Insights

A financial projection is only as strong as its assumptions. If your model only shows the number you are hoping for, it is not underwriting-ready. It is a pitch. Serious capital providers will rebuild your projections their own way, so the strongest position is to hand them a model that already holds up.

That starts with at least two cases: a defensible base case and a realistic upside case. Most experienced sponsors add a third, a downside case.

The base case: what you can defend line by line

The base case is the scenario you expect to happen and can support with evidence. Every assumption should trace back to something real: market data, signed contracts, quotes, or the performance of comparable projects.

• Revenue at market rates, not peak rates
• Ramp-up or lease-up at the pace comparable projects actually achieved
• Full operating costs, including reserves and management
• Contingency sized to the stage of design and construction
• Financing costs included, not left for later

The base case is the number capital is sized against. If it does not work, the deal usually does not work.

The upside case: realistic, not hopeful

The upside case shows what happens if things go better than expected for identifiable reasons: faster lease-up, stronger pricing, or lower costs from a specific procurement advantage. Each improvement should have a reason a reader can test. “The market will love it” is not a reason.

The downside case: proving the project survives

Underwriters care most about what happens when things go wrong. A downside case tests a project against higher costs, slower revenue, a delayed schedule, or tighter pricing. The question is not whether the returns look exciting. It is whether the project can still meet its obligations.

The path to stabilization

Growth looks different once you account for what it actually costs. Every project has a period between opening and stabilized operations when revenue is still ramping but costs are already running. Models that jump straight to year-three performance hide the most capital-intensive phase of the project. Show the path month by month or quarter by quarter until operations stabilize.

Sensitivity analysis: show your work

A sensitivity table shows how results change as a key assumption moves. For example, how coverage and returns shift if construction costs rise 10 percent, or if revenue lands 15 percent below plan. It tells a capital provider you already know where the model is fragile, which builds far more trust than a single polished number.

Underwriting-ready model checklist

• Base, upside, and downside cases built from the same structure
• Every major assumption sourced and documented
• Full CAPEX and OPEX, tied to your pro forma
• A visible ramp-up and stabilization period
• Sensitivity tables on the assumptions that matter most
• Return metrics clearly defined, with the time period stated

FAQ

How many scenarios should a financial model include?

At minimum a base case and a downside case. An upside case is useful for showing potential, as long as it is clearly labeled and supported.

Should the base case be conservative?

It should be realistic and defensible. Overly conservative assumptions can undersell a good project, and overly optimistic ones lose credibility quickly in diligence.

Getting a project ready for capital? Our team works with developers and corporations on business funding and large-cap projects. Start the conversation.

This article is for educational purposes only. It is not an offer, solicitation, or recommendation to buy or sell any security, and it is not tax, legal, or investment advice. All Phoenix Capital Solutions engagements are subject to due diligence, verification, and eligibility requirements. See our full disclosure.

Before a project is fundable, the numbers have to tell a credible story. A pro forma is where that story lives. Experienced underwriters do not just read what the spreadsheet says. They test why the numbers make sense, where each assumption comes from, and whether the project can support the capital it is asking for.

Here is how to read a pro forma the way they do.

What is a pro forma?

A pro forma is a forward-looking financial projection for a project or business. It estimates what it will cost to build or acquire, what it will cost to run, what it will earn, and how cash moves through it over time. In real estate and project finance, it is the core document capital providers use to size and price their commitment.

1. Capital expenditures (CAPEX)

CAPEX is everything it takes to get the project built or acquired: land, hard costs, soft costs (design, permits, legal, financing fees), and equipment. Underwriters look for:

• A cost basis tied to real documentation, such as a FEED study, contractor bids, or a purchase agreement
• A contingency line sized to the project’s risk and stage of design
• Financing costs and interest during construction, which are easy to leave out

2. Operating expenses (OPEX)

OPEX is the cost of running the asset once it is built: staffing, maintenance, utilities, insurance, taxes, management fees, and reserves for replacement. Thin OPEX assumptions are one of the most common red flags. Underwriters compare them to comparable assets and question anything that looks unusually lean.

3. Revenue assumptions

Revenue is where optimism tends to hide. Every revenue line should have a source: market rent comparables, signed leases, an offtake agreement, or verifiable pricing data. Watch for:

• Lease-up or ramp-up periods that are faster than the market supports
• Rent or price growth that outpaces historical trends
• Occupancy or utilization assumed at full capacity from day one
• Revenue with no clear contractual or market support

4. Cash flow

Cash flow connects the pieces. In real estate, the central figure is usually net operating income (NOI): revenue minus operating expenses, before debt service. Underwriters then compare that cash flow to the capital’s obligations. A widely used measure is the debt service coverage ratio (DSCR), NOI divided by annual debt service. Many capital providers look for meaningful headroom above 1.0x, because a project that only just covers its obligations has no room for anything to go wrong.

