Projected Debt-Notional Schedule for Real-Estate Loans

Good to see you again. In the previous lesson, you converted loan language into an exposure specification: benchmark, margin, reset mechanics, repayment terms, maturity, and prepayment rights. This lesson turns the repayment portion of that specification into a projected debt-notional schedule.

That schedule is the operational bridge between a real-estate business plan and a later hedging decision. It shows the amount of floating-rate debt expected to be outstanding on each relevant date, rather than merely repeating the facility commitment or original loan amount. For a client offering, it should be transparent about what is contractual, what is forecast, and what remains uncertain.

By the end, you should be able to construct a usable schedule for:

• a fully drawn, interest-only or bullet loan;
• a delayed-draw acquisition or construction facility;
• an amortising loan, including an interest-only period and balloon maturity; and
• a facility that combines those features.

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The debt-notional schedule: an exposure ledger, not just a loan model

The word notional usually appears in derivatives, but it has a simple starting point here: it is the relevant amount of principal outstanding. A projected debt-notional schedule is a dated record of how that outstanding principal is expected to change.

A facility may have a USD 30 million commitment, but if only USD 8 million is drawn today, the borrower’s immediate floating-rate exposure is ordinarily USD 8 million, not USD 30 million. Conversely, if the facility finances a construction programme, the exposure may grow materially as future draws are made.

The schedule should distinguish four related but different quantities:

Quantity	Meaning	Why it matters
Commitment	Maximum amount the lender has agreed to make available, subject to conditions.	Sets potential funding capacity; it is not automatically debt exposure.
Drawn principal	Amount actually advanced and outstanding.	Starting point for interest accrual and rate exposure.
Undrawn commitment	Remaining available amount, subject to draw conditions and expiry.	Indicates possible future exposure.
Projected debt balance	Drawn principal expected to be outstanding in future periods under stated assumptions.	The core output for financial planning and later hedge analysis.

The model therefore needs an explicit as-of date. A projection prepared on 1 March should state the balance actually outstanding on 1 March, then identify which future amounts are contractual and which depend on the property plan.

For example:

As of 1 March 2026: USD 8.0 million drawn under a USD 30.0 million delayed-draw facility. Future construction draws are based on the approved development budget dated 20 February 2026. No voluntary prepayments are assumed. Scheduled amortisation begins after practical completion, subject to confirmation of the executed facility schedule.

That statement makes the model reviewable. It also stops an adviser from presenting a construction budget as though it were a binding lender obligation or treating a lender commitment as debt already incurred.

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Choose the timing convention before filling in numbers

The most common modelling error is not arithmetic. It is mixing dates and balance conventions.

For each period, choose whether the displayed debt balance is measured at the beginning, end, or average of the period. A robust schedule normally contains at least beginning and closing balances.

Let:

• $B_t^{\text{open}}$ be debt outstanding at the start of period $t$;
• $D_t$ be new loan drawdowns during the period;
• $C{I}_t$ be capitalised interest added to principal;
• $S{P}_t$ be scheduled principal repayment;
• $M{P}_t$ be mandatory prepayment;
• $V{P}_t$ be voluntary prepayment; and
• $B_t^{\text{close}}$ be debt outstanding at the end of the period.

The core balance roll-forward is:

$$B_t^{\text{open}}=B_{t-1}^{\text{close}}$$ $$B_t^{\text{close}}=\max \left(0,B_t^{\text{open}}+D_t+C{I}_t-S{P}_t-M{P}_t-V{P}_t\right)$$

The maximum function prevents an impossible negative debt balance. It is a basic but important control, particularly when a maturity repayment, property-sale repayment, or prepayment is modelled.

If the facility commitment can reduce over time, undrawn capacity is:

$$U_t=\max \left(0,C_t-B_t^{\text{close}}\right)$$

where $C_t$ is the available commitment in the relevant period.

Monthly schedule versus event-date schedule

For a stabilised property with monthly interest payments and no expected debt changes between payment dates, a monthly schedule is usually adequate. For construction debt, acquisition debt, or loans with known disposal dates, use actual event dates as well.

Suppose USD 4 million is drawn on 1 April and USD 3 million is repaid on 28 April. A model that only records one month-end balance can hide the fact that the borrower carried USD 4 million of additional debt for most of April. That matters for interest forecasting and can matter when interpreting hedge performance.

Where material intra-period movements exist, either:

1. split the schedule into dated sub-periods; or
2. calculate a time-weighted average balance.

