# Commercial Acquisition: Exit Assumptions

**URL:** <https://kb.cremodels.com/t/commercial-acquisition-exit-assumptions/600>\
**Category:** Commercial Acquisition\
**Tags:** underwriting, cre-suite, acquisition\
**Created:** [June 27, 2022, 3:51pm UTC](https://kb.cremodels.com/t/commercial-acquisition-exit-assumptions/600 "2022-06-27T15:51:08Z")\
**Posts on this page:** 1\
**Page:** 1

<div class="post-metadata">

**Author:** ![MaddieMiller](https://yyz1.discourse-cdn.com/flex035/user_avatar/kb.cremodels.com/maddiemiller/32/1039_2.png) [@MaddieMiller](https://kb.cremodels.com/u/MaddieMiller)\
**Post date:** [June 27, 2022, 3:51pm UTC](https://kb.cremodels.com/t/commercial-acquisition-exit-assumptions/600/1 "2022-06-27T15:51:09Z")

</div>

**Purpose**

The purpose of this post is to outline the key functions of the Exit Assumptions in CREModels Commercial Acquisition models, as well as cover where to input values and how output values within the Exit Assumptions are calculated.

**Overview of Exit Assumptions**

 ![image](https://canada1.discourse-cdn.com/flex035/uploads/cremodels/original/2X/e/e0f3e502916a6bc369b5ed4302a937a1b1757b8b.png)

_Exit Assumptions_ are used to project the proceeds from the sale of the property at the end of the analysis period, as well as the overall profit of the project. There are four inputs when entering information into _Exit Assumptions_: _Reversion Month, Reversion Cap Rate, Selling Costs,_ and _Gross Sales Price Override_.

**Inputs**

**Reversion Month**

The first input of the Exit Assumptions table is the _Reversion Month_. The _Reversion Month_ will be the month in which the user assumes the property will be sold. Beneath this input, the model will display the Forward 12 NOI (the sum of NOI for the 12 months following the Reversion Month).

**Reversion Cap Rate**

The _Reversion Cap Rate_ is the cap rate to be used to calculate the Gross Sales Price upon the _Reversion Month_. The _Reversion Cap Rate_ may also be referred to as the _Exit Cap_. The _Gross Sales Price_ will be equal to the _Sale NOI Forward 12_ divided by the _Reversion Cap Rate_.

**Selling Costs**

The user may enter _Selling Costs_ as a percentage of the estimated sale price (_Gross Sales Price @ Exit Yr_). The model will use the input % to calculate the _Cost of Sale_ by multiplying the _Selling Costs_ percentage by the _Gross Sales Price @ Exit Yr._ For example:

 ![image](https://canada1.discourse-cdn.com/flex035/uploads/cremodels/original/2X/e/e0f3e502916a6bc369b5ed4302a937a1b1757b8b.png)

![image](https://canada1.discourse-cdn.com/flex035/uploads/cremodels/original/2X/1/127d3b05de87bf7bbaa410ce2c49f5b4d6d030b3.png)

**Gross Sales Price Override**

As an alternative to entering a Reversion Cap Rate, the user may enter an expected sale price for the property in the _Gross Sales Price Override_ input. If a value is entered here, then the model will use this input in place of the calculated _Gross Sales Price @ Exit Yr_ value.

**Outputs**

**Net Sales Proceeds** : The _Net Sales Proceeds_ is equal to proceeds from the sale of the property after subtraction of the _Cost of Sale_. Using the above example, the calculation is as follows:

![image](https://canada1.discourse-cdn.com/flex035/uploads/cremodels/original/2X/a/acfb5b613a204325f35d6c4cd86d1932f685d0bd.png)

**Net Proceeds to Equity:** The _Net Proceeds to Equity_ is the total proceeds from the sale of the property that will be paid to investors after all debt is paid off. The model calculates _Net Proceeds to Equity_ by subtracting any _Debt Payoff_ from the _Net Sales Proceeds_. The _Debt Payoff_ will be the equal to the Acquisition Loan balance which is remaining after the final principal payment is made in the _Reversion Month_. In our example:

![image](https://canada1.discourse-cdn.com/flex035/uploads/cremodels/original/2X/2/2d3a6534bc3c60d20f4bd075a4a8898389fb869b.png)

**PSF** : The model shows the previous outputs as both a total value and a PSF value. In order to obtain the PSF values, the model divides the total values by the Net SF of the property (entered by the user in the General Info table in the top left corner of the INPUTS sheet). For example, this property has a total net square footage of 103,835 SF. If we divide the _Gross Sales Price @ Exit Yr_ by the total net square footage of the property, then we will have the Gross Sales Price on a per square foot basis:

![image](https://canada1.discourse-cdn.com/flex035/uploads/cremodels/original/2X/8/82cb856eba8e60ae290501c3588fde6c0be9090a.png)