5. Project economics

Finally, the pro forma should show whether the whole effort is worth it: total project cost against value created, and returns at the project and investor level. These figures can look very different depending on the metric used. Always confirm which return metric is being shown and over what time period.

6. The risks behind the numbers

The best pro formas do not hide risk; they quantify it. Underwriters look for sensitivity analysis showing what happens if costs rise, revenue falls, or the schedule slips. If the model only works in one scenario, it is not ready. We cover this in depth in building an underwriting-ready financial model.

A quick pro forma checklist

• Does every CAPEX line tie to a document or quote?
• Is contingency appropriate for the stage of design?
• Are OPEX assumptions benchmarked against comparable assets?
• Does every revenue line have a market or contractual source?
• Is the ramp-up period realistic?
• Does cash flow comfortably cover the capital’s obligations?
• Is there a downside scenario, and does the project survive it?

Pro forma FAQ

What is the difference between a pro forma and a budget?

A budget is a spending plan. A pro forma is a projection of the full economics: costs, revenue, cash flow, and returns over time.

Who prepares the pro forma?

Usually the sponsor or developer, often with a financial advisor. Capital providers then build or adjust their own version based on their underwriting standards.

Want a second set of eyes on your numbers before you go to market? Request a consultation, or explore our real estate funding solutions.

This article is for educational purposes only. It is not an offer, solicitation, or recommendation to buy or sell any security, and it is not tax, legal, or investment advice. All Phoenix Capital Solutions engagements are subject to due diligence, verification, and eligibility requirements. See our full disclosure.

One of the biggest risks in an industrial or infrastructure project is not whether the technology works. It is whether anyone is contractually committed to buy what the project produces. That is the job of the offtake agreement, and it is often the document that unlocks the rest of the capital stack.

What is an offtake agreement?

An offtake agreement is a binding purchase commitment. A buyer (the offtaker) agrees in advance to purchase a defined quantity of a project’s future output at agreed pricing and terms. It is frequently signed before construction is complete, sometimes before it starts.

Its value is simple: it converts a production forecast into contracted revenue. Capital providers can underwrite contracted revenue. They are far more cautious about forecasts.

Why offtake agreements matter to capital providers

In project finance, the project itself repays the capital, usually through its cash flows rather than the sponsor’s balance sheet. That means lenders and investors focus on one question: if we build it, who is obligated to buy the output, and on what terms? A strong offtake agreement can:

• Create predictable, contracted revenue
• Reduce risk across every layer of the capital stack
• Support senior debt and institutional financing
• Strengthen applications for government incentives
• Make equity easier to raise, because downside revenue risk is reduced

The terms that make or break an offtake agreement

Not every offtake agreement is bankable. Underwriters read the details closely, and these are the terms that matter most:

Take-or-pay vs. take-if-tendered

Under a take-or-pay structure, the buyer pays for the contracted volume whether or not they take delivery. Under take-if-tendered, the buyer only pays for product actually delivered. Take-or-pay shifts more demand risk to the buyer and is generally viewed as stronger support for financing.

Pricing mechanism

Fixed pricing gives certainty. Index-linked pricing tracks a market benchmark and may include a floor and ceiling. Underwriters will test whether the project still covers its obligations if prices sit at the floor for an extended period.

Volume and duration

The contracted volume should cover a meaningful share of expected output, and the term (tenor) should generally extend at least as long as the financing it supports. A five-year contract backing ten-year capital leaves a gap that someone has to underwrite.

Counterparty strength

A contract is only as strong as the buyer behind it. A creditworthy offtaker, or one supported by a parent guarantee or credit enhancement, carries far more weight than an unrated startup.

Force majeure, termination, and conditions precedent

How broadly is force majeure defined? What lets either party walk away? What must happen before the obligation becomes effective? Loose language here can quietly turn a binding contract into an option.

Letters of intent are not offtake agreements

A memorandum of understanding or letter of intent signals interest, but it is usually non-binding. It can help a project early, but it will not carry the same weight in underwriting. The goal is to convert interest into a signed, binding agreement before the main capital raise.

Where offtake agreements show up

Offtake structures are common in steel and metals, energy and power, minerals and mining, agriculture, chemicals, and other physical commodities. For holders of commodities and natural resources, our C.A.R.R. program focuses on asset-backed funding structured around those resources. For larger projects, our L.I.F.T. program structures the capital stack around commitments like these, alongside the FEED study that defines what the project will produce.

