Which item is not included in development financing costs?

Which item is not included in development financing costs?

• A. Acquisition closing costs
• B. Construction costs
• C. Interest during construction
• D. Lender fees

Answer: (A)

Financing costs are the charges that come from obtaining and carrying debt for the project. Acquisition closing costs, on the other hand, are costs tied to purchasing the land or site itself and are part of the acquisition expense, not a debt-related charge. They’re capitalized as part of the land/base cost rather than as interest or lender fees. In a development proforma, the items that are clearly financing costs are those tied to the loan: interest during construction and lender fees. Construction costs are the actual build costs and are typically funded by the loan but are not financing charges themselves, while acquisition closing costs are incurred to close the land deal and thus belong with acquisition costs rather than financing costs.

Financing costs are the charges that come from obtaining and carrying debt for the project. Acquisition closing costs, on the other hand, are costs tied to purchasing the land or site itself and are part of the acquisition expense, not a debt-related charge. They’re capitalized as part of the land/base cost rather than as interest or lender fees.

In a development proforma, the items that are clearly financing costs are those tied to the loan: interest during construction and lender fees. Construction costs are the actual build costs and are typically funded by the loan but are not financing charges themselves, while acquisition closing costs are incurred to close the land deal and thus belong with acquisition costs rather than financing costs.