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.
Note: Commercial assets follow the same 8-step wizard and escrow mechanics as residential. Defaults: Dubai/UAE → Staged Escrow (all asset classes); Australia → 10/90 (all asset classes); Malaysia → Progress Drawdown (residential) / No Escrow (commercial). All four rules remain selectable everywhere.
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
The screen is titled Land as Equity. Use it to configure land as an equity contribution to the development financing. A BENCHMARK chip at the top of the wizard shows asset • city • country, and a read-only Land Cost (Component 1) value is shown so you can see the land figure this step is using.
Land Equity Contribution slider
Locked at 100% only for Dubai, United Arab Emirates.
KSA, the other emirates (Abu Dhabi, Ras Al Khaimah, Sharjah, Ajman, Fujairah), and all other countries are unlocked, range 30% to 100%.
Selecting or switching the escrow withdrawal rule never changes the stored land equity percentage.
Equity sources breakdown
Always shown. Total equity requirement = TDC − senior debt. Land value only counts toward equity if you own 100% of the land as equity; 70% of land value is credited after the bank haircut.
At 100% land equity: 100% land ownership — 70% of land value counts toward the equity requirement; remaining land value is not credited and must be funded via cash or other sources.
Land Term Loan Required
Appears automatically whenever land equity is set below 100%. The portion of the land not owned through equity must be financed. The land loan appears in the Monthly Cash Flow Projection under all escrow rules, including the Staged Escrow Rule (drawdown, interest, and bullet repayment rows).
- Principal (drawn at M0) = the unowned portion of the land cost. Bullet repayment of full principal at maturity.
- Land loan rate % (annual) — numeric input for the land facility rate.
Interest payment on land loan
- Capitalize: interest accrues to the loan balance — no cash interest during the tenor; bullet repayment of principal plus capitalized interest at maturity (e.g. M33).
- Paid current (quarterly): interest paid every 3 months from developer cash (increases peak equity requirement vs capitalize).
- Paid current (semi-annual): interest paid every 6 months from developer cash (increases peak equity requirement vs capitalize).
Loan tenor (bullet repayment)
Construction period + 6 months post-completion; full principal repayment at maturity.
Land term loan fees
Arrangement / processing fee (%) with benchmark hint (0.75% arrangement fee).
Legal & valuation fee (%) with benchmark hint (0.15% legal/valuation bundle).
Capitalized interest (illustrative): shows the amount that accrues to the loan and is repaid at maturity (principal + accrued interest).
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
Four tabs: 10/90 Rule, Staged Escrow Rule (Staged Escrow Rule Configuration; formerly Certification Intervals), Progress Drawdown Rule (Progress Drawdown Rule Configuration; formerly HDA Progress Withdrawals), and No Escrow Rules. All four remain selectable everywhere.
These are withdrawal mechanisms, not country labels; the project's location only pre-selects a default.
Location defaults (pre-select only)
- Staged Escrow Rule: Dubai/UAE — all asset classes.
- 10/90 Rule: Australia — all asset classes.
- Progress Drawdown Rule: Malaysia residential.
- No Escrow Rules: Malaysia commercial, plus every other location (KSA, other emirates, Thailand, China, …). All four options remain selectable everywhere.
Staged Escrow Rule
Staged Escrow Rule Configuration
Certification-based staged withdrawals. Default only for Dubai/UAE (all asset classes); selectable in any other market.
- Certification interval: progress withdrawals at each certification (e.g. every 3 months), with cash drawn the following month (1-month offset).
- Retention %: user-editable (default 5), held until practical completion plus defect liability.
- Release timing: retention released at practical completion + defect liability. Residual trust is swept by CP+12.
- Horizon: CP+12.
10/90 Rule
10/90 Rule Configuration
Deposit held in trust at lock; balance paid at settlement. Default for Australia (all asset classes); selectable anywhere.
- Purchase Deposit %: user-editable (default 10). Must sum with Balance % to 100.
- Balance %: user-editable (default 90). Paid at settlement.
- Deposit timing: lodged to trust at every lock month — during and after the construction period.
- Settlement timing: construction-period locks settle at handover; post-CP locks settle in the same month. Deposits are released at settlement.
- Residual sweep: any leftover trust is fully swept by CP+12 (never later).
- Trust interest: earned on the prior month's trust balance (1-month offset).
- Actual Sales Proceeds: balance + releases. Proceeds equal total locked sales plus net trust interest minus fees. Horizon is CP+12.
Progress Drawdown Rule
Progress Drawdown Rule Configuration
Milestone / S-curve-linked drawdowns. HDA is the Malaysian regime that uses this rule. Default for Malaysia residential (Malaysia commercial defaults to No Escrow); selectable anywhere.
- Drawdowns: withdrawals follow construction milestones and the S-curve (SPA signing, foundation, framework, and later completion / title stages).
- Retention: post-VP schedule through VP+24.
- Horizon: CP+24.
No Escrow Rules
Default for Malaysia commercial and every location that does not map to the three mechanisms above (including KSA and UAE emirates other than Dubai). Sales proceeds sweep directly to debt service and equity distribution; no escrow or trust accounts apply. Horizon is CP+6.
Optional toggle: Sales reduce equity need (optional).
Escrow Account Fees
Shown on the three escrow options (10/90 Rule, Progress Drawdown Rule, and Staged Escrow Rule). Hidden when No Escrow Rules is selected.
Setup fee (flat amount) — one-time setup fee, e.g. 5,000.
Management fee (% p.a.) — annual management fee, e.g. 0.03–0.08% p.a. on average balance.
The feasibility report's escrow slide is titled by the selected rule name (for example, "Staged Escrow Rule Configuration") and never by a country regulator outside that regulator's market.
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 (Staged Escrow Rule): Surplus escrow receipts automatically reduce the drawn RCF during the development phase, lowering interest costs.
GDV-Based Release (Progress Drawdown Rule): Sales reduce the equity need. Enabled when the Progress Drawdown Rule is selected (GDV-based release models).
Recycling behavior follows the selected escrow rule, not the country. The 10/90 Rule and No Escrow Rules keep their current treatment.
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:
- 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).
- Apply Debt Drawdowns: Based on the selected Drawdown Structure (Step 6), the RCF is drawn to cover costs up to the LTC limit.
- Identify the Gap: If the cumulative cash position is still negative after debt drawdowns, a "gap" exists.
- 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.
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
| Metric | Definition |
|---|---|
| Total Equity Amount | Land + cash injection deployed in the project. |
| Total Cash Injection | Cash equity injected by the gap-fill engine (excludes land equity). |
| Preference Shares | Pref. drawdown when the mezzanine tranche is enabled (zero otherwise). |
| Total Land Loan Amount | Land facility drawdown (appears when land equity is below 100%). |
| Total Construction Loan Amount | Construction facility (RCF) drawdown. |
| Total Loan Interest | Total interest across land and construction facilities. |
| Equity Multiple | Total distributions divided by total equity injected. |
| Equity Payback | Month of full equity recovery. |
| Equity IRR | Annualized levered internal rate of return on the equity cash-flow series. |
| DSCR Metrics | Skipped during the construction/sales phase — DSCR requires an operational CFADS definition and is not applicable during construction/sales. |