Investment & Financial Framework

• Who presented the financial framework in Week 6?

  1. Rotimi Joseph
• What is one learning objective of the course?

  Identify potential sources of construction project finance
• What are the main sources of project investment?

  • Equity (Shares)
  • Grant
  • Bonds
  • Loans (Mezzanine, Senior)
  • Mortgage (repayment or endowment)
  • Gift
• What do clients need to fund in construction projects?

  Land purchase, design, and construction fees
• How does financing strategy differ between sectors?

  It depends on whether it's private or public sector
• What are the types of debt financing?

  • Loans with interest
  • Bonds for long-term financing
  • Debentures backed by creditworthiness
• What is mezzanine finance?

  A hybrid of debt and equity financing
• What is the purpose of debt financing arrangements?

  To borrow funds for investment capital
• What is a debenture?

  A loan without collateral based on credit
• How are interests typically paid on debentures?

  Annually, with principal at maturity
• What is equity financing?

  • Obtaining capital by relinquishing ownership
  • Risks and liabilities shared with investors
  • Earnings shared between owner and investor
• What is a stock?

  A certificate of ownership in a firm
• What are the types of stocks?

  Ordinary, Preference, and Warrants
• What is a joint venture (JV)?

  A temporary arrangement for project collaboration
• What is mezzanine finance's role in financing?

  • Hybrid of debt and equity
  • Lender can convert to equity in default
  • Treated as equity on balance sheet
• What are grants?

  Funds given without repayment requirements
• What is the European Regional Development Fund (ERDF)?

  A grant aimed at economic development in the EU
• What are the types of Public Private Partnerships (PPP)?

  • BOOT: Build, Own, Operate, Transfer
  • BOT: Build, Operate, Transfer
  • BOO: Build, Own, Operate
• How much private sector capital investment have PPPs delivered in the UK?

  £56 billion
• What risk do PPPs transfer to the private sector?

  Delivery, cost, and performance risk
• What does a Private Finance Initiative (PFI) involve?

  • Special Purpose Vehicle (SPV)
  • Ongoing public service users
  • Annual charge for services delivered
• What is a Special Purpose Vehicle (SPV)?

  An entity created for a specific purpose
• What is the role of the financing construction projects?

  To provide funds for various project needs
• What are some sources of loans for debt financing?

  Banks, building societies, pension trusts
• What is the typical loan period for short-term loans?

  0-3 years
• How is the cost of loan borrowing often linked in the UK?

  To London Interbank Offered Rates (LIBOR)
• What is the typical interest percentage for loans in the UK?

  3 - 8%
• What is the repayment structure of loans?

  Principal and interest in instalments
• What happens to loans after project completion?

  They change to long-term loans
• What is the repayment structure for bonds?

  Payments on specified dates
• What is the role of the bond buyer?

  To provide a loan to the company
• How do bonds provide opportunities for investors?

  By participating in project delivery for returns
• What is the purpose of issuing project bonds?

  To raise funds for project delivery
• What is the significance of the repayment structure in loans?

  It ensures security against payment defaults
• What is the relationship between loan periods and project types?

  Short-term for construction, long-term for assets
• What is the role of collateral in loans?

  To secure against payment defaults
• What is the impact of equity financing on ownership?

  It relinquishes some ownership to investors
• How do risks and liabilities differ in equity financing?

  They are shared between owner and investor
• What is the purpose of issuing stocks?

  To raise finance for expansion
• What is the difference between ordinary and preference stocks?

  Ordinary stocks expect dividends; preference stocks have fixed returns