How a Property Development “workout” works

How a Property Development “workout” works

Step 1: Site Inspection and Analysis

We visit the site to understand the location, demographic, surrounding areas and other developments, catchment, local infrastructure, cap ex requirements, traffic flow, tenancy demographics and vacancy rates etc.

Step 2: Fact Finding Audit

We then deconstruct the existing development approval (if there is one) and look closely at the buildability and therefore fundability by benchmarking key performance indicators of the property including profitability, serviceability, security ratio’s, project sensitivity testing, debt to equity analysis, pre-commitments, residual LVR’s, viability of development staging model.
Once we understand the fundamentals of the property, we then analyse forward cash flow projections, understand key development and sponsor risks, current banking relationships and facilities, organisational structures, management capabilities and consolidated group financial position.

Step 3: Workout Strategy Report

By understanding Steps 1 and 2 we then begin the process of assessing the highest-and-best-use of the property in the current and forecast market, considering the value creation and ultimate divestment options. With a clear and workable strategy formulated, we then build financial modelling for the proposed development, combined with a logical and clearly defined implementation plan based upon the identified financial priorities and needs of the client and relevant stakeholders.

Step 4: Workout Implementation

The key to a successful workout is in the preparation and completion of bank quality credit risk submission, i.e. existing facility renewal, refinance, restructure or new credit application.

From here, we can then instruct our specialist alliance consultants as required. This includes valuers, quantity surveyors, development managers, specialist property lawyers, accountants, project positioning experts, project marketing agents and builders.

Step 5: Workout Placement

With an in-depth understanding of all requirements of our clients and their project, we can then facilitate and professionally manage the finance restructure process, presenting all finance options and recommendations, including facility pricing negotiation and interest rate risk management where required. From here, we then assist to meet conditions precedent, settle the restructure, then monitor the project against plans and budget right through until successful completion.

 

 

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