For a period containing several balance segments, the average balance is:

$${\bar{B}}_t=\frac{{\sum }_{j=1}^m{B}_{t,j}{d}_{t,j}}{D_t}$$

where $B_{t,j}$ is the balance for segment $j$, $d_{t,j}$ is the number of days in that segment, and $D_t$ is total days in the period.

This average balance will be useful in the next lesson when converting projected debt into interest expense. For now, its purpose is to reinforce a key point: the balance at month-end is not necessarily the balance that generated that month’s interest.

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Build the schedule around documented events

A practical debt schedule needs more than a “balance” column. Use a structure that makes each balance movement visible and auditable.

Column	Purpose
Date or period end	Shows the timing convention and event date.
Beginning debt balance	Equals the prior period’s closing balance.
Available commitment	Captures any draw-stop date, commitment reduction, or cancellation.
Planned draw	Separates expected advances from debt already outstanding.
Capitalised interest	Captures interest reserve funding or payment-in-kind debt.
Scheduled principal repayment	Reflects the contractual amortisation profile.
Mandatory prepayment	Captures contractual sweep, sale, insurance, or other repayment assumptions.
Voluntary prepayment	Normally zero in a base case unless the business plan specifies otherwise.
Closing debt balance	The result of the roll-forward.
Undrawn commitment	Available commitment less closing debt.
Source and status	Labels each material input as confirmed, forecast, or pending confirmation.

The final column is especially valuable in a client service. It forces the analyst to show the basis for each important line item:

• Confirmed: taken from the executed facility agreement, lender notice, or draw request.
• Forecast: based on an approved construction budget, asset-management plan, or underwriting case.
• Conditional: depends on a sale, refinance, extension, covenant result, or lender consent.
• Open item: cannot be modelled reliably until a document, schedule, or client decision is obtained.

A debt-notional schedule is not a legal interpretation of the facility. If a loan document is unclear on whether sale proceeds must prepay debt, record the issue and seek legal or lender clarification rather than embedding an untested conclusion in the model.

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A fully drawn loan: the simple case, properly stated

Consider a USD 25 million floating-rate loan that is fully drawn at closing, interest-only, and due in a single balloon repayment at maturity. Assume there are no committed curtailments, cash sweeps, or expected partial prepayments.

The projected balance is flat until maturity.

Date	Opening debt	Draw	Scheduled principal	Other prepayment	Closing debt
Closing date	0.0	25.0	0.0	0.0	25.0
First interest payment date	25.0	0.0	0.0	0.0	25.0
Subsequent payment dates	25.0	0.0	0.0	0.0	25.0
Maturity date	25.0	0.0	25.0	0.0	0.0

All figures are in USD millions.

This looks straightforward, but it still needs checks:

• Is the loan truly interest-only for the entire term?
• Is there a cash-sweep provision that could reduce debt?
• Is an extension available, and does it depend on lender consent or loan-to-value conditions?
• Is the borrower’s intended sale date earlier than maturity?
• Does the loan require partial repayment after a property disposal or release?

A flat balance is a valid base projection only if it reflects the contractual debt service and the current investment plan. It should not silently assume away a planned exit.

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Delayed-draw facilities: forecast the expected draw profile, not the full commitment

Delayed-draw debt is common in acquisitions with post-closing works, redevelopment, construction, tenant improvements, and capital-expenditure programmes. The lender may commit a maximum amount, but advances occur only after specified draw conditions are satisfied.

The key rule is:

A commitment is a capacity to borrow; a drawdown is debt outstanding.

The following excerpt from Watch Me Build: Construction Draw Schedule by Michael Belasco provides a useful modelling orientation. It shows how a construction timeline, cost profile, equity contribution, and debt funding schedule fit together.

Worked delayed-draw example

Assume a USD 20 million development facility with USD 4 million funded at closing. The approved base-case development budget expects further eligible draws as follows:

• USD 3 million on 1 April;
• USD 5 million on 1 July;
• USD 4 million on 1 October.

Assume interest is paid currently, so no interest is capitalised, and that no principal is scheduled to amortise during construction.

Date	Opening debt	Planned draw	Principal repayment	Closing debt	Undrawn commitment
1 January, closing	0.0	4.0	0.0	4.0	16.0
1 April	4.0	3.0	0.0	7.0	13.0
1 July	7.0	5.0	0.0	12.0	8.0
1 October	12.0	4.0	0.0	16.0	4.0
31 December	16.0	0.0	0.0	16.0	4.0

All figures are in USD millions.

