Sale Stream

Component 4: Financing (Sale)

Component 4 models the complete financing structure for for-sale developments, including land term loans, construction revolving credit facilities (RCF), escrow-regulated sales proceeds, and jurisdiction-specific withdrawal rules. The component uses a dynamic gap-fill engine to determine equity requirements and calculates levered Equity IRR based on the waterfall payment structure.

Key Difference from Operational Stream: Sale Stream financing is structured around the construction period (typically 30-36 months) with escrow-regulated sales proceeds, rather than long-term hold financing with DSCR covenants. The focus is on funding the development gap until sales collections cover costs.

Note: For Commercial Strata assets (Office and Warehouse), the system may apply Non-Escrow logic or simplified withdrawal rules depending on jurisdiction, as these assets are not subject to residential HDA/RERA regulations.

Overview

Component 4 walks you through 8 sequential steps to configure your complete financing structure. The component integrates with Components 1-3 to calculate debt sizing, equity requirements, escrow mechanics, and ultimately the levered Equity IRR.

What This Component Produces

  • •Monthly Cash Flow Projection: Post-financing cash flows showing loan drawdowns, interest, equity injections, and net cash position.
  • •Levered Equity IRR: Internal rate of return on equity cash flows after debt service.
  • •Escrow Schedule: Jurisdiction-specific withdrawal milestones and retention releases.
  • •Capital Stack: Debt/Equity split with peak funding gap analysis.

Step-by-Step Walkthrough

Step 1: Project Summary

Review consolidated inputs from Components 1-3 before configuring financing. This step provides a comprehensive overview of your project's financial position.

Development Costs & Project Metrics

Displays Total Development Costs (TDC) from Component 1, and Net Sales Proceeds, Construction Period, Sales Start Month (e.g., -M6 for pre-sales), and Net Surplus from Component 2.

Funding Gap Visualization - Preliminary

Three critical metrics displayed in cards:

Peak Funding Gap

Maximum cash shortfall during construction before debt drawdowns.

Max Debt Capacity

Maximum loan based on LTC ratio.

Min Equity Required

Minimum equity based on LTC.

Peak Equity Required (Dynamic)

This is the actual equity needed, calculated dynamically based on:

  • The larger of: cumulative construction shortfall (pre-drawdowns) OR residual cash equity from senior debt sizing on full TDC.
  • Equity breakdown: land counts only at 100% land equity (then 70% of land value); below 100% land equity, no land credit.
  • Actual needs may differ with sales recycling and land loan configuration.

Step 2: Debt Sizing (LTC & LTV)

Configure your debt type and define loan-to-cost (LTC) and loan-to-value (LTV) ratios to determine your maximum credit facility amount.

Debt Type Selection

Conventional Debt

Fixed or floating interest (e.g., benchmark + margin).

Islamic Financing

Murabaha / Ijara / Sukuk-style profit rate wording.

Credit Facility Sizing

Two sliders allow you to set your desired Loan-to-Cost and Loan-to-Value ratios. The system calculates the credit facility amount based on both metrics and uses the lower value as the binding constraint (lenders use the more conservative figure).

Based on LTC (60% of TDC): AED 94,465,566

Based on LTV (60% of Stabilized Value): AED 125,332,891

Approved Credit Facility Amount: AED 94,465,566 ✓ Limited by LTC

Step 3: Land Ownership & Equity

Configure land as equity contribution to the development financing. This step is critical because land ownership rules vary by jurisdiction and significantly impact your cash equity requirement.

⚠️ Jurisdiction-Specific Rules

UAE: Developer must own 100% of land equity. Land value is credited at 70% (30% haircut) for equity calculation purposes.

Malaysia / Australia: Different rules apply based on local HDA or state regulations.

Equity Sources Breakdown

The system calculates how much of your total equity requirement can be met with land value (after haircut) and how much must come from cash.

Total equity requirementAED 62,977,044
Land (counted as equity, 70% haircut)AED 34,004,355
Cash equity (required)AED 28,972,689

Step 4: Preference Shares

Optional mezzanine tranche with a fixed return or Islamic target profit. Configure after land and senior debt sizing; amounts reference cash equity required from the stack above.

Toggle to enable preference shares. You can allocate a percentage of your cash equity requirement to this tranche, set a target return (e.g., 10% p.a. fixed dividend), and define the return type.

Preference shares are subordinate to senior debt and repaid after bank facility payoff at handover.

Step 5: Escrow Withdrawal Configuration

Configure escrow withdrawal rules based on your project's jurisdiction. The system provides pre-configured templates for major markets. Users selecting different jurisdictions can choose between these three primary withdrawal configurations:

🇦🇪 UAE — RERA (Certification Intervals)

Used for projects in the UAE. Withdrawals are based on certification intervals and retention percentages.

  • Certification Interval: Progress withdrawals occur at each certification milestone (e.g., Every 3 Months).
  • Retention Percentage: A percentage (e.g., 5%) is held until project completion.
  • Release Timing: Retention is typically released 12 months post-completion.

🇲🇾 Malaysia — GDV Escrow (HDA Progress Withdrawals)

Used for Malaysian projects under the Housing Development Act (HDA). Withdrawals are strictly tied to construction milestones and S-Curve triggers.

