Financial Analysis and Underwriting Loan Packages. Provide Depth to my analysis by commenting on ratios etc.
This report gives an analysis for the value recommended loan package for the mixed-use development. Based on the quantitative and qualitative analysis conducted the following values of the presented loan packages have been generated:
Table 1: 60% Debt to Equity Initial Construction Loan.
Financing Packages NPV IRR Net IRR Equity MoM
2. Amicable Banking Group (70,222,379.80) 16.7% 1.7% 160,000,000 (0.44x)
1. Fidelity (A) 198,956,525 21.0% 6.0% 160,000,000 1.24x
1. Fidelity (B) 288,695,655.50 22.7% 7.7% 160,000,000 1.80x
4. ASEADA Pension Fund 88,695,655.52 22.7% 7.7% 160,000,000 1.80x
5. SPICL Corp Bond Sale 288,695,656.33 24.0% 9.0% 160,000,000 1.80x
3. Providers of Construction Loan 288,695,656.37 24.1% 9.1% 160,000,000 1.80x
Table 2: 70% Debt to Equity Initial Construction Loan.
Financing Packages NPV IRR Net IRR Equity MoM
2. Amicable Banking Group (15,303,903.32) 16.7% 1.7% 120,000,000 (0.13x)
1. Fidelity (A) 298,782,612 22.9% 7.9% 120,000,000 2.49x
1. Fidelity (B) 403,478,264.21 25.7% 10.7% 120,000,000 3.36x
4. ASEADA Pension Fund 403,478,264.24 25.8% 10.8% 120,000,000 3.36x
5. SPICL Corp Bond Sale 328,695,656.30 24.3% 9.3% 120,000,000 2.74x
3. Providers of Construction Loan 403,478,265.01 27.3% 12.3% 120,000,000 3.36x
Table 3: Total and % Fees of Presented Loan Packages
Loan Fees of Loan Packages Fees % Fees £
1. Fidelity (A) 2.0% £ 3,840,000
3. Providers of Construction Loan 2.0% £ 4,800,000
1. Fidelity (B) 3.0% £ 7,200,000
2. Amicable Banking Group 3.0% £ 1,440,000
4. ASEADA Pension Fund 3.0% £ 7,200,000
5. SPICL Corp Bond Sale 5.0% £ 12,000,000
It is evident that in both cases where SL Property Investment Company (SLPICL) intends to finance the construction loan with either 60% or 70% debt the ‘Providers of Construction Loan’ were the most competitive and presented the best loan package. The Loan packages were evaluated on their ability to provide the highest net internal rate of return for SLPICL.
⦁ Introduction
This report takes into account several assumptions which will be outlined in the assumptions section when determining the most appropriate loan package for SPICL. Based on the investment criteria of SLPICL as well as the current market performance it was evident from initial assessment that the less equity invested into the project the more profitable it would be. As a result of the aforementioned two key factors of market performance and lack of equity the best loan package is Providers of the Construction Loan. As indicated by the investment document provided by SLPICL the property company and Dr. Siew Lan has a very good reputation and as a result is able to be 100% Leveraged. Further, Dr. Siew Lan’s reluctance and risk averse nature indicates a preference to avoid spending personal liquid equity on this mixed-use development regardless of the market performance.
