NOI — Net Operating Income
Operating income after all operating expenses, before debt service, taxes and capital expenditure.
Total Revenue − Operating Expenses
Strong Margin ≥ 35%Acceptable 28–35%Weak < 28%
IRR — Internal Rate of Return
The annualized return earned by equity investors, accounting for the timing of every cash flow.
Discount rate where NPV of equity cash flows = 0
Strong ≥ 20%Acceptable 15–20%Weak < 15%
Equity Multiple
Total cash distributions divided by total equity invested.
Σ Distributions ÷ Equity Invested
Strong ≥ 2.0xAcceptable 1.5–2.0xWeak < 1.5x
DSCR — Debt Service Coverage Ratio
How comfortably operating income covers annual debt payments. Lenders size loans against it.
NOI ÷ Annual Debt Service
Strong ≥ 1.50xAcceptable 1.25–1.50xWeak < 1.25x
Exit Value
The estimated sale value of the asset at the end of the hold period, capitalized on stabilized income.
Stabilized NOI ÷ Exit Cap Rate
Yield on Cost
Stabilized income return on the total capital deployed — the developer's return before any market re-pricing.
Stabilized NOI ÷ Total Project Cost
Strong ≥ 8%Acceptable 6–8%Weak < 6%
Development Spread
The premium earned for taking development risk versus buying a stabilized asset.
Yield on Cost − Exit Cap Rate
Strong ≥ 2.0%Acceptable 0–2.0%Weak < 0%
Value Creation
Value produced (or destroyed) by the project relative to the capital it consumed.
Exit Value − Total Project Cost
Strong PositiveAcceptable Near zeroWeak Negative
NPV — Net Present Value
Present value of all equity cash flows discounted at the required return. Positive means the deal beats the hurdle.
Σ CFₜ ÷ (1 + target IRR)ᵗ
Break-even Occupancy
The occupancy level at which revenue exactly covers operating expenses and debt service.
(Operating Expenses + Debt Service) ÷ Revenue at 100% occupancy
Cap Rate
The market's required income yield on a stabilized asset.
NOI ÷ Property Value
LTC — Loan to Cost
Share of total project cost funded with debt.
Loan Amount ÷ Total Project Cost
Strong ≤ 65%Acceptable 65–75%Weak > 75%
Profit Margin
For sellout projects, developer profit as a share of gross sales; for hold strategies, value creation over cost.
Developer Profit ÷ Gross Sales
Strong ≥ 20%Acceptable 15–20%Weak < 15%