Portofino Townhome Community

Location: Fort Myers, FL

Company Website:

For Sale Website:

Description:

The attached spreadsheet is for the Portofino Townhome community in Fort Myers, Florida that is listed for sale at $3.25 million.  This spreadsheet includes a pro forma income statement and balance sheet for the community forecasted out over fifteen years based on market assumptions in Fort Meyers and gives an analysis of cost of capital and cash flows.

The community ceased construction in 2007 during the downturn in the housing market after only building a clubhouse and twenty-six out of two hundred possible townhomes.  The model takes this into account.  Starting in 2012, it assumes a large construction loan for additional townhomes built over the course of eleven years until the full lot is built by 2017. We assume renovations are made every eight years, starting in 2015 on the original 26 townhomes as they will need an update by then.

For loan interest rates, we found average numbers based on bank numbers in the Fort Myers area.  We assumed a cost of $65/square foot for construction, as this was an average for the area as well. Given our assumptions, we came up with a WACC 5.85% and an IRR of 1.55%.  

After looking this over, we do not feel that this would be a profit making business venture given these market assumptions.  The excel sheet provided can be used to change assumptions to see if it would work under more accurate information on the market (if given), but the WACC and IRR are not equal therefore this won’t work.  Not only this, but breaking even on these units takes place far into the future part of the investment. With how everything is set up, there is barely a 1% overall return on this investment. Selling the townhomes as you go may be the best option when looking at the overall picture with renting the townhomes.