D2G Investment Model
Workshop Q&A

TI = Tenant Improvements (Mieterausbau). These are the renovation costs incurred when a residential unit turns over. In the model, TI costs are 2A row 53 = €712/m² × renovatable area. They're triggered by churn events modeled in 2E rows 15-22. "TIs resi" simply means the tenant-improvement budget allocated to residential (as opposed to commercial) units.

Size classes are defined in 3A CRM_INPUT as 7 cohorts (up to 35 m², 35-40, 40-45, 45-50, 50-65, 65-75, 75+). Each cohort has a lower, mid, and upper target rent. These are consumed by 2B GRI via an INDEX/MATCH that selects the appropriate rent tier based on the dropdown in 2B cell E3 ("Rent Index - Upper", "Lower", "Mid", etc.). The formula:

German rent law (§558 BGB) caps residential rent increases at 20% over any rolling 3-year period (15% in "angespannte Wohnungsmärkte" like Hamburg). Column 2F AK tracks how much headroom remains for each unit.

For example, if a unit's rent was already raised 8% last year, only 12% (or 7% in tight markets) remains available. The Output Rent Roll 2E rows 29-36 uses these percentages to schedule BGB increases at specific months (e.g., month 6 at 15%, month 42 at 11%).

This is critical because it limits how fast rents can be raised to market level even after renovation.

Churn = tenant turnover. When a tenant leaves, the unit goes vacant temporarily, then gets re-let (ideally at a higher rent). Churn is modeled in 2E rows 15-22:

• Row 15-16: Gewerbe Laden (retail): 79 m² churning at month 0
• Row 17-18: Gewerbe Büro (office): 304.49 m² churning at month 0
• Row 22: Total Gewerbe Relet — area requiring re-tenanting

Churn matters because it triggers TI-CAPEX spend, temporary vacancy loss, and unlocks the ability to set a new (higher) rent on the re-let.

VAT Damage = non-recoverable VAT (Vorsteuer-Schaden). When CAPEX is spent on units that are rented to residential tenants (VAT-exempt), the investor cannot reclaim the 19% VAT. This "damage" appears in multiple places:

• 2E row 20: VAT Damage on churned TI = percentage lost on tenant improvement costs
• 2E row 77: VAT Damage Modernisierungscapex = 0.72 (72% of modernization VAT is non-recoverable)
• 2A row 32: Total VAT Damage in CF = –€81k over the hold period

NLA = Net Leasable Area (Nettomietfläche). The rentable floor space excluding common areas, stairwells, and technical rooms. In 2E row 23, NLA starts at 926.49 m² (month 0) and grows to 1,098.99 m² by month 2 as commercial spaces are re-let after churn. Total portfolio NLA is 9,501 m².

EE-Top-Up = Energy-Efficiency surcharge (Energetische Modernisierungsumlage). After energy-efficiency renovations, German law (§559 BGB) allows landlords to pass through up to 8% of the renovation cost per year as a rent increase — on top of the normal BGB cap.

In the model: 2E row 43, calculated as a weighted average = €1.97/m²/month.

This kicks in from 2E row 31 "ModUmlage drawn month" = month 21 — i.e., once renovations complete.

Commercial units use three separate rent development mechanisms (Felix's question about rent-development, VPI, last indexation):

1. Rent Development — The base annual rent growth assumption applied to commercial rents. Market-driven.
2. VPI (Verbraucherpreisindex) — Consumer Price Index indexation. Commercial leases often tie rent adjustments to CPI. Triggered when cumulative CPI exceeds a threshold (typically 5-10%).
3. Last Indexation — Tracks when the rent was last CPI-adjusted. The model checks if enough time has passed and enough inflation has accrued since the last adjustment before applying the next one.

The logic in 2E row 24 uses a conditional INDEX/MATCH:

This finds the rent value for the specific month, falling back to the hold-period end if the month lookup fails.

This is the largest single calculation block in D2G. Each residential unit follows one of three paths based on 2F col AQ:

The combined rent development formula in 2E row 39 sums all components:

Color formatting in the rent roll: Cells with colored backgrounds typically indicate override zones where investment managers have manually adjusted assumptions for specific units — e.g., accelerated churn, custom renovation timing, or rent-free periods.

The Modernisierungsumlage has a two-tier cap that creates a sharp strategic inflection point:

On a 100 m² unit held 36 months, the difference is €1 × 100 × 36 = €3,600 per unit. Across a portfolio of 145 resi units this creates substantial return impact.

Strategy: Investment managers time the first BGB rent increase to bring as many units as possible above €7 before EE-CAPEX completes. Getting a unit from €6.80 to €7.10 via a BGB increase before renovation is complete unlocks the full €3 levy.

The entry date affects IRR through two compounding mechanisms that are easy to overlook:

1. BGB increase eligibility window: The model uses "months from entry date" (not calendar months) for when BGB increases can be applied. Shifting the entry date by one month shifts all BGB increase windows by one month — which can suddenly make a large portion of the rent roll eligible or ineligible depending on the applicable Mietspiegel values.
2. Annual Mietspiegel update: If the Mietspiegel only updates once a year (e.g., in March), and BGB increase is scheduled for month 6 after a February purchase, the applicable reference is 11 months old. A March purchase instead uses a freshly updated Mietspiegel with a higher value — yielding a meaningfully larger BGB increase.