The schedule says the base case expects USD 16 million of outstanding debt by year-end. It does not say the borrower has already incurred USD 16 million of debt, and it does not prove that the final USD 4 million will be available. Availability may depend on loan-to-cost tests, loan-to-value tests, completion progress, no-default conditions, cost-to-complete evidence, and lender approval.

Use scenarios when timing or amount is uncertain

In a real-estate underwriting context, a single draw schedule can create false precision. Construction timing and cost variation are frequently material. Maintain at least a small scenario set:

Scenario	Draw assumption	Interpretation
Base case	Draws follow the approved development budget and timetable.	Central planning assumption.
Delayed works case	Later construction draws are deferred, perhaps with an extended completion date.	Exposure may be lower initially but last longer.
Maximum utilisation case	Debt is drawn up to the available commitment as soon as permitted.	Conservative exposure ceiling, not necessarily the expected case.
Cost-overrun case	Costs exceed budget, with funding subject to equity support and lender consent.	Highlights that additional project cost does not necessarily mean additional loan availability.

For a future hedge assessment, draw uncertainty affects both the amount and timing of exposure. At this stage, do not choose a hedge instrument merely because the draw profile is uncertain. Instead, quantify the uncertainty accurately and show the client what balance range may arise.

Capitalised interest requires special care

In some development facilities, the lender funds interest from an interest reserve or permits it to be capitalised. Capitalised interest increases debt rather than being paid in cash.

This can create a feedback effect: debt generates interest, and funded interest increases debt. The construction-draw video illustrates the importance of adding capitalised interest into the cumulative debt balance rather than treating it as an off-model expense.

Your schedule should show capitalised interest as a separate line, with a clear source:

• a lender-approved interest reserve;
• an amount calculated under the facility’s capitalisation mechanics;
• a forecast based on projected rates and projected draws; or
• a provisional assumption requiring lender confirmation.

Do not double-count it. If the facility commitment includes the interest reserve, capitalised interest consumes commitment capacity. If it sits outside the stated development commitment, the facility documents and lender model should be checked carefully.

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Amortising loans: model principal reduction and the balloon separately

An amortising loan requires more than a maturity date. You need the actual repayment mechanics.

Three common patterns are:

Repayment structure	Principal behaviour
Interest-only	No scheduled principal reduction until maturity or another stated event.
Straight-line amortisation	Contractually specified principal amount repaid each period.
Mortgage-style amortisation	Total debt-service payment is calculated over a long amortisation term; its principal component rises gradually.
Balloon repayment	Residual balance becomes due at the shorter legal maturity date.

The key distinction from the previous lesson remains important: a 30-year amortisation period does not mean a 30-year loan term. A five-year loan amortising on a 30-year basis typically retains a large balloon balance at maturity.

The following portion of Watch Me Build a Fully Dynamic Mortgage Amortization Table in Excel by Adventures in CRE is a helpful practical demonstration of that distinction and of a responsive debt roll-forward.

Mortgage-style amortisation

Where the facility specifies a constant periodic payment calculated over an amortisation period, the periodic payment can be projected as:

$$\text{Payment}=\frac{B_{0}i}{1-(1+i{)}^{-N}}$$

where:

• $B_0$ is the debt balance at the start of amortisation;
• $i$ is the periodic interest rate used in the calculation; and
• $N$ is the total number of periods in the amortisation term.

For a monthly payment, the periodic rate is generally the annual rate divided by 12, but the actual facility payment mechanics govern. A floating-rate loan may recalculate its payment at reset dates, may use a fixed contractual amortisation schedule, or may have another stated approach. Always prefer the lender’s amortisation schedule if one is available.

Suppose a USD 10 million loan is interest-only for 12 months and then begins monthly amortisation on a 25-year basis. For illustrative purposes, assume a projected annual all-in rate of 6.00 percent remains constant when amortisation starts.

$$i=\frac{0.06}{12}=0.005$$ $$N=25\times 12=300$$

The projected monthly payment is approximately USD 64,433. In the first amortising month:

$$\text{Interest}=10,000,000\times 0.005=50,000$$ $$\text{Scheduled principal}=64,433-50,000\approx 14,433$$

Period	Opening debt	Total payment	Interest portion	Scheduled principal	Closing debt
Final interest-only month	10,000,000	50,000	50,000	0	10,000,000
First amortising month	10,000,000	64,433	50,000	14,433	9,985,567
Second amortising month	9,985,567	64,433	approximately 49,928	approximately 14,505	approximately 9,971,062

These figures are illustrative and rounded. In a live model, use the loan’s specified calculation convention, the actual payment dates, and the documented interest rate mechanics.

