Programming & Analysis > Development Financing > Flashcards

Development Financing Flashcards

(60 cards)

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1
Q

How does Budget affect a project?

A

It influences design decisions and can determine feasibility of a project.

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2
Q

What are the four interrelated variables that go into a project budget?

A

-Quantity of material
-Quality of construction
- Available funds
-Time to construct

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3
Q

What must budget account for when it comes to length of construction time?

A

Inflation

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4
Q

What are Project Budget Line Items?

A

Site acquisition, building cost, site development, total construction cost, movable equipment, furnishings, professional services, inspection, escalation estimate, contingency, financing costs, moving expenses.

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5
Q

What is Value Engineering?

A

The process of reviewing individual systems or materials to see if the same function can be done in a less expensive way.

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6
Q

What is Contingency?

A

A percent of the total budget that is set aside for unanticipated expenses.

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7
Q

Budgets that are made earlier in the project should use a _________ contingency that later in the project.

A

Higher

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8
Q

What is a common contingency %?

A

5-10%

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9
Q

What is Financing?

A

The long-term interest expense and immediate loan origination fee required to secure cash-flow for developing projects.

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10
Q

What is Debt Service?

A

It is a long-term interest, that is not included in the project budget because it’s an ongoing cost to the owner, like a maintenance cost.

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11
Q

What is the accuracy of using Project Comparison Method?

A

Within 15-25%

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12
Q

What is the Project Comparison Method?

A

Cost of a new project is estimated using past projects of similar scope and function. Three budgets are typically developed: low/medium/high.

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13
Q

What is the Area Method / Square-Foot Method / Volume Method?

A

Developed after preliminary design, with good idea of size, function, quality, and complexity of a project. Uses avg. cost per unit area. Cost figures can be divided by space and program to get a more accurate result.

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14
Q

What is the accuracy of using Area Method / Square-Foot Method / Volume Method?

A

Within 5-15%

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15
Q

What is the Assembly Method / System Method?

A

Developed during SD using historic, assumed costs for each type of subsystem (i.e. foundations, roofing, exterior walls, ceiling, etc.)

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16
Q

What is the accuracy of using Assembly Method / System Method?

A

This is the most accurate method, within 10%

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17
Q

What is Pro Forma?

A

On a for-profit project, the developer calculates the income expected against expected costs to build. Estimated selling price or rent/sf is calculated.

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18
Q

What is a Bond?

A

Debt security issued by government entity to raise money for construction project.

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19
Q

How are bonds purchased?

A

By individual investors or investment companies.

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20
Q

What is a Blanket Loan?

A

Also known as a blanket mortgage, they are used to fund purchase of a large piece of land for subdivision. Each time a parcel is sold, a portion of the mortgage is paid back and retired.

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21
Q

What is a Bridge Loan?

A

Short-term loan to purchase property quickly, before long-term financing can be arranged.

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22
Q

What is a Construction Loan?

A

Finances the construction of the project and is in effect for the duration of construction.

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23
Q

What happens to a construction loan after construction is complete?

A

The loan must be converted to a long-term permanent loan or re-paid.

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24
Q

What is Hard Money Loan?

A

Short-term loan for a distressed financial situation, such as foreclosure or bankruptcy. Based on the quick-sale value of the property, it typically comes in under market, with high interest rates.

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25
What is a Mezzanine Loan?
Secured by collateral in the stock of a development company rather than a property.
26
What is General Tax?
Any tax imposed for general governmental purposes. Property taxes are ad valorem (based on value of property) and are used for ongoing operation and maintenance.
27
What is a Special Sales Tax?
Imposed for specific purpose or a single-purpose authority (i.e. transportation projects).
28
How are Special Sales Taxes imposed?
They are voted by the general population.
29
What are General Obligation Bonds?
Issued by city or state, backed by general tax revenue and city's credit. These bonds finance big construction projects and are used to purchase property.
30
What are Revenue Bonds?
Also known as rate-supported bonds; similar to General Obligation Bonds, but backed by revenue that will come from customers who use whatever project the bond funded, as opposed to credit or tax revenue (i.e. revenue from city water and sewer facilities).
31
What are Public Enterprise Revenue Bonds?
They are issued by cities to finance facilities for revenue producing enterprises. Bonds are paid off by revenue made by facilities through charges on customers (i.e. Airports, garages, hospitals).
32
What is Tax-Increment Financing?
Used for improvements that will encourage private development in an area, and generate increased taxes due to increased property values.
33
What is the sequence of Tax-Increment Financing?
1. Gov. creates a special district and assesses the value of all properties before freezing taxation of these properties. 2. Gov. issues a bond and the revenue from the bond is used to finance public works. 3. At the conclusion of this work, property values in the district are reassessed (values have increased). Properties now pay a higher property tax, and the increased revenue backs the initial bond.
34
What are Development Impact Fees?
Imposed on developers to pay for improvements to off-site infrastructure (i.e. roads, utilities, police). Developers pay Exactions.
35
What is an Exaction?
A hookup fee for utilities that is often controversial.
36
What are Subdivision Exactions?
Requirements that a developer dedicate some land for public use or give cash for the purchase of land to local governments.
37
What are Special District Assessments?
Also known as Business Improvement Districts (BIDs) or Benefit Assessments. Fees paid by owners are used to fund public space improvements to enhance area's appeal and property values. Majority of property owners must agree.
38
What is Abatement?
Reduction in the price of a property due to discovery of a problem that decreases the value of the property.
39
What is Amortization?
Payment of loan using equal payments over the life of the loan. A portion of each payment goes to principal and the remainder goes to interest.
40
What is Assessed Value?
The value given to property by a local jurisdication.
41
What is a Buffer Zone?
A piece of land used to separate two incompatible zones.
42
What are CC&Rs?
Covenants, Conditions, Restrictions. Rules applying to property owners in subdivisions, condos, or coop housing facilities.
43
What is Conditional Use Permit (CUP)?
Permit given by city or zoning jurisdictions for a proposed use that is not permitted by zoning and imposes special conditions.
44
What is Conveyance?
Act of transferring interest in a property to another person.
45
What is a Demising Wall / Party Wall?
Shared wall between two leased spaces or residential units.
46
What is Despoil?
Remove items of value from a site.
47
What is Down-zoning?
Change in zoning resulting in a decrease of allowable density.
48
What is Up-zoning?
Change in zoning resulting in an increase of allowable density.
49
What is Escalation Rate?
Rate of change in the price for a good or service.
50
What is a Ground Lease?
Long-term property lease that allows the tenant to use and improve the land, but reverts to the owner at the end of the lease.
51
What is Improvement Ratio?
Ratio of the value of improvements on a property to the value of the property alone.
52
What is Inverse Condemnation?
Court mandated remedy for a private land owner whose land has been taken away by the government.
53
What is a Lien?
Claim made against a property's deed by someone who has provided work by has not been paid.
54
What is a Plat?
Legally defines a subdivision layout.
55
What is a Pad Site?
Separate location for development of retail space near (not in) a shopping center.
56
What is Riparian?
Pertaining to land adjacent to a river or a body of water (i.e. riparian buffer or rights).
57
What is Spot Zoning?
Application of a specific zoning to a specific property when nearby land is a different zoning.
58
What is Uniform Sinking Fund?
Amount of money that must be invested at today's value at a given interest rate to become a specified amount of money at a given date in the future.
59
What is Usury?
Illegal practice of charging exorbitant interest rates on a loan.
60
What is Zero Lot Line?
Describes instances in which zoning regulations set back requirements allow buildings to be constructed up to a property line without a setback.
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