Property development finance - Revision history

Designing Buildings at 08:14, 5 October 2020

2020-10-05T08:14:45Z

← Older revision		Revision as of 08:14, 5 October 2020
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	* Property development appraisal and finance, by D.Isaac, J O’Leary and M Daley. Palgrave Macmillan.		* Property development appraisal and finance, by D.Isaac, J O’Leary and M Daley. Palgrave Macmillan.

−	[[Category:Cost_/_business_planning]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:DCN_Policy]] [[Category:Cost_/_business_planning]]

Designing Buildings at 09:44, 4 August 2020

2020-08-04T09:44:25Z

← Older revision		Revision as of 09:44, 4 August 2020
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	* Shared ownership.		* Shared ownership.
	* Speculative construction.		* Speculative construction.
		+	* Types of development.
	* What is a mortgage?		* What is a mortgage?
	* What is a valuer?		* What is a valuer?

Editor at 17:01, 19 November 2019

2019-11-19T17:01:26Z

← Older revision		Revision as of 17:01, 19 November 2019
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	* Private sector.		* Private sector.
	* Project-based funding.		* Project-based funding.
		+	* Property market.
	* Property rights.		* Property rights.
	* Property valuation.		* Property valuation.
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	* Working capital.		* Working capital.

−	=== External links ===	+	= External links =

	* Property development appraisal and finance, by D.Isaac, J O’Leary and M Daley. Palgrave Macmillan.		* Property development appraisal and finance, by D.Isaac, J O’Leary and M Daley. Palgrave Macmillan.

	[[Category:Cost_/_business_planning]]		[[Category:Cost_/_business_planning]]

Editor at 18:05, 29 January 2019

2019-01-29T18:05:42Z

← Older revision		Revision as of 18:05, 29 January 2019
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	* Budget.		* Budget.
		+	* Built to suit.
	* Buy to leave.		* Buy to leave.
	* Buy-to-let mortgage.		* Buy-to-let mortgage.

Editor at 16:04, 6 November 2018

2018-11-06T16:04:03Z

← Older revision		Revision as of 16:04, 6 November 2018
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	* Partnering and joint ventures.		* Partnering and joint ventures.
	* Private Finance Initiative.		* Private Finance Initiative.
		+	* Private sector.
	* Project-based funding.		* Project-based funding.
	* Property rights.		* Property rights.

Editor at 15:48, 30 October 2018

2018-10-30T15:48:44Z

← Older revision		Revision as of 15:48, 30 October 2018
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	It is possible to hedge against the borrower’s exposure to adverse interest rate movements. Financial instruments of capping are an 'insurance policy' against a rate rising above a level at which the cap is agreed – effectively creating a ceiling. The premium for such a policy is reduced if a collar is agreed where the borrower compensates the hedge funder if rates fall below an agreed level.		It is possible to hedge against the borrower’s exposure to adverse interest rate movements. Financial instruments of capping are an 'insurance policy' against a rate rising above a level at which the cap is agreed – effectively creating a ceiling. The premium for such a policy is reduced if a collar is agreed where the borrower compensates the hedge funder if rates fall below an agreed level.

−	~~= Find out more =~~	+	= Related articles on Designing Buildings Wiki =
−		+
−	=== Related articles on Designing Buildings Wiki ===	+

	* Budget.		* Budget.
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	* Property rights.		* Property rights.
	* Property valuation.		* Property valuation.
		+	* Real estate.
	* Real Estate Investment Trusts.		* Real Estate Investment Trusts.
	* Reverse premium.		* Reverse premium.

Editor at 13:59, 15 May 2018

2018-05-15T13:59:17Z

← Older revision		Revision as of 13:59, 15 May 2018
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	* Property valuation.		* Property valuation.
	* Real Estate Investment Trusts.		* Real Estate Investment Trusts.
		+	* Reverse premium.
	* Shared equity / Partnership mortgage.		* Shared equity / Partnership mortgage.
	* Shared ownership.		* Shared ownership.

Editor at 15:45, 28 March 2018

2018-03-28T15:45:08Z

← Older revision		Revision as of 15:45, 28 March 2018
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	* Mezzanine finance.		* Mezzanine finance.
	* Microeconomics.		* Microeconomics.
		+	* Off-plan property.
	* Overage.		* Overage.
	* Partnering.		* Partnering.

