Development finance

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Additional content on real estate development and funding can be found in the Development, structures and funding—overview topic.

Real estate development finance involves the acquisition and funding of a development site and the funding of a new development on it. Once developed the property may be sold by the developer to an investor or retained by the developer for its own investment purposes. The loan will be secured both on the property and the developer's rights under the constructions documents. A funder will be particularly interested in:

  1. •

    the value of the site compared to the loan: The development site whilst under development will be worth considerably less than when the development is completed. The level of pre-lets or sales and, in the case of pre-lets the covenant strength of prospective tenants will be important criteria for the full development loan monies to be advanced to complete the project

  2. •

    the development cost: the funder will want to ensure that the cost of designing, building, managing, letting or selling the development are well controlled and within budget in order that the project cost does not exceed the value of the

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