Example: an entry date shift from February to March could increase the share of rent roll eligible for full BGB increases from 60% to 80% — a direct IRR impact of 100–200 bps at deal scale. Senior analysts know this; junior users often don't realise changing the entry date has this effect.

Staffel lease tenants cannot be charged the Modernisierungsumlage levy while the Staffel is active (legally contested but the model's default position). However, v5.5 includes a "catch-up" toggle:

• If the Staffel expiry falls shortly after EE-CAPEX completion, the full accumulated levy can be applied as a lump catch-up once the Staffel ends
• This is legally argued as applying the levy at the point the contractual barrier (the Staffel) lifts
• The toggle is configurable per-deal based on legal advice

Without the catch-up, a Staffel unit that churns late in the hold period may never receive the EE-Top-Up at all — a meaningful return leak on units with long Staffel durations.

Modernisierungsumlage is the legal mechanism for passing renovation costs through to tenants. After energy-efficiency or other qualifying renovations:

1. Landlord completes renovation (CAPEX in 2A rows 43-56)
2. After completion (modeled at month 21 in 2E row 31), landlord can announce Umlage
3. Max pass-through: 8% of allocated renovation cost per year (§559 BGB), adding ~€1.97/m²/month 2E row 43
4. This is on top of normal BGB increases — it has its own cap

Investment manager decision process: The manager decides when and how much to increase, weighing: BGB headroom remaining (col AK), EE-Top-Up eligibility (post-renovation), tenant sensitivity, and market comparables. The sheet provides the maximum possible increase; the manager often applies less to manage tenant relations.

"Rent development based on averages" uses the cohort-level weighted average (from GRI), while "rent development based on rent roll" traces back to unit-level projections in 2E. They should converge, but small discrepancies arise because:

• Averages smooth out timing differences (one unit's BGB increase hits month 6, another's hits month 9)
• Weighting is by m² (area), so a 100 m² unit has more influence than a 35 m² unit

The CF Engine 2A row 19 uses the GRI-aggregated figures (not individual unit rows), making GRI the authoritative rent source for everything downstream.

Two separate provisions:

• Standard Rent Loss row 26 = 1% of NRI — covers tenants who pay late or default (Mietausfall)
• Development Rent Loss row 27 = 3% of NRI — additional provision during active renovation, when construction disruption causes temporary rent reductions or concessions

These are not the same as vacancy (row 25), which covers structurally empty units.

CAPEX doesn't hit all at once — it's phased across the hold period 2A rows 43-46:

• EE-CAPEX: Months 4–18 (energy retrofit phase)
• TI-CAPEX: Triggered by churn events (as units turn over)
• General CAPEX: Months 4–18 (general maintenance)
• Expansion CAPEX: Months 7–21 (building extensions/conversions)

Yes — KfW and IfB stack. In this deal, KfW provides €4.0M and IfB provides €3.97M = €7.16M total. However, there's a 60% eligible-spend cap 2H row 17: total subsidies cannot exceed 60% of qualifying CAPEX. The model enforces this with a MIN() formula.

The €/m² levy you can charge tenants after renovation is not simply 8% of gross CAPEX. The qualifying spend is calculated net of several deductions — this matters significantly for the final number:

1. Start with gross EE-CAPEX
2. Add back the non-recoverable VAT share (net spend is what you actually paid)
3. Subtract the KfW interest advantage for year 1 (the subsidised loan benefit must be deducted)
4. Subtract the portion attributable to commercial space (residents shouldn't fund commercial upgrades)
5. Subtract the maintenance share — the portion you would have spent anyway on standard upkeep (e.g., window replacement that was already due)
6. Subtract grants and subsidies received (KfW repayment subsidy, IfB grants)
7. Divide result by total resi m² → then apply 8% → gives annual levy → divide by 12 for monthly amount

This net figure is capped: max €3/m²/month if the pre-renovation rent is above €7; max €2/m²/month if below €7. See the €7 threshold explained in the Rent Roll tab.

The term "cash trap" was raised as a question in the workshop catalog — the actual explanation requires input from the business team on the specific FKG program mechanics. What is confirmed from the D2G architecture session: subsidies are modeled as immediate cash offsets against CAPEX spend in the CF Engine. Any program-specific distribution restrictions or timing conditions are not currently modeled inside D2G itself, but exist as external legal constraints managed at the SPV/fund level.

New in v5.5. Some assets are in such poor condition that re-letting immediately at a low rent creates a legal problem: once you re-let, you can no longer achieve the target rent after renovation without a full refurbishment and justified rent increase. It can be financially better to keep the unit vacant for 1–2 years until renovation is complete, then re-let directly at the target rent.

The strategic vacancy scenario allows users to set a cut-off date. All churn occurring before that date accumulates into vacant space (rather than being re-let at a lower interim rent). After the cut-off, normal re-letting resumes. The cut-off defaults to one month after EE-CAPEX completion.

An optional mechanism where the asset manager pays a compensation per m² to accelerate tenant turnover. The rationale: paying €200/m² to a tenant whose unit can then be re-let at €7,000/m² exit value vs. €3,000/m² occupied value is a highly favorable trade-off.

Modeled in 2E / 2A: compensation costs flow into the CF Engine as a one-time cost. The vacated space then enters the normal re-let pipeline with the full target rent uplift.

Note: The team is deliberate about not over-using this — it creates reputational risk and RENEO does not want to be perceived as an aggressive displacing investor.