A New Property Development Model Is Challenging The Big End of Town

Property Development – Changing the Funding Model

The Australian property market is a potential ticking time-bomb with residential investors increasingly focused on the capital appreciation for returns, whilst commercial property transactions has actively pursued yield based investments over the past 12-18 months. The property market seems buoyed by large interest from offshore investment and local cashed-up investors and developers. The short to medium term outlook for interest rates appears to be positive, but longer term there is an expectation of rising rates – tightening interest rates from banks are coming into play and access to development finance isn’t as rosy as it once was.

The restrictions on institutional lending will become a growing issue as the major banks need to reduce exposure to property leading and markets. The market is also adjusting to tightening on foreign buyers and global policy changes happening around the movement of capital outflows such as China. According to Knight Frank Chinese-backed developer’s bought 38% of Australian residential development sites in 2016.

Developers/Builders – The Challenge

Developers appreciate there are still significant opportunity in the market but the challenge now sits in accessing capital and potentially looking at non-bank capital sources. Key aspects will be to consider development design, building services and fabric costs. Stripping back development costs to these numbers can demonstrate opportunity to extend funding budget and potentially look at specialist funding sources.

The cost of funding might rise on the debt side, but if investor equity is costly, the increase LVRs available with private funders might provide net decreases in the overall cost of capital. The ability to access this funding without pre-sale quotas make it a desirable option for smaller developers.

Typically buildings are being designed and built to minimum code removing the costs of all the bells and whistles to maximise builder & developer profit. Less consideration and emphasis is placed on the new development’s ongoing operation and liabilities.

The New Model

What if we could put in all these additional extras to create a better performing asset with lower operational costs, but not have to increase the capital budget – in-fact decrease our capital cost by accessing Green Structured Finance (GSF), long-term funding available, subsidised by specialist product funding. This new loan/debt will be serviced by the operational savings made by the improved technology and products.

As an example, a developer is building and owning a mixed use site for $50m. We consider the design and energy consuming technologies for the site (ie lighting, solar, metering/embedded network, thermal insulation, glazing performance, energy efficient white-goods, hot water, HVAC).

SFG assess the ongoing lifecycle cost of these technologies. We then create a package outlining which products have an attractive return on investment based off the predicted energy costs. For this example $5m is taken out of the capital cost of the project for the improved package. This will reduce the developers Capex and Opex, improving cashflow and returning profit. This reduction of $5M or 10% is able to used on other projects or contribute to improving the project LVR and financial make-up.

Green Structured Finance from Sustainable Future Group is a new approach to a tightening development financing market, designed to optimise financial and development performance. We specialise in pulling together projects crossing the boundaries of Financial, Design, Advice and Delivery. Contact us to see how we can help improve your development.

MoS2 Low Friction Coatings – Not Just For The Aviation Industry Anymore

MoS2 low friction coatings (also known as molybdenum disulfide, also spelled, disulphide) are regarded the most widely used form of solid film lubrication today. What makes them unique (with the other dichalcogenides) is the weak atomic interaction (Van der Waals) of the sulfide anions, while covalent bonds within molybdenum are strong.Thus, lubrication relies on slippage along the sulfur atoms. All the properties of the lamella structure are intrinsic. No external form of moisture is required. In fact, best performance from MoS2 low friction coatings is attained in the absence of water vapor, which are prone to surface adsorption. This makes them ideal under vacuum.There are a number of methods to apply MoS2 low friction coatings, including a simple rubbing or burnishing, air-spraying resin-bonded or inorganically bonded coatings, and more recently by sputtering through physical vapor deposition (PVD).Thickness will vary, depending on form of MoS2 low friction coatings, but typically ranges between 5 to 15 micrometer. Sputtering techniques can produce thin films of 0.2 micrometer. While plasma sprays will result in higher builds, beginning at 0.003 inch or more.Friction coefficient less than 0.05 is attainable, but will also vary with humidity and sliding conditions. Tests show friction decreases with increasing vacuum strength. Friction also lowers with higher load, faster surface speed, or both. In fact, MoS2 low friction coatings are superior to both graphite and tungsten disulfide (WS2). Friction with MoS2 low friction coatings is independent of particle size, though the larger particles can carry more load.Dry lubrication for MoS2 low friction coatings remains superior at higher temperatures, with oxidation rates remaining relatively low at temperatures up to 600 degrees Fahrenheit. And in dry, oxygen-free atmospheres, lubricating performance, even with oxidation products, is stable to 1300 degrees Fahrenheit.Higher air flow can affect oxidation kinetic rates in atmosphere. Molybdenum oxide products (MoO3) and sulfur dioxide. Since MoO3 alone offers dry lubrication, based on its relative softness, molybdenum disulfide coating are ideal in higher temperature environments. At higher temperatures, though, they are better suited under vacuum. In atmosphere, they are prone to water adsorption from air based on their hygroscopic properties.As with the other dry film lubricants, while differences may prove negligible, you will have to determine which is better for you: longer wear life or better performance, using MoS2 low friction coatings. Generally, friction will be slightly higher by coating both surfaces, rather than coating one surface only. But wear life will increase coating both surfaces.Friction can be good in so many areas of life. Without it we could not easily stop and start our motion, or change direction. But in moving machinery, friction causes considerable loss of energy, poorer performance, not to mention limiting wear life.As with many non-lubricated systems, the static coefficient of friction is higher than the dynamic coefficient of friction. The resultant motion is often referred to as ‘stick-slip’. Basically, the two surfaces stick together until the elastic energy within the system has accumulated to some threshold, where a sudden, forward slip takes place. Under magnification, it’s apparent the union of two surfaces is often limited to intimate contact only at the tips of a few of the asperities (small scale, surface irregularities). At these point areas, pressures relating to contact may be near the hardness of the softer material. Thus, plastic deformation occurs on some localized scale. This is known as cold welding. Where bonded junctions are formed between two materials.For lubrication to occur, these bonds, this adhesive component of friction, must be broken. And this is where products like MoS2 low friction coatings serve well.So, where are these products used today? Consider aerospace, automotive, marine and electronic, for starters. There, you’ll find MoS2 low friction coatings, again and again.

