Can someone please explain why in real estate development models Purchaser's Costs are deducted from the GDV to make the NDV. i.e. if the GDV is £53m the NDV is £50.6m after accounting for 6.4% of purchaser costs.
I appreciate that these costs account for SDLT and other costs but would these not be paid for by the buyer as opposed to the seller/developer? Cannot understand why these are included in the deal level cash flow. Any help would be welcomed!
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Because an NIY is calculated including SDLT?
Because the next purchaser is solving to a market Net Initial Yield. This gives them their total purchase price, inclusive of costs. They won’t solve to market net initial yield and then pay an additional 6.4% to dilute their NIY.
This means the seller doesn’t receive the full purchase price, rather the purchase price less costs.
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