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Methodology

Practical Examples

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Example 01

Small Residential — 24 Apartments

24-unit residential development in a city center

I Key Inputs

  • 12 one-bed units (42 m², €2,800/m²)
  • 8 two-bed units (65 m², €2,650/m²)
  • 4 three-bed units (88 m², €2,500/m²)
  • Build cost: €1,200/m² GIA, 5% contingency
  • Land: €420,000
  • Senior debt: €700,000 at 5.5%
  • 18-month timeline

! What to Watch

  • Unit mix diversity spreads revenue risk across price points
  • Small contingency (5%) leaves little margin for error — one material price spike could erode profit
  • Sales absorption rate is critical — how fast can you sell 24 units in this market?

O Expected Output

  • GDV approximately €3.6M
  • Profit €500K+
  • Return on Cost 18–22%
  • Break-even around month 14–16
  • Sensitivity: most exposed to build cost overruns
GDV ~€3.6M RoC 18–22% Break-even Mo. 14–16

? Key Decisions

  • Can you reduce land cost through negotiation?
  • Should contingency be 7–10% for safety?
  • What happens if sales take 2 months longer than planned?
Example 02

Mixed-Use Development — 40 Residential + 6 Commercial

Two-phase development with apartments and ground-floor retail

I Key Inputs

  • Phase 1: 40 residential units (45–72 m², €2,750–2,900/m²)
  • Phase 2: 6 commercial units (85 m², €1,800/m²)
  • Build cost: €1,150–1,350/m² GIA per phase
  • Land: €850,000
  • Senior + Mezzanine financing
  • 24-month timeline

! What to Watch

  • Phased construction creates complex cash flow — costs overlap between phases
  • Commercial units sell slower (absorption rate ~2/month vs 5 for residential)
  • Two revenue streams reduce concentration risk but add complexity

O Expected Output

  • Total GDV approximately €6.5M
  • Profit €800K+
  • Return on Cost 15–18%
  • Higher peak funding due to two concurrent phases
  • S-curve shows wider gap = more capital required
GDV ~€6.5M RoC 15–18% Timeline 24 mo.

? Key Decisions

  • Which phase to start first?
  • Is mezzanine funding worth the extra cost?
  • What if commercial units don't sell?
Example 03

Office Development — Bank Review Perspective

Conservative 8-unit office development for bank financing review

I Key Inputs

  • 8 office blocks (120 m², €2,100/m²)
  • Build cost: €1,450/m² GIA, 7% contingency
  • Land: €480,000
  • Senior debt only, 7.2% interest
  • 18-month timeline

! What to Watch

  • Bank focuses on LTV (should be <65%) and LTC (should be <75%)
  • Higher contingency (7%) shows conservative planning — banks prefer this
  • Office sales can be lumpy — timing uncertainty is higher than residential

O Expected Output

  • GDV approximately €2M
  • Moderate profit, RoC 12–15%
  • Lower return but lower risk profile
  • Sensitivity: most exposed to sale price changes
GDV ~€2M RoC 12–15% Contingency 7%

? Key Decisions

  • Does LTV meet the bank's lending criteria?
  • What happens in the downside scenario — does the bank still get repaid?
  • Should the developer pre-let before starting construction?

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