Four townhouses, funded in stages

Daniel had the site and the planning approval and was close to starting construction. What he needed was a facility that matched the build programme, and a straight answer on how much equity had to go in before any money could be drawn.

The feasibility also needed room in it - for the cost of the funding itself, and for the work nobody plans for. A feasibility with no contingency is not a feasibility; it is a hope with a spreadsheet around it.

We went through the proposed funding structure, the construction contract, the builder's information, the contingency and the expected sale proceeds. Lenders assess the builder about as hard as they assess the developer, and a capable builder with no capacity is a problem the file has to deal with honestly.

The application set out the $4.5 million total budget - project costs and finance costs together, because a budget that excludes the cost of the money is not the real number - and showed how the developer equity sat within it. We compared the funding options that suited a project this size, then coordinated the lender's valuation, the quantity surveyor's review and the approval conditions.

Before settlement we walked Daniel through what would actually happen: the conditions on each drawdown, how interest would be allowed for during the build, and how the facility was expected to be repaid from completed sales. Then we tested those exit assumptions against slower sales and higher costs, which is the version of the feasibility that matters.

The $3.15 million senior facility was approved with $1.35 million of developer equity supporting the budget. Once the initial conditions were satisfied the first drawdown was released and construction started.

The milestone reached here is the first drawdown, not a completed and sold project. We say so deliberately: a development is not finished until the stock is gone, and this is where this one stood.

On a development, the conditions attached to the first drawdown decide whether the programme holds. Understand them before settlement, budget the finance costs inside the total development cost rather than beside it, and stress the exit before a lender does it for you.