Operational Stream

Component 6: Scenario Analysis

Component 6 is FeasiBuild's stress-testing engine. It allows you to apply "shocks" to key financial drivers and instantly see how those changes cascade through your entire model — affecting construction costs, operating cash flows, debt service, and ultimately your Project IRR and Equity IRR.

Key Concept:Scenario Analysis doesn't create a new model — it applies multipliers to your existing base case assumptions and recalculates the entire financial engine in real-time.

Overview

The Scenario Analysis page is divided into four main sections:

1. Base Case Metric Sources

Shows your current base case metrics (Unlevered Project IRR, Levered Equity IRR, Peak Equity, Min DSCR) sourced from Components 1-5. This is your "starting point" before any shocks are applied.

2. Scenario Presets

One-click presets for Base Case, Downside, and Upside scenarios. Downside/Upside presets apply pre-configured shocks based on your asset type (e.g., Hotel downside = lower ADR + higher construction costs).

3. Adjust Shock Values

Interactive sliders for each shock factor. Each slider shows the current shock value, the impact on Unlevered IRR, and the impact on Levered IRR. Shocks are categorized into Common Factors and Asset-Specific Factors.

4. Scenario Comparison & Tornado Chart

A comparison table showing Base vs Current vs Downside vs Upside for key metrics, plus a Tornado Chart showing IRR sensitivity ranked by driver impact (most impactful at the top).

Base Case Metric Sources

Before applying any shocks, FeasiBuild displays your base case metrics. These are sourced directly from the calculations in Components 1-5:

Unlevered Project IRR (9.80%)

Sourced from Component 3 (Project IRR). This is the IRR calculated on the project's unlevered cash flows (before debt service). It represents the pure project return independent of financing structure.

Levered Equity IRR (9.40%)

Sourced from Component 5 (Equity Returns). This is the IRR calculated on the equity investor's cash flows (after debt service). It reflects the actual return to the equity investor given the financing structure from Component 4.

Peak Equity Required (277.2M)

Sourced from Component 4 (Financing). This is the maximum cumulative equity injection required during the construction phase, calculated using the dynamic gap-fill mechanism.

Min DSCR (0.59x)

Sourced from Component 4 (Financing). This is the minimum Debt Service Coverage Ratio across all operating years. A DSCR below 1.0x indicates the project cannot cover debt service from operating cash flows in that year.

Scenario Presets

FeasiBuild provides three one-click scenario presets:

Base Case

All shocks reset to 0%. This is your current model with no modifications.

Downside

Applies pre-configured negative shocks based on your asset type. For example, a Hotel downside scenario might apply: Construction Cost +15%, ADR -10%, Occupancy -8pp, Exit Cap Rate +50bps.

Upside

Applies pre-configured positive shocks. For example, a Hotel upside scenario might apply: Construction Cost -5%, ADR +12%, Occupancy +5pp, Exit Cap Rate -25bps.

Note: Downside/Upside presets are asset-specific. A Residential project will show different preset shocks than a Hotel project (e.g., Monthly Rent psf instead of ADR, Absorption Speed instead of Occupancy).

Common Shock Factors

These shock factors apply to all asset types and represent the most universal drivers of project risk:

Construction Cost (-20% to +30%)

Applies a percentage multiplier to all construction costs from Component 1 (including land, hard costs, soft costs, FF&E, and POWC).

Impact Chain: Higher construction costs → Higher Total Development Cost (TDC) → Higher debt required → Higher interest expense → Lower Equity IRR. Also increases peak equity requirement.

Operating Expenses (-10% to +25%)

Applies a percentage multiplier to all operating expenses from Component 2 (departmental costs, undistributed expenses, management fees, etc.).

Impact Chain: Higher operating expenses → Lower Net Operating Income (NOI) → Lower cash flow available for debt service → Lower DSCR → Lower Equity IRR.

Exit Cap Rate (-50bps to +150bps)

Applies a basis point adjustment to the exit capitalization rate from Component 3. A higher cap rate means a lower exit value (inverse relationship).

Impact Chain: Higher exit cap rate → Lower terminal value → Lower exit proceeds → Lower Equity IRR. This is often the most impactful shock for hold assets.

Interest Rate (-100bps to +300bps)

Applies a basis point adjustment to the interest rate from Component 4. Affects both construction interest (IDC) and operating interest expense.

Impact Chain: Higher interest rate → Higher debt service → Lower cash flow to equity → Lower Equity IRR. Also increases total debt if IDC is capitalized.

Asset-Specific Shock Factors

These shock factors change based on the asset type selected in Component 1. Each asset type has unique revenue drivers that are critical to its financial performance.

