The Direct Capitalization and Discounted Cash Flow (DCF) sheets function together.  The data in these sheets are collected as a function of completing the revenue and expense sheets. The Direct Cap and DCF tables are generated automatically and do not require any additional setup. However, you can modify and edit various cash flow-related elements to customize your analysis. 

Prerequisites 

1. Subscription Tier: 
   • Enterprise: Included with the Subscription fee
   • Professional: Available as an Add-On
     • Please contact the Client Success Manager if you want to upgrade your subscription to access the Valcre Hospitality Workbook and Word Report template. 
2. Downloaded Hospitality Template from Valcre Online.
3. Set up the Hospitality Valuation Workbook & complete all previous sheets. 

Table of Contents

1. Video
2. How-to Guide
   • Discounted Cash Flow
     • Set up your DCF sheet
     • Present Value Assumptions
   • Direct Cap
   • As-Is

Video

How-to Guide 

Discounted Cash Flow

Step 1: Access the Discounted Cash Flow (DCF) sheet.

Select HDCF from the bottom or left-side menu.

Many of the conclusions in this sheet have been made on the previous sheets. (Departmental Revenue + Expenses, Undistributed , Fixed Expenses, & Fixed Variable) 

Step 2: View all rows utilized for the Assumptions in this sheet. 

Select the drop-down next to Assumptions, and select Show. 

This will show you the collection of all the assumptions being utilized, tracking them here and utilizing them in the math going forward. In other words, for each projection for a particular year, the formulas rely on your estimates and then show the conclusions here.  

Pro-Tip: You don’t have to show these rows in your report; it’s there for transparency.

 

Set up your DCF sheet

These settings can be adjusted and updated as needed. The sheet will update accordingly, and you will not need to re-enter any previously entered data. 

Pro-tip: You must reset the tables in the Present Value Assumptions  by selecting Click Here to Show All Rows and then selecting it again to Hide All Rows.

 

Step 1: Decide your holding period 

Use this drop-down to select your desired period.

Step 2: Decide the year for Prospective Upon Completion and Prospective Upon Stabilization. 

Use the drop-down menu to select the desired year.

These two options will alter the math in specific places and ensure that it calculates growth starting from the first stabilized year and from an unstabilized period.  It also adjusts the Present Value Assumptions table to start at the selected Stabilized Year. 

As-Is Comment

This cell will automatically populate and fill in based on the information selected for stabilization and the information in the table.

Prospective Upon Completion Comment

This cell will automatically populate and fill in based on the information selected for stabilization and the information in the table.

Prospective Upon Stabilization Comment

This cell will automatically populate and fill in based on the information selected for stabilization and the information in the table.

Discounted Cash Flow

The cash flow table shows both the As Is and the Stabilized periods (co-terminus). 

• The As-Is cash flow contains all of the periods in the Hold.
• Stabilized cash flow refers only to the stabilized periods in the Hold.
  • In the example above, the stabilization year is set for year three.  

 

Present Value Assumptions

Step 1: Input your Terminal Capitalization Rate.

Step 2: Enter the sensitivity analysis spreads

Step 3: Add the Discount Rate

Step 4: Add the Reversionary Sales Cost

Step 5: Make the appropriate selection for NOI to Capitalize

Note: The default setting is 12 Mos. Following Re-sale.

Step 6: Select if you want to Adjust NOI for Gross up.

Step 7: Select if you would like to Adjust Gross Resale.

 

Direct Cap

Step 1: Access the Direct Capitalization sheet

Select HDCAP from the bottom or left-side menu. 

The Direct Capitalization sheet directly follows the DCF sheet as it utilizes the year you identified to be stable to determine which NOI to capitalize into perpetuity. In our example, we have the stabilized year set at year three. The totals will match the totals in the DCF sheet based on Year three.

As-Is

The tables below reflect the matrix for each of the scenarios. 

Once you have completed all necessary information in the Direct Capitalization and Discounted Cash Flow sheets, you can move on to the Values sheet. 

For additional questions about using the Direct Capitalization and Discounted Cash Flow sheet in the Hospitality Valuation Workbook, please get in touch with Valcre Support using the Online Chat using Valcre Online or Valcre Mobile.