Case Study – Spreadsheet Peer Review of a Real Estate Property Developer’s Pricing Models

The Mandate

This mandate involved a peer review of a Real Estate Developer’s pricing spreadsheets. It required a strong attention to detail, and the need to become well versed in the mechanics of the client’s various pricing models by project. In turn, each project had an eclectic array of condominiums to price, based on their area, key features such as number of bedrooms and bathrooms, orientation and other subjective metrics such as views.

Adding Value to the Client

There were a number of technical areas that Strategize was able to help the client in:

  • The esoteric application of a multiplier on the pricing across all its condominiums,
  • Integrate and complete all pricing factors in the pricing equation of each condominium,
  • Update and correct all tax modelling for each condominium in the pricing model, and
  • A variance analysis of the various condominiums in one project, and identify by condo type, the quantity of condos’ overall quality ratings have changed, as a result of the review of price amendments.

The introduction of error and alert checks in the pricing models helped to reinforce the success of the mandate, in terms of better understanding the model, by verifying formulae, cross-checking computed numbers and referenced source data.

A further value-add of the Strategize peer review was the ability to assist the real estate developer, to better analyse sales patterns of its condos, by condo type based on purchaser preference patterns by area type. This in part lies the essence of a peer review; the value delivered to clients of providing a second set of analytical and technically-minded eyes.

The final area of the peer review was the benchmarking of pricing models, by different development stage for the same project. By benchmarking by level, area range and orientation of each condo; an average sales price per area could be assessed by each development stage.

Financial Modelling Expertise

Given the strong financial modelling experience of Strategize, and its focus of implementing or emphasising the importance of best practice financial modelling to client spreadsheets; the firm was able to make some minor but value-adding changes to the client’s pricing model.

Strategize was able to recommend, where possible, how to streamline and improve the efficient computation of the client’s pricing spreadsheets. Where appropriate, the odd complex formulae were broken down into 2-3 formulae, across adjacent cells; in order to improve the auditability of the pricing model. This helped to reinforce the application of complex pricing approaches, and safeguard the correct application of the client’s pricing of its condos, by type and project

In Conclusion

A strong attention to detail, thorough quantitative and advanced financial modelling skills, which were complemented with the approach of best practice financial modelling; ensured the successful execution and delivery of this peer review mandate of the Real Estate Developer’s Pricing models.