Editor at 12:10, 16 March 2018

2018-03-16T12:10:31Z

← Older revision		Revision as of 12:10, 16 March 2018
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	* Buy to leave.		* Buy to leave.
	* Buy-to-let mortgage.		* Buy-to-let mortgage.
		+	* Buyer-funded development.
	* Cash flow.		* Cash flow.
	* Construction loan.		* Construction loan.

Editor at 18:10, 6 March 2018

2018-03-06T18:10:03Z

← Older revision		Revision as of 18:10, 6 March 2018
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	* A development opportunity where a profit can be realised by means of added value.		* A development opportunity where a profit can be realised by means of added value.

−	The prime concern of any party lending money for property development is the ability of the borrower to repay the loan under agreed terms and conditions. Therefore the first requirement of a developer seeking finance is to produce a funding prospectus setting out the project‘s financial requirements and persuading potential lenders that the proposed project is viable.	+	The prime concern of any party lending money for property development is the ability of the borrower to repay the loan under agreed terms and conditions. Therefore, the first requirement of a developer seeking finance is to produce a funding prospectus setting out the project‘s financial requirements and persuading potential lenders that the proposed project is viable.

	The lender will be concerned with what will happen in the case of default; whether the property is to be owner occupied, sold on, or retained as an investment. Its value at all stages of development is critically important since it becomes the security of the loan and may be repossessed by the lender in the event of default by the borrower. This should be set out in a lending agreement.		The lender will be concerned with what will happen in the case of default; whether the property is to be owner occupied, sold on, or retained as an investment. Its value at all stages of development is critically important since it becomes the security of the loan and may be repossessed by the lender in the event of default by the borrower. This should be set out in a lending agreement.
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	Interest on the loan is charged on a fixed or variable basis. Well capitalised developers with a strong track record can negotiate non-recourse loans where the loan is a loan on property without recourse to outside collateral.		Interest on the loan is charged on a fixed or variable basis. Well capitalised developers with a strong track record can negotiate non-recourse loans where the loan is a loan on property without recourse to outside collateral.

−	Historically, funds from banks have been available up to 70% LTV (loan to value ratio), however in volatile markets the banks may revert to a LTC (loan to cost ratio), in order to reduce their exposure. Highly geared (debt to equity ratio) companies will find it hard to obtain loans in a falling market increasing the need to look at equity funding from the borrower or mezzanine finance. Banks normally take first charge over a developer’s site before advancing funds on a draw-down basis against a project programme and its cash flow requirements.	+	Historically, funds from banks have been available up to 70% LTV (loan-to-value ratio), however in volatile markets the banks may revert to a LTC (loan-to-cost ratio), in order to reduce their exposure. Highly geared (debt to equity ratio) companies will find it hard to obtain loans in a falling market increasing the need to look at equity funding from the borrower or mezzanine finance. Banks normally take first charge over a developer’s site before advancing funds on a draw-down basis against a project programme and its cash flow requirements.

	The loan agreement will set out interest rates, which may be fixed or set at a margin over LIBOR (London Inter-Bank Offered Rate). The loan agreement will set cost limits and completion dates as well as allowing interest to be rolled up until after completion. Any cost overruns will fall to the borrower for payment.		The loan agreement will set out interest rates, which may be fixed or set at a margin over LIBOR (London Inter-Bank Offered Rate). The loan agreement will set cost limits and completion dates as well as allowing interest to be rolled up until after completion. Any cost overruns will fall to the borrower for payment.
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	Convertible mortgages are structures which allow the lender to share in the uplift of the value of the property in return for reduced interest rates.		Convertible mortgages are structures which allow the lender to share in the uplift of the value of the property in return for reduced interest rates.

−	Mortgage debenture issues allow corporations to raise loans on a debenture issue which is secured against property and /or other corporate assets, yielding either a fixed or index-linked dividend.	+	Mortgage debenture issues allow corporations to raise loans on a debenture issue which is secured against property and/or other corporate assets, yielding either a fixed or index-linked dividend.

	Syndicated loans involve a group of banks providing project finance to a borrowing entity for a given period at pre-determined margins.		Syndicated loans involve a group of banks providing project finance to a borrowing entity for a given period at pre-determined margins.
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	* Speculative construction.		* Speculative construction.
	* What is a mortgage?		* What is a mortgage?
		+	* What is a valuer?
	* Working capital.		* Working capital.