Offtake agreement FAQ

Is an offtake agreement the same as a supply contract?

They are related. An offtake agreement is a supply contract viewed from the project’s side: the project is the seller, and the agreement secures demand for its output.

Can a project be financed without an offtake agreement?

Sometimes, through merchant or market-based structures, but it usually means more equity, more expensive capital, or both, because the revenue risk is not contracted.

When should an offtake agreement be signed?

As early as practical, and ideally before the main capital raise, since it is one of the first documents serious capital providers will ask to see.

Structuring a project around contracted revenue? Talk with our team about how we approach the capital stack.

This article is for educational purposes only. It is not an offer, solicitation, or recommendation to buy or sell any security, and it is not tax, legal, or investment advice. All Phoenix Capital Solutions engagements are subject to due diligence, verification, and eligibility requirements. See our full disclosure.

When we evaluate a large-scale development or industrial project, the pitch deck is not the first thing we ask for. The first thing we ask for is the FEED study. A strong idea is only the beginning. The FEED study is what turns that idea into something institutional capital can actually underwrite.

What does FEED stand for?

FEED stands for Front-End Engineering Design. It is the engineering and cost blueprint completed after the concept stage and before detailed design and construction begin. Where a concept study asks “could this work?”, a FEED study answers three harder questions:

• What can the site support? Site feasibility, utilities, access, permitting path, and environmental constraints.
• What will it cost? A defined scope with an engineered cost estimate, not a rough order of magnitude.
• When can it be built? A phased build schedule with the critical path and long-lead items identified.

What a FEED study typically includes

Scope varies by industry, but a completed FEED package for an industrial, energy, or large mixed-use project usually covers:

• Design basis and process or program definition
• Site layout, plot plans, and preliminary equipment or building specifications
• Utility, infrastructure, and interconnection requirements
• An engineered capital cost estimate (CAPEX) with stated accuracy and contingency
• Operating cost assumptions (OPEX) tied to the design
• A construction and procurement schedule, including long-lead equipment
• A risk register identifying technical, schedule, and cost risks

Pre-FEED vs. completed FEED: why the gap matters

A pre-FEED or conceptual study is useful for deciding whether to keep going. Its cost estimate is intentionally broad, often with a wide plus-or-minus range, because the design is not yet defined. A completed FEED narrows that range significantly because the scope, equipment, and quantities have been engineered.

That difference is the difference between a capital provider saying “interesting” and saying “let’s underwrite it.” Lenders and institutional investors size their commitment against the cost estimate. If the estimate can move by 30 to 50 percent, the risk sits with whoever funds it, and the terms reflect that or the deal does not move at all.

Why every other agreement is measured against the FEED

The FEED study becomes the reference document for the rest of the project. Engineering, procurement, and construction (EPC) contracts are priced against it. Supply and offtake agreements are sized to the output it defines. Government incentive applications cite its costs and job counts. The financial model and pro forma pull their CAPEX and OPEX directly from it.

When those documents do not reconcile with the FEED, underwriters notice, and the diligence process slows down while everyone figures out which number is real.

The most common mistake: raising before the FEED is done

The most frequent reason a fundable project stalls is that the sponsor goes to market for capital on a concept-level estimate. Documentation beats belief in an institutional raise. A completed FEED can be the difference between raising capital in months and raising it in years, because it answers the questions every serious capital provider will ask anyway.

If budget is the constraint, it is often worth treating the FEED itself as the first, smaller raise. Spending to de-risk the design is usually far cheaper than carrying a large raise that cannot close.

How Phoenix Capital Solutions uses the FEED study

For large-cap and project-level engagements, including our L.I.F.T. program for high-value projects, the FEED study is one of the first documents we review. It tells us whether the project is ready to be structured, what the realistic capital requirement is, and which risks need to be addressed before capital is committed.

FEED study FAQ

Who prepares a FEED study?

An engineering firm with experience in the specific project type, typically the same type of firm that would perform detailed design. Capital providers give more weight to studies from firms with a track record on comparable projects.

How long does a FEED study take?

It depends on size and complexity. Smaller projects may take a few months; large industrial or energy projects can take considerably longer.

Is a FEED study required for every project?

Not for every project. A straightforward acquisition or stabilized real estate asset is underwritten differently. FEED-level work matters most for new construction, industrial facilities, energy, and infrastructure, where the cost to build is the central risk.

Have a project moving from concept to capital? Request a consultation and our team will review where your documentation stands.

This article is for educational purposes only. It is not an offer, solicitation, or recommendation to buy or sell any security, and it is not tax, legal, or investment advice. All Phoenix Capital Solutions engagements are subject to due diligence, verification, and eligibility requirements. See our full disclosure.