FULLY FUNDED MEDIUM-DENSITY RESIDENTIAL, NO PRE-SALES
Two business partners had accumulated three adjoining houses over a period of time. The properties had appreciated in value providing intrinsic equity for a proposed project.
Recognizing that the highest-and-best-use was to redevelop, the next question was how to extract the highest return: build-and-retain for rental income or build-and-sell?
…that decision would depend on the status of the market at project completion, 2 years later.
The Problem
One of the properties was held via a company, the other two personally via Joint Tenancy.
The two individuals were at retirement age, had no recent relevant development experience, and wanted to keep open their market options (did not want to commit to pre-sales).
The LINK Solution
With a favourable Development Consent, LINK formulated a finance solution based on LINK’s research, project analysis and group financial analysis.
LINK introduced the appropriate project valuer & QS who had recently worked on projects in the immediate local market.
LINK turned to the clients’ own bank, which had declined a previous application. LINK’s comprehensive credit memorandum with project feasibility and financial analysis facilitated a fully geared, well priced project facility and without bank pre-sales requirement.
The End Result
A fully funded project finance facility requiring minimal developer’s equity. LINK identified the new 2% SBBIS bond ensuring project compliance towards Occupancy Certification.
LINK attends monthly on-site Progress Control Meetings and reports to the bank.
Outline
Loan Amount
$9,610,000
Lender
Tier-1 Bank
Lender Exposure
70% LVR ("as if completed" GRV, 80% of Project Costs
Loan Term
3 Years
(construct-and-retain basis)
Interest Rate
4.13% pa capitalized interest (including bank's line Fee)
Lender Estab. Fee
0.90% of loan amount
Exit Strategy
Automatically switches to a 2 year investment facility; no penalty for partial lot sales should the developer decided to sell some units
