I Capital Structure & Profit Forecast
On March 2023, the fund acquired the asset holding company (Sparkling Joy, Lda) via a combination of share purchase and shareholder’s loan (as of September, 2023 the total equity injected is €2.25M:
- Capital: 525,000 euros
- Shareholder’s loan: 1,725,000 euros
After reassessment of the project's business plan we are presenting the following scenarios for equity requirements and respective profits:
- Scenario A:
- Total common equity required of €4.0M which will be used to support land acquisition costs and 100% of project's soft costs;
- In this scenario would be required an additional capital injection of €2.8M. This additional cash could be provided through common equity injections or other alternative instruments such as preferred equity or debt.
- At this stage, we do not have full visibility over the alternatives that could be applied to this project which means that the estimated profit for this scenario will need to be reviewed according to the financing costs.
- According to the assumptions and limitations above identified we are pointing for a return of equity of 51.5%
- Scenario B:
- In this situation common equity will be used to support land acquisition costs, soft costs, 15% of hard costs and furniture expenses. In this scenario we have assumed an assumption where the bank loan for construction will not exceed 85% of the total amount.
- Besides the construction loan, we are not expecting any other instruments of debt. Common equity required to this would be higher (€7.0M), however this will significantly change the return of equity to 30.8%.
Capital Structure & Financing
Total Estimated Project Cost
Total Capital Invested
Project Profit Forecast-Allocated to Equity Investor
Common Equity Investor (Scenario A: Land + Soft Costs)
Additional Capital Required (Scenario A)
Profit Forecast (Scenario A) - Allocated to Common Equity Investor
Total Projected Return (Scenario A)
Common Equity Investor (Scenario B: Land + Soft Costs + Hard Costs)
Profit Forecast (Scenario B) - Allocated to Common Equity Investor
Total Projected Return (Scenario B)