Glossary
Every feasibility term, defined.
Plain-English definitions, formulas, and worked examples for the metrics that drive a residential development feasibility.
C
2 terms- Capitalisation rateCap rateRevenue & valueThe income return a stabilised income-producing asset delivers, expressed as net operating income divided by value.
- Construction contingencyCostsAn allowance added to construction cost to absorb scope changes, latent conditions, and pricing risk between feasibility and final completion.
D
4 terms- Development cashflowProcessA period-by-period schedule of every project inflow (settlements, debt drawdowns, equity contributions) and outflow (land, construction, soft costs, finance, distributions).
- Development feasibilityProcessThe exercise of testing whether a development project meets its target return at a given set of site, cost, revenue, and finance assumptions.
- Development management feeDM feeCostsThe cost line that compensates the developer (or external development manager) for delivering the project. Sits inside TDC and reduces profit on cost.
- Development marginReturnsProject profit divided by net realisation. Tells you how much of every revenue dollar you keep after building and selling the project.
E
1 termF
2 terms- Feasibility modelProcessA structured model that takes site, build, finance, and timing inputs and produces the project's profit, return, and funding profile.
- Finance costsCostsInterest, line fees, and establishment fees paid to senior (and any junior) lenders over the project term. Calculated against the drawn debt balance, period by period.
G
2 terms- Gross lettable areaGLAAreasThe total internal floor area available to be let or used by a tenant, including columns and structural elements within the tenant's space.
- Gross realisation valueGRVRevenue & valueTotal revenue expected from selling every dwelling in the project, before selling costs, GST, or any other deduction.
L
2 terms- Loan to costLTCCapital structureThe size of the senior construction loan divided by the total development cost. The principal lever a lender uses to size debt.
- Loan to valueLTVCapital structureThe size of the senior construction loan divided by the project's gross realisation value. The second lever a lender uses to size debt.
N
3 terms- Net lettable areaNLAAreasThe usable office floor area excluding common areas (lobbies, lifts, toilets, plant), measured per the Property Council of Australia's method of measurement.
- Net operating incomeNOIRevenue & valueGross rental income less direct operating expenses (rates, insurance, building management, maintenance), before debt service, depreciation, and capital expenditure.
- Net saleable areaNSAAreasThe total floor area inside the boundary of saleable lots: typically the internal area of each apartment or townhouse plus balconies, courtyards, and exclusive-use storage.
P
4 terms- Peak debtCapital structureThe largest senior debt balance reached at any point during the project's life. Usually just before the first settlements drop the balance back down.
- Peak equityCapital structureThe largest amount of developer equity committed to the project at any point in time. Usually after acquisition and during early construction, before debt drawdowns offset it.
- Profit on costPOCReturnsProject profit divided by total development cost. The headline ratio used by Australian residential developers to decide whether a deal is worth doing.
- Project IRRReturnsThe internal rate of return on all project cashflows, before allocating any debt. Tells you the unlevered return the project generates on its own.
R
1 termS
2 terms- Soft costsCostsAll non-construction development costs: design fees, planning, statutory contributions, legal, marketing, leasing, valuations, and project management.
- Stabilised valueRevenue & valueThe value of an income-producing asset once occupancy and rents have reached steady-state. Calculated by capitalising stabilised NOI at the market cap rate.
T
1 termY
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