MEDIUM-DENSITY, ABSOLUTE RIVERFRONT, NO PRESALES, REGIONAL PROJECT
At the time in the cycle when bank funding was limited and selective.
Our client had achieved a favourable Development Consent for a mixed-use project but it was in a regional location, considered ‘speculative’.
Pre-sales from the target market of largely interstate owner-occupiers was not going to be feasible or possible.
The Problem
Regional NSW project location with interstate based developer. Our client was a contract builder but with limited development experience and no resources in the local area.
A difficult time in the cycle: bank funding was scarce and extremely selective; our client’s bank would not accommodate despite holding all group property and business assets as security.
Securing pre-sales from a largely interstate based, owner-occupier target market prior to commencement of this regional project was not feasible or realistic.
The absolute river front position meant high-risk; required specialized engineer and builder.
The LINK Solution
After fully researching and analyzing the quantitative and qualitative aspects of the project, consulting QS and interstate marketing agents, LINK presented its detailed commercial credit memorandum with full project & scenario analyses to a carefully selected specialist NBFI.
The End Result
LINK negotiated favourable terms for full project funding, including a stepped pre-sales program to kick-off after project commencement.
A single senior debt facility, protected developer’s profit, based on strong contracted builder.
Prior terms achieved from a private lender comprised conservative senior debt + mezzanine + preferential equity (with profit share) meant giving away almost all of the developer’s profit.
Outline
Loan Amount
$19,800,000
Lender
Tier-2 Specialist NBFI
Lender Exposure
62% LVR vs GRV and 79% vs Total Project Costs
Loan Term
18 Months
Interest Rate
+/- 10% pa capitalized for the loan term
Lender Estab. Fee
1.25% of loan amount (deferred to end of project to assist cash flow)
Exit Strategy
Completion of pre-sales/ sell-down of residual stock
