Project Risks

Important Notice: This section is provided for informational purposes only and does not constitute financial or personal advice. Investors should seek independent advice from a qualified professional before making any financial commitments.

Overview of Project Risks


Property development projects inherently carry a range of risks that may impact timelines, costs, profitability, and overall feasibility. While thorough due diligence has been conducted, the following risks should be carefully considered:

1. Market and Economic Risks

  • Economic Downturn – A recession or slowdown in the property market may reduce investor demand and limit exit opportunities.

  • Inflationary Pressures – Rising costs of materials and labour due to inflation could erode profit margins.

  • Market Competition – Similar childcare developments in the area could affect rental yields and valuation.

2. Builder and Construction Risks

  • Construction Delays – Weather conditions, supply chain disruptions, or workforce shortages could push back completion timelines.

  • Builder Insolvency or Financial Distress – If the appointed builder experiences financial difficulties, the project could face delays, cost overruns, or the need to engage a replacement builder.

  • Poor Workmanship or Defects – Construction quality issues may lead to rectifications, disputes, or potential legal action.

  • Subcontractor Failures – Delays or cost increases due to subcontractor insolvency, poor performance, or contractual disputes.

  • Safety and Compliance Issues – Workplace health and safety breaches or non-compliance with building codes could cause delays and financial penalties.

3. Planning and Regulatory Risks

Changes in Building Code Requirements – Alterations to compliance standards during construction could require costly modifications.

4. Financial and Funding Risks

  • Financing Shortfalls – If additional funds are required but unavailable, the project could be delayed or require restructuring.

  • Refinancing Risks – Changes in lender policies or financial conditions could impact project funding terms

5. Leasing and Operational Risks

  • Tenant Risk – The childcare operator’s financial stability and ability to meet lease obligations over the long term.

  • Regulatory Changes in the Childcare Sector – Government policy shifts could impact demand or licensing requirements.

  • Vacancy Risk – If leasing arrangements fall through, the property may remain untenanted longer than expected.


6. Legal and Contractual Risks

  • Disputes with Contractors or Suppliers – Legal conflicts may lead to project delays, cost increases, or work stoppages.

  • Force Majeure Events – Unforeseen disasters (e.g., pandemics, floods, fires) could impact project feasibility.

  • Insurance Coverage Limitations – Inadequate insurance policies may result in financial exposure if issues arise.

7. Exit and Liquidity Risks

  • Market Volatility at Exit – Unfavourable economic conditions at project completion could impact the sale price.

  • Liquidity Constraints – The ability to exit the investment may be limited if market conditions are poor.

  • Risk Mitigation Strategies.

While these risks cannot be eliminated, the following measures help mitigate exposure:

  • Fixed-price contracts where possible to limit cost escalation e.g Builder has agreed to a fixed price build for this project.

  • Thorough due diligence on builder selection, including financial stability and past performance.
    Contingency reserves are built into project financing for unexpected costs.

  • Comprehensive insurance policies covering construction, liability, and business continuity.

  • Ongoing project oversight and reporting to monitor budget, quality, and timelines.
    Leasing agreements were secured early to reduce vacancy risk post-completion.


Final Consideration: Investors should conduct independent assessments and seek professional financial, legal, and tax advice before proceeding.