Financial ModelIndex

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.

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

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.

• 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.

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.

• Principal alignment and 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.

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.

• 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 for Direct-Hold Solution vehicles — 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.
• How sensitivity and stress-test analysis works for Direct-Hold Solutions — How Direct-Hold Solutions model interest-rate, occupancy, and development-yield stress against the 1.20x interest-coverage covenant.

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

See also

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