Capital Structure and Fees

@@ -7,18 +7,69 @@ type: topic
content_type: topic
quality: complete
short_description: "The financial engine: the Narrow Banking Model, under which buildings are intended to be built with zero construction debt and borrowing comes only after buildings are leased."
index_type: thematic
index_scope: financial-model
status: active
bcsc_class: public-disclosure-safe
language_protocol: PROSE-TOPIC
last_edited: 2026-07-03
last_edited: 2026-08-24
editor: woodfine-editorial
paired_with: _index.es.md
---

The Financial Model covers the financial engine behind the Direct-Hold Solutions: the Narrow
Banking Model, under which buildings are intended to be built with zero construction debt and
borrowing comes only after buildings are leased. Articles here describe the fees Woodfine
charges and earns, and how its escrowed stake is designed to keep it aligned with investors.
Under the Narrow Banking Model, buildings are intended to be built with equity and no
construction debt, and borrowing is intended to begin only once a building is leased. The
Financial Model covers that financing discipline, the compensation structure designed to
keep the developer's capital at risk alongside the investor's, and the methodology used to
value and forecast. Content is structural — how the model is designed to work — not a
projection of any particular building's economics or a guarantee of any financial outcome.

Content is structural — how the financing discipline is designed to work — not a projection of
any particular building's economics or a guarantee of any financial outcome.
<!-- START-HERE-HIGHLIGHT: engine reads this block to render the single "start here" card
     (reuses the existing cluster-card--start-here component). Do not add more than one. -->

**Start here:** [[narrow-bank-financial-model|Narrow bank financial model]] — the two-phase
financing rule that every other article in this category assumes.

<!-- END-START-HERE-HIGHLIGHT -->

## Financing discipline

When debt enters a building's life and on what terms: the equity-funded construction phase,
the mortgage debentures placed after lease-up, and the coverage tests that constrain how
much can be borrowed.

<!-- AUTO-GENERATED MEMBERSHIP: DO NOT EDIT BELOW — regenerate from index_group: financing-discipline -->
- [[narrow-bank-financial-model]] — Two-phase financing discipline of the Direct-Hold Solutions: equity-funded unlevered construction, then First Secured Mortgage Debentures collateralized by the completed buildings.
- [[debt-service-and-financing-structure]] — How commercial mortgage financing is structured within direct-hold limited partnerships: loan-to-value conventions, DSCR-constrained debt sizing, interest rate risk, and the interaction between debt structure and the ICR distribution gate.
<!-- END AUTO-GENERATED -->

## Compensation and alignment

What the developer is paid and when: profit taken as equity held in trust until investor
capital is returned, in place of the conventional 2-and-20 management and performance fee.

<!-- AUTO-GENERATED MEMBERSHIP: DO NOT EDIT BELOW — regenerate from index_group: compensation-and-alignment -->
- [[principal-alignment-fee-preservation]] — Compensation model replacing the 2/20 structure: developer profit taken as equity held in trust until investor capital is returned, plus a fixed annual overhead contribution.
<!-- END AUTO-GENERATED -->

## Valuation and forecasting methodology

How value and forward figures are arrived at: the three-method estimate for the parent
holding company, the IFRS basis on which a vehicle-level forecast is built, and the stress
scenarios run against the 1.20x interest-coverage covenant.

<!-- AUTO-GENERATED MEMBERSHIP: DO NOT EDIT BELOW — regenerate from index_group: valuation-and-forecasting-methodology -->
- [[holding-company-valuation-methodology]] — The three-method framework — price/earnings, earnings-yield, and book value — used to model a composite fair-value-per-share estimate for the parent holding company, distinct from asset- and vehicle-level valuation.
- [[ifrs-forecast-methodology-direct-hold-solutions]] — How a 10-year IFRS-styled financial forecast for a Direct-Hold Solution vehicle applies IFRS 18, IAS 40, IFRS 13, and IFRS 2 to project future financial statements — illustrative, not a guarantee of results.
- [[sensitivity-and-stress-test-methodology]] — How Direct-Hold Solutions model interest-rate, occupancy, and development-yield stress against the 1.20x interest-coverage covenant.
<!-- END AUTO-GENERATED -->

What a unit holder is actually paid, and when a distribution is withheld, is covered under
Distributions and Transfers.

## See also

- [[distribution-declaration-mechanics|Distribution declaration mechanics]] — the coverage gate applied before any distribution is declared
- [[financing-and-interest-rate-risk|Financing and interest rate risk]] — what happens if refinancing terms move against the model
- [[cre-financial-metrics|CRE financial metrics]] — definitions of NOI, DSCR, LTV, ICR, and the other measures used here
- [[non-ifrs-measures-explained|Non-IFRS measures explained]] — how these supplementary measures relate to IFRS statements