Key takeaways
- Property development is capital-intensive, has a long cycle and receives cash in lumps, so Peak Funding must always be read alongside IRR.
- Chapter 1 is summarised from the original text; Chapters 2 and 3 are summarised from the headings in the book's table of contents.
Chapter 1 The property development business from a financial perspective
This chapter sets out why the finance of a property project differs from that of an ordinary business in three respects: it is capital-intensive, it has a long cycle of 3–10 years, and its cash flow is lumpy. The land payment goes out in full at the start, construction costs are paid out gradually along the S-curve, while most customer money arrives on transfer day. This creates a cost-revenue timing mismatch, which can leave a project profitable on paper but short of liquidity. Monthly profit therefore says less about a project's health than cumulative cash flow does.
The main tool is the J-curve of cumulative cash flow. The lowest point of the curve is Peak Funding, which typically occurs towards the end of construction, before transfers begin, and it determines whether the project is actually feasible. Ways to reduce Peak Funding include Presale-first, phased development, designing the customer payment schedule, supplier credit, and supplementary capital structures such as mezzanine finance or a JV.
The chapter also distinguishes corporate finance from SPV-based project finance, and organises KPIs into three groups that must be used together.
- Returns: Project IRR, Equity IRR, MOIC, Profit on Cost
- Leverage and coverage: DSCR, LTV, LTC, ICR
- Liquidity: Peak Funding, Cash Balance, Presale Cash Coverage
The key takeaway is that an attractive IRR means nothing if Peak Funding exceeds what can be raised, or if DSCR fails the bank's threshold. This chapter is therefore used to decide the SPV structure, the amount of capital to prepare, and the role of the CFO as capital allocator and gatekeeper of investment.
Chapter 2 The strategic finance mindset
Summarised from the headings in the book's table of contents
This chapter separates strategic finance from operational finance and sets out a value creation framework for property developers. The topics that follow are the risk-return trade-off across different project types, cost of capital and hurdle rate, capital allocation across projects, and the strategic finance decision framework, which is used to decide which project limited capital should go to and on what terms.
Chapter 3 Finance organisation structure and governance
Summarised from the headings in the book's table of contents
This chapter covers how a developer's finance team is organised and divides its duties into FP&A, treasury, tax, controlling and investor relations. It continues with the roles of the Finance Committee and Investment Committee, the authority matrix for approving financial decisions, and relationships with the MD, the board, shareholders and investors, through to the finance policy and standard operating procedures that make decisions auditable after the fact.