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!
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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