixes it.

Then revenue, but don't start by trusting it

The top of the income side of a pro forma is the projected revenue: what the finished units are expected to sell for, or what they'll rent for if the plan is to hold them. This number anchors everything below it, which is exactly why it deserves the most scrutiny.

Ask what the revenue assumption is based on. Is it grounded in recent sales of comparable units in that specific Vancouver neighbourhood, or in the most optimistic listing someone could find? A revenue figure that leans on the top of the market quietly inflates every number downstream. The unit count matters here too, under BC's small-scale housing rules, whether a lot yields three, four, or six units changes the total sellable area, and that's one of the biggest levers in the whole model.

Unit count: the lever that moves the most

It's worth pausing on unit count on its own, because people treat it as a detail when it's closer to the spine of the model. The provincial small-scale multi-unit housing framework lets many lots support a range of outcomes, a triplex on one, a fourplex or up to six units on another, depending on lot size and proximity to frequent transit. Each additional door adds sellable area, and revenue climbs with it.

But the extra units don't fall straight to profit. More doors can trigger more demanding servicing, more parking, additional fire separation, and code requirements that add cost back on the other side of the ledger. A pro forma that assumes the maximum unit count while ignoring the cost that count brings is telling you the good half of the story. The honest version models the count that's actually achievable on that specific Vancouver, Burnaby, or Coquitlam lot, and carries the cost that comes with it.

Hard costs: what it takes to build

Hard costs are the construction itself, excavation, foundation, framing, envelope, mechanical, finishes, the physical building. On most multiplex pro formas this is the single largest cost line, and it's where an unrealistic number does the most damage.

A credible hard-cost figure reflects the actual lot and the actual spec. A sloped North Vancouver site costs more to get out of the ground than a flat one. A higher BC Energy Step Code level means more envelope detail and better mechanical systems, which cost more to build but perform better. Finishes chosen for the unit's market position move the number. We won't quote figures here because honest hard costs come from pricing a specific design against current Metro Vancouver and the Fraser Valley trade availability, but you can always ask how the number was derived. "Industry average" is not an answer.

Soft costs: everything that isn't the building

Soft costs are the design, engineering, permits, legal, insurance, and financing fees that surround the build. Individually they look small next to hard costs. Together they're substantial, and a pro forma that lowballs them is hiding real expense.

Watch for soft-cost lines that seem suspiciously round or suspiciously absent. Architectural and engineering fees, municipal permit and development charges, survey and geotechnical work, legal costs for the partnership and the financing, each is a real invoice. A model that compresses all of this into one optimistic figure hasn't done the work. The provincial small-scale housing framework speeds up some approvals, but it doesn't make the soft-cost line disappear.

Financing and carrying cost: the price of time

A development project borrows money and pays interest on it for the entire stretch between the first draw and the day the units produce income. That carrying cost grows with the timeline, which is why a project's schedule and its financing line are really the same conversation.

When you read the financing section, look at the assumed timeline behind it. A pro forma that assumes a fast, frictionless permitting process across Metro Vancouver and the Fraser Valley, where timelines genuinely vary city to city, is understating its own carrying cost. Stretch the schedule and the interest bill grows, eating into the result. Ask whether the financing assumptions match a realistic schedule for that specific municipality.

Contingency: the line that tells you who built the model

Contingency is the reserve set aside for what goes wrong, and it's the truest signal of whether a pro forma was built by an optimist or a realist. Every Metro Vancouver and the Fraser Valley build encounters surprises, soft soils, a hidden servicing upgrade, a permitting condition that adds cost, a trade pricing change. Contingency is what absorbs them.

A thin contingency makes the bottom line look better, which is exactly why an over-eager model shrinks it. We'd rather see a contingency that looks generous than one that assumes nothing will go wrong, because something always does. When you evaluate a pro forma, a realistic contingency should increase your confidence, not decrease it, it means the author has actually built things.

Flex one number: the sensitivity test

A single scenario, however carefully built, is one guess about the future. The stronger question isn't "what does the model say?" but "what happens when I'm wrong?" That's what a sensitivity analysis answers. You take the assumptions doing the most work, revenue, hard cost, timeline, and move them, one at a time, to see how far the result bends before it breaks.

This is the fastest way to tell a durable project from a fragile one. If the deal only works when revenue lands at the top of the range, construction comes in under budget, and permitting sails through, it isn't really a project, it's a coincidence that hasn't happened yet. A build that still stands up when revenue softens a little or the schedule slips a couple of months is a build worth pursuing. We run this test on every model we take seriously, because the market has never once cared how optimistic the original spreadsheet was.

The residual: the number everyone reads first

The bottom line, call it the residual, the profit, or the return, is what's left after every cost comes out of revenue. It's the number investors and homeowners flip to first. It should be the last thing you trust.

By now the reason is clear. The residual isn't an independent fact; it's the arithmetic product of every assumption above it. A confident result built on optimistic revenue, lowballed costs, and a thin contingency is more dangerous than no number at all, because it looks like rigor. Read upward. If the assumptions hold, the bottom line means something. If they don't, it's a story.

The return at the bottom of a pro forma is the least informative number on the page. The assumptions above it are where the truth lives., Venture Pacific

Nothing here is financial advice or an offer; it's a way to read a document that decides whether a project is worth building. If you're holding a pro forma for a Vancouver or Burnaby lot and want to know whether the assumptions underneath it are sound, that's the core of our Feasibility & Equity Review, we rebuild the model on real, property-specific inputs and pressure-test the lines that carry the result, so you can see which ones were doing the heavy lifting. Run your own first-pass scenario through the multiplex calculator, then bring it to us to challenge.

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