🗞️ News & Moves 🏠

The U.S. Real Estate Magnet—Foreign Cash Is Flooding Back (Commercial Observer)

Trump’s tariffs?

Rising rates?

Global uncertainty?

None of it matters—foreign investors are diving back into U.S. commercial real estate.

Savills (London-based real estate advisory firm) projects $542 billion in deals this year, marking a 39% increase.

The world sees America as the safest bet, even with all the political noise.

Forget trophy office towers—investors are chasing data centers, logistics, and student housing.

And while tariffs might rattle some, the reality is clear.

Global capital needs the U.S. market.

DOGE’s lease cuts could wreck $12B in loans (Bloomberg)

The government’s real estate purge risks $12 billion in commercial mortgage-backed securities (CMBS).

Barclays reports that DOGE (the Department of Government Efficiency) cut leases on 22 properties.

Expect more cuts soon.

Washington, DC is feeling it the most, with $6 billion in exposure—on top of its already brutal 17.2% vacancy rate.

Office properties make up 87% of the risk.

Trump and Musk’s cost-cutting spree is shaking up federal agencies.

For landlords, the message is clear: if Uncle Sam is your tenant, buckle up.

🚨 The Fed Pulse 🚨

The Fed sent a clear message: rate cuts are off the table, and for good reason.

Inflation is acting up.

The CPI reached 3.0% in January.

This is the fourth month in a row of increases.

Core inflation?

Stuck at 3.3%, well above the Fed’s 2% target.

Food prices are going up.

Natural gas costs are rising fast.

Services like insurance and auto repairs have increased by over 6.5% compared to last year.

Producer prices are high at 3.5%.

This means we may see more consumer price increases soon.

The economy, however, isn’t slowing down.

Retail sales are strong.

Industrial production is steady.

Tariffs are adding to inflation.

So, there’s little reason for rate cuts.

The 10-year Treasury yield stays steady at 4.46%.

Meanwhile, mortgage rates are under 7%, which brings some relief.

Bottom line?

This is the new normal for interest rates—at least until something breaks.

5 Years of Proforma Lessons in 1 Email

This past Friday, we got about two inches of snow here in Chicago, and just like that, the roads turned into a mess.

Some highways slowed down to a crawl—others just stopped completely.

My usual one-hour drive home turned into a two-hour test of patience.

Surprisingly, I didn’t see any accidents.

But the moment drivers felt their wheels slipping, they hesitated, and everything ground to a halt.

Chaos.

Meanwhile, I was cruising in my 4-wheel drive pickup, breezing past the mess.

That's when it hit me - this whole situation is a perfect example of a value-add proforma.

A value-add proforma always has four key levers:

✅ Income

✅ Expenses

✅ Improvements (CAPEX)

✅ Time

These four levers need to align, just like a car’s traction system.

If one is off, the whole thing skids out of control.

A proforma is more than a spreadsheet.

It’s a blueprint that connects all four elements.

This helps make sure a deal works in real life, not just on paper.

Now, let’s dive into each one.

Why Most Proformas Don’t Work

I’ve tried many software and templates for proforma modeling.

In the end, I found one key point: they only work if you buy the same identical asset each time.

Value-add real estate is dynamic.

Every deal is unique.

Properties, locations, and market conditions vary.

So, you need to be flexible.

That’s why I believe:

❌ Forget hard-coded proformas.

✅ Learn basic Excel gymnastics, and you’ll be 10x better off.

And one more thing—you can’t outsource this 100%.

The final decision-maker on the numbers should be someone who has walked the property, shares the vision, and has real-world experience.

In other words, this is you. 🫵

Proformas aren’t just about plugging in data—it’s almost an art.

The 4 Levers That Make or Break a Value-Add Deal

1. Income

When I first analyze a property, I start with the in-place income—the revenue it’s generating today.

📌 Step 1: I create a “Current” tab in my Excel sheet and input:

• Existing rent roll

• Other income sources (parking, laundry, etc.)

• Tenant reimbursements (taxes, insurance, CAMs, utilities)

📌 Step 2: I copy and paste this data into a new “Projected” tab.

Then, I adjust rents based on what they’ll be after renovations and stabilization.

This gives me two critical topline revenue numbers: where the property is today vs. where it will be after the value-add improvements.

2. Expenses

Next, I focus on operating expenses (OPEX) and separating reality from seller Data

📌 Step 1: In the “Current” tab, I enter all expense data provided by the seller.

📌 Step 2: I go line by line and compare these numbers to similar properties we own.

Common red flags?

🚩 Underreported maintenance costs

🚩 Missing property management fees

🚩 Unrealistically low insurance or tax numbers

I update the expense numbers to what I think it should be.

📌 Step 3: In the “Projected” tab, I estimate what the building’s expenses will be once stabilized and fully operational.

At this point, I now have two critical NOI numbers:

1. Current NOI (based on seller’s data, adjusted for reality)

2. Future NOI (post-renovation, fully stabilized)

3. CAPEX

CAPEX is where most investors—including myself—tend to underestimate.

This step is easy to understand but hard to do.

First, list all improvements.

Then, estimate the cost for each one.

🚧 Pro tip: Your initial numbers will be estimates, but they should be as close as possible. Eventually, you’ll back them up with actual bids.

To make sure I’m in the right ballpark, I use a cost matrix—a tool I’ll share in a future newsletter.

4. Time

Time is the biggest proforma killer—and it sneaks up on you fast.

Many investors underestimate how long it will take to complete a value-add project.

Here’s the harsh reality:

🚀 If you plan for 2 years but finish in 1, you turn a good deal into a goldmine.

⏳ If you plan for 2 years but take 4, a good deal turns into a bust.

In my proforma, I create a separate tab for each project year. Here, I map out:

• Yearly NOI growth projections

• Timing for filling vacancies

• Dates for rent bumps

Dressing It Up

Once these four levers are dialed in, the deal either works—or it doesn’t.

If it works, now comes the fun part:

📌 Calculating IRR, equity multiples, cash flow projections

📌 Structuring the investor payout model

📌 Deciding leverage levels

At this stage, I’m not massaging the numbers to make a bad deal look good.

I’m just slicing up the pie in a way that’s fair and win-win for everyone involved in the project.

Takeaways

✅ Before getting lost in the weeds, focus on these four levers first:

• Income

• Expenses

• CAPEX

• Time

✅ Time is the most overlooked lever in value-add. 

It can be just as powerful—if not more—than income.

✅ A deal cannot be dressed up if these four main components are off.

Here's my value-add proforma template (Google Sheet).

Use it, abuse it, and make moves.

That's it for today.

Hope you got some value.

If you have a question you want me to answer, please hit reply!

(Yes, this is the real me; I read every email).

Be Well,

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