If this same loan matures after five years rather than 25 years, the remaining balance at the five-year legal maturity is a balloon. Record it as a maturity repayment in the final period, which reduces the closing debt to zero if the model assumes repayment, refinancing, or sale occurs on that date.

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Translate the logic into a controlled spreadsheet

A model can be built in Excel, a portfolio system, or a structured data workbook. The tool matters less than the control logic.

For a monthly model, use a separate assumptions area for:

• facility commitment and current outstanding amount;
• closing date and maturity date;
• draw-stop date;
• interest-only end date;
• amortisation start date and method;
• expected draw dates and amounts;
• scheduled principal repayment amounts;
• mandatory repayment assumptions;
• planned sale or refinance date, if applicable;
• capitalised-interest mechanics; and
• scenario designation and model version date.

The operating formulas are conceptually straightforward:

Opening_Debt = Prior_Period_Closing_Debt

Scheduled_Principal =
MIN(Required_Scheduled_Principal, Opening_Debt + Planned_Draw + Capitalized_Interest)

Closing_Debt =
MAX(
    0,
    Opening_Debt
    + Planned_Draw
    + Capitalized_Interest
    - Scheduled_Principal
    - Mandatory_Prepayment
    - Voluntary_Prepayment
)

Undrawn_Commitment =
MAX(0, Available_Commitment - Closing_Debt)

Use MIN in the repayment line so a scheduled repayment cannot exceed the balance remaining after draws and capitalised interest. Use MAX in the closing balance so a prepayment, sale repayment, or balloon amount cannot drive debt below zero.

For every major input, preserve a traceable source. A useful source note might say:

“USD 5.0 million draw on 1 July: forecast from borrower-approved works budget, version 3, dated 20 February 2026; subject to facility conditions precedent and lender approval.”

That is much stronger than simply typing USD 5.0 million into a model without explanation.

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Quality controls before using the schedule externally

Before the schedule is used in a client discussion, dealer request, or lender-facing analysis, perform several basic checks.

Balance integrity

• Closing debt never falls below zero.
• Every period’s opening debt equals the prior period’s closing debt.
• Debt is fully repaid at maturity if the model assumes a sale, refinance, or balloon payment.
• Draws never exceed the applicable available commitment.
• Capitalised interest is included once, not omitted or counted twice.

Document consistency

• The opening debt agrees to the latest lender statement or draw notice.
• The commitment and draw period agree to the executed facility and amendments.
• Scheduled repayments agree to the amortisation schedule or contractual repayment clause.
• Mandatory prepayments reflect known asset sales, cash sweeps, or insurance events.
• The assumed refinancing or exit date is consistent with the investment team’s current business plan.

Scenario clarity

• The schedule is labelled base case, downside case, or maximum-utilisation case.
• Forecast drawdowns are visibly distinct from drawn debt.
• Conditional events, particularly sale and refinancing, are not presented as certain.
• Any unresolved facility interpretation is listed as an open issue rather than modelled as fact.

These controls are not administrative decoration. In a hedging-coordination offering, a weak debt profile can produce a weak recommendation even if every derivative term is quoted correctly.

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Key takeaways

A projected debt-notional schedule is a dated roll-forward of the debt expected to be outstanding, built from the borrower’s actual balance, facility mechanics, and investment plan.

• Drawn debt, not the full facility commitment, is the immediate interest-rate exposure.
• A schedule should show opening debt, draws, capitalised interest, scheduled repayments, other prepayments, closing debt, and remaining commitment capacity.
• For delayed-draw facilities, future draw amounts and dates are forecasts. They should be based on a documented budget and expressed through scenarios where uncertainty is material.
• For amortising loans, obtain the contractual repayment schedule where possible. A payment calculated using an amortisation formula is a projection, especially where the loan rate floats.
• Treat the balloon balance at maturity as a distinct repayment event.
• Preserve source evidence and label each input as confirmed, forecast, conditional, or open.

Next, you will use the debt-notional schedule together with the loan’s benchmark, margin, reset convention, and day-count basis to calculate unhedged interest expense under forward-rate and stress-rate scenarios.