  • HDA Deposit: A deposit percentage (e.g., 3% of construction costs) is lodged into escrow at M0.
  • Milestone Schedule: Withdrawals trigger when the construction S-curve reaches specific thresholds (e.g., 10% at SPA Signing, 10% at Foundation Works ≥15%, 15% at RC Framework ≥30%, up to 100% at Strata Title Application).
  • Retention Release: 50% released 8 months after VP (Vacant Possession), final 50% released 24 months after VP.

🇦🇺 Australia — State Regimes (10/90 Rule)

Used for Australian projects. Follows the standard 10/90 withdrawal rule.

  • Purchase Deposit (10%): Typically 10% of sales proceeds held in trust until units are delivered.
  • Balance Payment (90%): The remaining 90% of the sales price is paid when the project is completed.
  • Retention: 5% GDV retention held for 12 months post-completion.

Escrow Account Fees

Configure the one-time setup fee (e.g., AED 5,000) and the annual management fee (e.g., 0.05% p.a. on average balance) for the escrow account.

Step 6: Drawdown Structure

Choose how the construction loan (RCF) is drawn down to fund the project.

LTC-Proportional Milestone

Drawdown occurs at MAX(S-curve month, certification month). The S-curve cumulative must reach a specific progress threshold (e.g., 30% TDC) before the milestone window opens.

Equity-First Gap-Fill

Equity funds shortfalls first; the RCF fills the residual gap each period. This is the engine's default gap-fill mode, minimizing debt interest by using equity before drawing on the loan.

Step 7: Interest, IDC & Escrow Income

Configure the interest rate type (Fixed or Floating), the all-in rate percentage, and how Interest During Construction (IDC) is handled.

IDC Treatment (Construction RCF)

  • Capitalize: Interest is added to the loan balance and released pro-rata with principal. (Most common for sale developments).
  • Pay Current: Interest is paid monthly from equity during construction.
  • Hybrid: A split between capitalized and paid current.

Escrow Deposit Rate %

The interest rate earned on funds held in the escrow account (default set by jurisdiction, e.g., 3.9%).

Canonical Rule: The 1-Month Offset

To ensure institutional-grade accuracy, FeasiBuild applies a strict 1-month offset to specific financial calculations:

  • Construction Loan Interest: Interest at Month t is calculated on the outstanding loan balance at the end of Month t-1.
  • Escrow / Trust Interest Income: Interest earned in Month tis based on the prior month's escrow balance.
  • UAE/KSA Progress Withdrawals: When a milestone is certified in a given month, the actual cash withdrawal occurs in the following month.

This lag reflects real-world banking and regulatory processing times, preventing the model from overstating early-period cash availability.

Step 8: Sales & Escrow Recycling

Configure how surplus sales proceeds collected in escrow are utilized during the development phase.

Construction Cost-Based Release (UAE/KSA): Surplus escrow receipts automatically reduce the drawn RCF during the development phase, lowering interest costs.

GDV-Based Release (Malaysia): Sales reduce the equity need. Enabled when the jurisdiction is set to Malaysia.

Output: Financing Model Preview

Upon completing Component 4, FeasiBuild generates a comprehensive Monthly Cash Flow Projection and Key Financing Metrics. This output demonstrates how the gap-fill engine and waterfall structure work together to fund the project and calculate returns.

How the Gap-Fill Engine Works

The Sale Stream uses a dynamic Gap-Fill Mechanism to determine exactly how much cash equity is required to keep the project solvent month-by-month. Instead of assuming a fixed equity amount upfront, the engine calculates the shortfall dynamically:

  1. Calculate Pre-Equity Position: The engine sums all cash inflows (sales proceeds, escrow interest) and outflows (construction costs, soft costs, land cost, loan interest, commitment fees).
  2. Apply Debt Drawdowns: Based on the selected Drawdown Structure (Step 6), the RCF is drawn to cover costs up to the LTC limit.
  3. Identify the Gap: If the cumulative cash position is still negative after debt drawdowns, a "gap" exists.
  4. Inject Equity: Cash equity is injected exactly equal to the gap amount to bring the cumulative NCF to zero (or positive). This minimizes the total equity deployed and maximizes the Equity IRR.

The Waterfall Structure & Equity IRR

The Monthly Cash Flow Projection table follows a strict Payment Waterfall to ensure capital is returned in the correct order of priority. This structure is critical for calculating the levered Equity IRR.

1.Senior Debt Service: Loan interest and principal repayments are made first from available cash flows.
2.Preference Shares: If enabled, fixed dividends and eventual repayment of the mezzanine tranche are paid next.
3.Common Equity Distributions: All remaining residual cash flows are distributed to the common equity investors. This is the "levered" cash flow used to calculate the Equity IRR.

IRR Calculation: The Equity IRR is solved using the Newton-Raphson method on the series of equity cash flows (negative for injections, positive for distributions). The discount rate that makes the Net Present Value (NPV) of these flows equal to zero is the Equity IRR.

Key Financing Metrics

Total Equity Amount

AED 62,977,043.71

Land + Cash Injection

Total Cash Injection

AED 28,972,688.71

Total Construction Loan Amount

AED 8,692,155.47

Equity Multiple

1.36x

Equity Payback

M35

Month of full recovery

Equity IRR

11.52%

Annualized

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