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Workouts

Development Finance Partners Workouts. Expert strategy, advice and support.

The scenario is all too common – a property development turns toxic, administrators are called in and stakeholders lose out in an ensuing fire sale.

Under these circumstances, it’s imperative to avoid a situation whereby an administrator has to offload a property for the best price they can get – when the receiver sells the asset no one wins.

 

Development Finance Partners Workout Approach

The alternative approach involves a step-by-step process to identify key issues and risks with a project and then to devise a workout strategy in consultation with all stakeholders and ways to implement the plan.

Case Study

The Medowie Woolworths transaction in NSW is a case in point. Developer Buildev approached Development Finance Partners after legacy issues with its balance sheet due to financial difficulties.

Development Finance Partners worked with the developer to secure funding from an offshore lender. Funding was provided at the required level (83 per cent of gross realisation value) on a cost-to-complete basis, which is generally unheard of.


 

Workouts diagram

Step 1: Site Inspection and Analysis

We visit the site to understand the location, demographic, surrounding areas and other developments, catchment, local infrastructure, cap ex requirements, traffic flow, tenancy demographics and vacancy rates etc.

Click here for Step 2: Fact Finding Audit

Step 2: Fact Finding Audit

We then deconstruct the existing development approval (if there is one) and look closely at the buildability and therefore fundability by benchmarking key performance indicators of the property including profitability, serviceability, security ratio’s, project sensitivity testing, debt to equity analysis, pre-commitments, residual LVR’s, viability of development staging model.
Once we understand the fundamentals of the property, we then analyse forward cash flow projections, understand key development and sponsor risks, current banking relationships and facilities, organisational structures, management capabilities and consolidated group financial position.

Click here for Step 3: Workout Strategy Report

Step 3: Workout Strategy Report

By understanding Steps 1 and 2 we then begin the process of assessing the highest-and-best-use of the property in the current and forecast market, considering the value creation and ultimate divestment options. With a clear and workable strategy formulated, we then build financial modelling for the proposed development, combined with a logical and clearly defined implementation plan based upon the identified financial priorities and needs of the client and relevant stakeholders.

Click here for Step 4: Workout Implementation

Step 4: Workout Implementation

The key to a successful workout is in the preparation and completion of bank quality credit risk submission, i.e. existing facility renewal, refinance, restructure or new credit application.

 

From here, we can then instruct our specialist alliance consultants as required. This includes valuers, quantity surveyors, development managers, specialist property lawyers, accountants, project positioning experts, project marketing agents and builders.

Click here for Step 5: Workout Placement

Step 5: Workout Placement

With an in-depth understanding of all requirements of our clients and their project, we can then facilitate and professionally manage the finance restructure process, presenting all finance options and recommendations, including facility pricing negotiation and interest rate risk management where required. From here, we then assist to meet conditions precedent, settle the restructure, then monitor the project against plans and budget right through until successful completion.

Return to Step 1: Site Inspection and Analysis

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