CONSTRUCTION LENDING

Before you send a proposal, you should know who these providers are and their criteria. The tax structure set up for the development (i.e., The Special Purpose Vehicle (SPV) and debt security/lending recourse to that structure).

  • Number of lots/dwellings, single, group or multi dwellings are the type and size of the development.
  • The location of the development (suburb/postcode).
  • Personal profile (your experience as a developer).
  • Are you developing to hold and rent or developing to sell (trading or holding activity)?

Presales evidence by contracts if developing to sell

CASE STUDIES

CASE STUDIES

Purchasing land for civil construction in Victoria.

  • Property details

A large piece of land 35 km Northwest of the central business district in a residential development zone in Victoria. The site came with plans and permits for shovel ready civil construction for 157 blocks resulting in many houses and land packages.

  • What did the client want?

They were comparing offers from other lenders. They contacted us seeking reduced upfront costs by offering a higher LTV.

  • Key points

The loan to valuation ratio (LTV) exceeds a certain level, so the lender may increase charges.

  • Difficulties along the way

The added risk of a non-income producing situation and the real estate location. Many lenders were sceptical.

  • What did we do?

We arranged a meeting with one of our most reliable lenders for land subdivisions.

  • The end results

After credit assessment, we offered reasonable terms with a higher LTV subject to presale conditions being met.12 months on, civil construction begun.

  • LTV: 65%
  • Rate: 5% variable rate (interest only)
  • Term: 2 years

Industrial construction development.

  • Property details

An industrial zoned piece of vacant land nearby Liverpool, New South Wales.

  • What did the client want?

The corporate borrowers from interstate were full of energy and wanted local banking contacts with competitive terms.

  • Key points

The lenders needed assurance of proven industry accomplishments as they applied for a considerable loan amount.

  • Difficulties along the way

Many lenders we engaged expressed concerns about the total amount outstanding with other financial institutions.

  • What did we do?

After arranging a meeting with a state director from a significant local lender, we offered finance at competitive terms.

  • The end results

A competitive LVR (Loan to Value Ratio) and interest rate satisfied interstate corporate clients.

  • LVR: gross 70%
  • Rate: 4% (interest only)
  • Term: 5 years

Construction financing in Hawthorn Melbourne.

  • Property details

Two fully detached dwellings side by side were under contract. After demolition, the site was ideal for building multiple townhouses.

  • Key points

One of the biggest problems can be presales for many developers, especially for more significant residential developments. Most lenders will want a certain number of presales to reduce their risk. But funding can vary from one lender to another.

  • What did the client want?

Twelve months from the settlement, they received the development approval. The clients were actively seeking presales to meet their financial conditions. The unforeseen Victorian lockdown prevented mobility, and as a result, the client could not meet their presale obligations.

  • Difficulties along the way

Because they did not meet the presale conditions, we resorted to our network of lenders. We sourced a suitable financier that accepted the current number of presales.

  • The end results

We worked with the lender and got the project off the ground. The loan attracted a higher interest rate and associated costs because of the lack of presales. But the client was pleased with our success.

Incomplete construction site in Brisbane.

  • Property details

A prominent freehold incomplete construction site at a major intersection north of Brisbane was incomplete because of a shortage of funding from the builder.

  • Key details

Many lenders will not consider applications for incomplete construction sites because of added risks.

  • What did the client want?

A group of experienced investors saw the opportunity to take over and complete the construction work. Still, they needed access to the right lender.

  • Difficulty along the way

The vendors’ insolvency meant working under strict time constraints to complete the transaction.

  • What did we do?

We arranged for a colleague to inspect and forward a detailed report before submitting a formal loan application to our lender.

  • The end results

We achieved an ideal result for our clients within an unusual lending scenario.

LET US HELP YOU FIND

THE SUITABLE SERVICE

We offer an end to end financial solution with a focus on making the
process as simple and stress-free as possible.

LET US HELP YOU FIND

THE SUITABLE SERVICE

We offer an end to end financial solution with a focus on making the
process as simple and stress-free as possible.