CONSTRUCTION LENDING

The key to financing your project is to know who these providers are and what their criteria is before you submit a proposal. The tax structure set up for the development (i.e. The Special Purpose Vehicle (SPV) and subsequently debt security/lending recourse to that structure).

  • The type and size of the development (number of lots/dwellings, single, group or multi dwellings).
  • 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 way of contracts if developing to sell (if presales are a policy requirement of the lender or specified for your project given the level of debt sought, product type and/or location of the development).

CASE STUDIES

Purchasing land for civil construction in Victoria.

  • Property details  

Alarge piece of land35 km Northwestofthe central business district in a residential developmentzonein Victoria. The site camewithplans andpermitsfor shovel ready civil constructionforapproximately157blocks resulting in many house andlandpackages.

  • Key points  

Where the Loan to Valuation ratio (LTV) exceeds a certain level, the lender may increase charges.

  • What did the client want?  

Ourclients werebased in Melbourneandwere comparing offersfromother lenders.Theyapproachedus seeking reduced upfront costsby our lender and being able to offerahigher LTV.

  • Difficulties along the way  

Duetothe added risk ofanon-incomeproducingsituationandthelocation of the real estate,most private lenders choose toavoid this type of security.Somelenderswere also skepticalaboutthepotential of thelocation.

  • What did we do?  

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

  • The end results  

After credit assessment weofferedreasonableterms with a higher LTV subject to pre-sale condition being met.  12 months on civil constructioncommenced.

  • 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 interstatewere full ofenergy andwantedlocal banking contactswith competitiveterms.

  • Key points

The lenders needed assurance of proven industry accomplishmentsas they were applying fora considerable loan amount.

  • Difficulties along the way 

A few of thelenderswe engaged were concerned about the total amount oflendingtheycurrentlyhadoutstanding with other financial institutions.

  • What did we do?  

After arranging a meeting with a state director from a major locallender. We offered finance at competitive termsin atimely manner.

  • The end results  

A competitive LVR (Loan to Value Ratio) and interestrate resultingwith a satisfied corporate interstate client.

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

 

Construction financing in Hawthorn Melbourne.

  • Property details

Two fully detacheddwellingsside by side wereunder contract. After demolition,the sitewasideal forbuildingmultiple Townhouses.

  • Key points  

For many developers one of the biggest problems can be presales – especially for larger residential developments.  Most lenders will want a certainnumberof presales to reduce their risk. Funding can vary from one lender to another.

  • What did the client want?

Twelvemonthsfrom settlement the developmentapproval was received,and theclients were actively seeking presales to meet theirfinance conditions. Theunforeseen Victorian lockdownpreventedmobility, and as a result the client wasunableto meettheir presale obligations.

  • Difficulties along the way 

Because the presale conditions were not met, we resorted to our network of lenders and sourced a suitable financier that accepted the current number of presales.

  • The end results 

We worked closely with the lender and got the project off the ground. Due to the lack of presales the loan attracted a higher interest rate and associated costs.  However, the client was pleased with our success.

 

Incomplete construction site in Brisbane. 

  • Property details   

A large freehold incomplete construction site situated at a major intersection north of Brisbane was neglected and incomplete due to a shortage of funding from the builder.   

  • Key details  

Many lenders will not consider applications for incomplete construction sites due to additional risks. 

  • What did the client want?  

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

  • Difficulty along the way  

The vendors insolvency meant that we were 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.