Ontario’s Wine Industry – Harvesting the Benefits of SR&ED

How wonderful it is to proudly browse the wide selection of Ontario’s wines at your local LCBO. Knowing that your own winery is both a driving force in the Canadian economy and an innovator of the local wine industry can certainly be rewarding, both personally and professionally.From challenges to opportunitiesQuite often the goal of a grape grower to produce a consistent, high-quality brand of wine is met with many unexpected challenges. With the erratic situation of the Canadian economy following the recession, wine makers of Ontario struggle to produce at the risk of manufacturing downsizing. In addition to economic factors, the wine industry of Ontario is faced with a higher stringency under Vintners Quality Alliance (VQA) regulations, and the push from Wine Council of Ontario (WCO) to raise industry standards by participating in programs like Sustainable Winemaking Ontario.For the individual winery of Ontario, keeping up with competition means continuously utilizing new technologies and finding innovative ways to provide a premium product, despite such challenges. Simply put, this boils down to having the necessary financial opportunities become available to maintain a healthy competition. Are these opportunities available to the wine industry of Ontario? Yes – SR&ED is the answer!The SR&ED programThe SR&ED program (Scientific Research & Experimental Development) aims to reimburse companies for their experimental development expenses. For over 20 years and with about $4 billion a year in funding, it remains the largest single source of federal funding for R&D in Canada. The goal is to make creativity and innovation affordable in the Canadian business environment and foster future development.The program is highly relevant to businesses who are naturally involved in shop-floor
experimentation. R&D projects that qualify under the program include (1) work undertaken for the purpose of achieving technological advancement and/or (2) creating new, or improving existing materials, devices, products or processes. The actual refund amount depends on proper identification and qualification of eligible expenditures.Wineries in Ontario serve as ideal candidates for such funding. Typical SR&ED eligible activities that apply to the wine industry include:Developing new wines
Altering soil chemistry
Handling and harvesting technology
Improved bottling techniques
Altering practice as result of the weather
Many more…
Wineries and growers may be regularly overcoming such obstacles in daily operation. Your innovative solutions to these problems may very well qualify you for some SR&ED funding. The program supports any attempts to improve your business operations, even if they do not prove successful.Which costs qualify?Working on new ideas takes time, wastes material and requires equipment modification. The SR&ED program allows retrieving these expenses:68% of wages and salaries of personnel directly involved in R&D
41% of sub-contractor expenses
22% of capital expenditures
The refund has no strings attached – as a winery owner you are free to spend it anyway you like – buy new equipment, attempt new projects, or give everyone a big bonus – the decision is yours!How we can help?Submitting a SR&ED claim is a fairly complex and time consuming process. It involves properly identifying eligible activities within your business, associating the appropriate costs to these projects and completing a highly technical report to support the claim.Using the extensive experience of a professional consultancy like ourselves, business owners have the opportunity to review their potential for qualification, and complete the application process in a few hours, and with no up-front costs. We get paid when you do!Discovering that your business is eligible for SR&ED funding makes a world of difference. The goal is to help your winery take potential technical risks that will eventually lead to significant improvements in your industry.