Funding options for building developments
It is rare in the private sector for the client to provide all the funding for its capital projects and even in the public sector the government has sought to use external funding by means of the private finance initiative (PFI).
A preliminary assessment of funding options should be carried out when considering whether to proceed with a project.
This assessment might consider:
- Budget.
- Draw-down facilities.
- Approvals and consents.
- Tax and grants (such as UK trusts and foundations and European trusts).
- Loan size and term.
- Land and site value.
- Building costs.
- End valuation.
- Stage payments.
- Planning risk.
- Profit on cost.
- Collateral or guarantor.
Sources of funding might include:
- Construction and development loans from a specialist property funder or senior debt lender (such as a commercial or high street bank).
- Mezzanine finance.
- Bridging finance.
- Project finance with special project vehicle (equity) and syndicated non-recourse loans and /or limited recourse finance.
For the public sector, funding options might also include:
- Private developer scheme (PDS).
- Leasehold.
- Crown build.
If assistance or advice is required from the consultant team or independent client advisers in the preparation of a funding prospectus, application for grants etc, then this should be made clear in appointing documents as it may not be included in their standard scope of services.
NB: The damning 2011 House of Commons Treasury Select Committee report on PFI has found '...that PFI projects are significantly more expensive to fund over the life of a project' and that there is no '...clear evidence of savings and benefits in other areas of PFI projects which are sufficient to offset this significantly higher cost of finance'.
On the 5th December 2012, the government published details of a new approach, stating that it ‘…remains committed to private sector involvement in delivering infrastructure and services, but has recognised the need to address the widespread concerns…’. The new version of PFI is referred to as PF2, and the key changes are set out in the article: PF2.
In the October 2018 Budget, the then Chancellor Philip Hammond announced that he would abolish the use of private finance initiatives (PFI) for future building projects.
[edit] Related articles on Designing Buildings
- Bridging loan.
- Business process outsourcing (BPO).
- Buyer-funded development.
- Collateral.
- Construction loan.
- Construction project funding.
- Cost plans.
- Drawdown.
- Equity and loan capital.
- Funder.
- Funding prospectus.
- Global Real Estate Sustainability Benchmark GRESB.
- Gross development value.
- Leaseback.
- Mezzanine finance.
- PF2.
- Private Finance Initiative.
- Project-based funding.
- Property development finance.
- Property valuation.
- Remortgage.
[edit] External links
Featured articles and news
2023 HSE data on workplace injuries and ill health
And CIOB's response.
Building Safety Act and Secondary Legislation
Presidential update from CIAT's Eddie Weir PCIAT.
Starting pistol Statement for an election campaign?
Rates freeze, NI cuts, full expensing; early election?
Positive pressure or positive input ventilation
Could this be a remedy for condensation, damp or mould?
Unlocking a Healthier Tomorrow
Report on Social housing retrofit in Scotland 2023
Call for ministerial group and National Retrofit Delivery Plan.
The Great Transformation 1860–1920. Book review.
2023 Autumn Statement in brief with reactions
Including the devolved governments, CIOB, ECA, APM and IHBC.
Irish Life Sciences HQ, an exemplar of adaptive reuse
AT awards small to medium size project category winner.
Formal and informal adaptive re-use or new use of buildings.
Broken Record. Emissions Gap Report 2023
Temperatures hit new highs, yet world fails to cut emissions (again).
Environment Agency cuts waste red tape
No longer enforcing certain waste transfer documentation.
APM Project Management Awards 2023
Winners reactions during the event at the Park Plaza Hotel.
BSRIA Living Laboratory Innovation Challenge
An exciting opportunity for stakeholders to collaborate.
Discussing issues related to inside and outside air quality
Report from the BSRIA Briefing 2023, Cleaner Air, Better Tomorrow.