What are pro formas typically used to project?

Pro formas are essential financial tools in real estate development that provide a detailed projection of income and expenses over a specified period, often multiple years. They offer a comprehensive overview of anticipated cash flows, enabling developers and investors to analyze the financial feasibility and profitability of a proposed project or property. By projecting future revenues from rents, sales, and other income sources, as well as estimating operating expenses, capital expenditures, and financing costs, pro formas help stakeholders make informed decisions about investments.

This approach to financial modeling is critical in real estate, as it allows developers to plan for various scenarios, assess risks, and present potential returns to investors or lenders. Thus, the emphasis on multi-year financial projections encapsulates the intended use of pro formas, highlighting their role in long-term planning and analysis within the real estate sector.