project financing

Location
TAGS
finance
mortgage loan
OTHER names

Project financing is a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights, and interests held as secondary collateral. Project finance is especially attractive to the private sector because companies can fund major projects off-balance sheet (OBS).

Real estate project finance is a classic example. Real estate project finance cash flows should be sufficient to cover operating expenses and to fund the financing repayment requirements. Typically, the financing is made up of debt and equity matched to the lifespan of the asset.

When it comes to funding real estate project finance, the capital stack includes several considerations, as follows:

  • Draws on construction loans for financing
  • Security and priority for various lenders in the capital stack
  • Term that matches the length of time it takes to develop and sell the project
  • Trade-offs between fixed and floating interest rate
  • Pricing around the equity

The capital stack, which consists of all of the different types of financing that may be used, typically comprises the following:

  • Senior debt
  • Subordinated debt
  • Equity

Senior debt is the most secured capital, while equity is the riskiest out of the three.

Source: Corporate Finance Institute

Strict standards. Bank-grade security.
Your data stays safe with us at all times.

HousingCount

Decoding the housing crisis

A public data project to track and analyze the rental housing shortage across the country, highlighting where additional units are needed most.

Shortage statistics for households earning Under 50% AMI
21
states with severe shortage
75%
of households rent-burdened
4.5M
total shortage of affordable units