🏨 Hotel / Hospitality

ADR (Average Daily Rate) (±15%)

Applies a percentage multiplier to the ADR assumptions from Component 2. ADR is the primary revenue driver for hotels.

Occupancy Rate (±10pp)

Applies a percentage point adjustment to the occupancy rate from Component 2. Note: This is in percentage points (pp), not percentage (%). A +5pp shock means occupancy increases from 70% to 75%.

F&B Revenue (±20%)

Applies a percentage multiplier to Food & Beverage revenue from Component 2. F&B is typically 20-30% of total hotel revenue.

Stabilization Period (±6 months)

Adjusts the number of months required to reach stabilized occupancy. Longer stabilization means more months of ramp-up with lower occupancy.

🏠 Residential (BTR / Multi-Family)

Monthly Rent psf (±15%)

Applies a percentage multiplier to the monthly rent per square foot from Component 2. This is the primary revenue driver for residential projects.

Occupancy Rate (±10pp)

Applies a percentage point adjustment to the stabilized occupancy rate. Similar to hotel occupancy but typically higher (90-95% for residential vs 65-75% for hotels).

Rent Escalation Rate (±50%)

Applies a percentage multiplier to the annual rent escalation rate. A +50% shock on a 3% escalation rate means escalation increases to 4.5%.

Lease-up / Absorption Speed (±50%)

Adjusts the speed at which units are leased. Faster absorption means reaching stabilized occupancy sooner, improving early-year cash flows.

🛍️ Shopping Mall / Retail

Base Rent psf (±15%)

Applies a percentage multiplier to the base rent per square foot from Component 2.

Percentage Rent (±20%)

Applies a percentage multiplier to the percentage rent (overage rent) from Component 2.

Tenant Sales (±15%)

Applies a percentage multiplier to tenant sales assumptions, which affects percentage rent calculations.

Lease-up Period (±6 months)

Adjusts the time required to reach stabilized occupancy (typically 12-24 months for retail).

🏢 Office (Stabilized)

Base Rent psf (±15%)

Applies a percentage multiplier to the base rent per square foot from Component 2.

Occupancy Rate (±10pp)

Applies a percentage point adjustment to the stabilized occupancy rate.

Rent Escalation (±50%)

Applies a percentage multiplier to the annual rent escalation rate.

Lease-up Period (±6 months)

Adjusts the time required to reach stabilized occupancy (typically 12-36 months for office).

Custom Shock Drivers

FeasiBuild allows you to define up to 3 custom shock drivers for scenario-specific analysis. This is useful for modeling unique risks or opportunities not covered by the standard factors.

Define Custom Shock Driver Modal

Click "+ Add Custom Factor" to open the modal. You can:

Choose a Template: Pre-configured drivers like "Property Tax Increase", "Management Fee Increase", "Stabilization Period", "F&B Revenue Decline", "Soft Costs Overrun", "Insurance Cost Increase"
Driver Name: Custom name (e.g., "Marketing Spend", "Permit Delay")
Base Value: The starting value (e.g., 0 for percentage shocks)
Min/Max Shock: The range of the shock (e.g., -25% to +25%)
Unit: Percentage (%), Basis Points (bps), or Absolute Value
Impact Logic: Choose how the shock affects the model:
- 💚 Affects Revenue (multiply inflows)
- ❤️ Affects Costs (multiply outflows)
- 📅 Affects Timeline (shift cash flows)
- ⚙️ Custom formula (Advanced)

Scenario Comparison Table

The Scenario Comparison table shows key metrics across four scenarios side-by-side:

Metric	Base	Current	Downside	Upside
Unlevered Project IRR	11.75%	15.20%	10.57%	12.92%
Unlevered Payback (months)	42	42	44	40
Levered Equity IRR	12.18%	14.03%	12.25%	13.00%
Levered Payback (months)	162	162	162	162
Peak Equity Required	266.4M	224.7M	266.4M	241.7M
Min DSCR	0.77x	0.77x	0.77x	0.77x

IRR Sensitivity Tornado Chart

The Tornado Chart ranks shock factors by their impact on Levered Equity IRR. The most impactful driver appears at the top, with the least impactful at the bottom. This helps you identify which assumptions matter most for your project's success.

How to Read the Tornado Chart

Green Bar: Shows the range of Levered Equity IRR when the driver moves from its minimum shock to maximum shock (one at a time, holding all other factors constant).
Range Values:Shown to the right of each bar (e.g., "14.03% – 16.23%"). This is the IRR range when only that driver is shocked.
Ranking: Drivers are sorted by the width of their bar (widest = most impactful). In the example, ADR (±15%) has the widest bar, meaning it has the largest impact on IRR.
Axis:The x-axis shows the Levered Equity IRR range (e.g., "10% to 26%"). All bars are plotted on this common axis for comparison.

