POST 068 · CROSS-DOMAIN BINDING

A pro forma is a forecast, not a spreadsheet.

Adjust the volatility of rent, cap rate, and cost. The fan chart widens. The "IRR" isn't a number — it's a distribution. A single-number pro forma is a lie told with decimals.

Rent volatility (σ)

3.0%

Cap rate volatility (σ)

0.5%

Cost overrun volatility (σ)

5.0%

P10–P90 fan

P25–P75 fan

P50 (median)

hurdle (18%)

P50 IRR at exit

—

P10 IRR (downside)

—

Pr(IRR ≥ 18% hurdle)

—

Single-number pro formas hide risk behind false precision. A forecast shows you the distribution of outcomes — and where the tails live.