Pro Forma
A pro forma is a projected income and expense statement for a property, forecasting rent, other income, and operating costs — often assuming stabilized occupancy or rent increases that haven't yet been achieved. Lenders treat an owner's pro forma as a starting point, not a given, typically re-underwriting it to current, in-place figures with conservative assumptions.
Re-underwriting a pro forma usually means substituting trailing actual income and expenses for projected ones, applying a vacancy factor even to currently full buildings, and haircutting rent growth that isn't yet supported by signed leases — the result is typically a lower NOI than the pro forma showed.
Pro formas matter most on value-add and lease-up deals, where current in-place income meaningfully understates eventual performance; the gap between pro forma and in-place NOI is exactly what the business plan is trying to close, and precisely what bridge lenders underwrite around.