Methodology: How FeasiBuild Calculates IRR Changes

When you apply a shock factor, FeasiBuild recalculates the entire financial model in real-time. Here's the step-by-step methodology:

Step 1: Apply Shock Multiplier to Base Assumption

Each shock factor applies a multiplier or adjustment to the corresponding base case assumption from Components 1-5.

// Example: Construction Cost +10% shock

adjustedConstructionCost = baseConstructionCost × (1 + 0.10)

// Example: ADR +15% shock

adjustedADR = baseADR × (1 + 0.15)

// Example: Exit Cap Rate +50bps shock

adjustedCapRate = baseCapRate + 0.0050

Step 2: Recalculate Affected Component

The adjusted assumption flows through the relevant component:

Construction Cost shock → Recalculates Component 1 (Cash Outflows) → New TDC, new monthly construction cash flows
Operating Expenses shock → Recalculates Component 2 (Cash Inflows) → New NOI, new operating cash flows
ADR/Occupancy/Rent shock → Recalculates Component 2 (Cash Inflows) → New revenue, new NOI
Interest Rate shock → Recalculates Component 4 (Financing) → New debt service, new IDC
Exit Cap Rate shock → Recalculates Component 3 (Project IRR) → New terminal value

Step 3: Recalculate Downstream Components

Changes cascade through dependent components:

// Example: Construction Cost +10% cascade

Component 1: TDC increases by 10%

↓

Component 4: Higher TDC → Higher debt required → Higher interest expense

↓

Component 5: Higher interest → Lower cash flow to equity → Lower Equity IRR

↓

Component 3: Higher TDC (same exit value) → Lower Project IRR

Step 4: Recalculate Project IRR (Unlevered)

Project IRR is calculated on the unlevered cash flows (before debt service):

// Unlevered Cash Flow = Operating Cash Flow - Capital Expenditures

UnleveredCF[t] = NOI[t] - CapEx[t] - ChangeInWorkingCapital[t]

// Terminal Value = NOI[final year] / Exit Cap Rate

TerminalValue = NOI[final] / adjustedCapRate

// Project IRR = IRR of [-InitialInvestment, UnleveredCF[1], ..., UnleveredCF[n] + TerminalValue]

ProjectIRR = IRR(unleveredCashFlows)

Step 5: Recalculate Equity IRR (Levered)

Equity IRR is calculated on the levered cash flows (after debt service):

// Levered Cash Flow = Unlevered Cash Flow - Debt Service

LeveredCF[t] = UnleveredCF[t] - (Interest[t] + Principal[t])

// Equity Investment = Peak Equity Required (from Component 4)

EquityInvestment = peakEquityRequired

// Terminal Equity Value = Terminal Value - Remaining Debt Balance

TerminalEquityValue = TerminalValue - remainingDebt[final]

// Equity IRR = IRR of [-EquityInvestment, LeveredCF[1], ..., LeveredCF[n] + TerminalEquityValue]

EquityIRR = IRR(leveredCashFlows)

Step 6: Calculate Delta vs Base Case

The impact is shown as the difference between the shocked IRR and the base case IRR:

// Impact on Project IRR

ProjectIRRImpact = shockedProjectIRR - baseProjectIRR

// Impact on Equity IRR

EquityIRRImpact = shockedEquityIRR - baseEquityIRR

// Example: If base Equity IRR = 12.18% and shocked Equity IRR = 14.03%

EquityIRRImpact = 14.03% - 12.18% = +1.85pp (positive impact)

Important: All shocks are applied independently (one at a time) when calculating the Tornado Chart. When multiple shocks are active simultaneously (in the Scenario Summary), they are applied together and the combined impact is calculated.

Tips & Best Practices

Start with Downside/Upside Presets

Use the one-click presets to quickly see the range of possible outcomes, then fine-tune individual shocks using the sliders.

Focus on the Tornado Chart

The Tornado Chart tells you which assumptions matter most. If your project's IRR is highly sensitive to ADR, focus your due diligence on validating your ADR assumptions with market data.

Watch the Min DSCR

If Min DSCR drops below 1.0x in any scenario, the project cannot cover debt service from operating cash flows in that year. This may require equity injections or loan restructuring.

Use Custom Shocks for Unique Risks

If your project has unique risks (e.g., environmental remediation costs, permit delays), create custom shock drivers to model their impact.

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