Four Development Funding Options You Can’t Get From Your Bank
As Banks continue to place speed bumps and roadblocks to Developers seeking speed, consistency and flexibility in the approval process, Developers continually seek alternatives.
Development Finance Partners (DFP) regularly receives calls from clients who’ve been disillusioned by an experience with a Bank, particularly where the front line sales team are offering one thing, only to have the credit hierarchy come back with another.
DFP has established relationships with senior decision makers in financial institutions and understand what their requirements are. This can save a lot of time and “cut to the chase” on the likely outcome.
DFP’s expertise however goes further than this. We have strong relationships with Non-Bank Counterparty’s that do offer speed to settlement, consistency in the decision making process, flexibility and have a strong desire to build relationships with quality Clients.
Examples of Funding Options that are available outside of the Banks include:
1. Access to Preferential Equity (PE). As a guide, the Banks will fund to 75% of Total Project Cost. PE providers will, for the right projects, top this up to 90% TDC. For developers lacking experience, DFP has in house Development Management and Project Management capability which will de-risk the project accordingly and provide comfort to the PE provider. This equity underpin enables Clients to spread their cash equity across more projects whilst still maintaining a healthy return on equity.
Preferential Equity can also be used to reduce the Senior Bank debt to a level that marries up with the presales that have so far been achieved. A client may have achieved debt cover to 65% however by injecting PE to a certain level, the current presale level equates to 100% net debt cover.
2. Blended first mortgage. DFP can provide private funding at elevated loan to value ratios with a pro rata elevated interest rate. This is “pricing for risk” and is another alternative to Preferential Equity. This works effectively when presales achieved are well below what the Bank requires and the equity falls short of Bank hurdles.
3. 100% net debt cover on presales. DFP fails to understand why banks appear in most cases to default to this safety ground. DFP has a strong capability in providing funding from Non- Bank and Private Mortgage counterparties for all project sizes with net debt cover from zero for smaller projects to circa 50% for larger projects. This enables developers to commence their project and not be burdened by gaining more presales and the cost associated with trying to achieve this.
4. Land Bank Funding – DFP can also secure funding for Land banks that are in the process of securing a Development Consent. In certain instances, the DA lodged (or about to be lodged), is complicit with Planning for that given zoning. The Funder takes the view (following due diligence on Planning Risk) that Council are supportive of the Application so the risk of the Application being rejected is nominal. DFP recently secured 55% LVR on a Land bank with no DA.
If you are seeking more flexibility and quicker turnaround times when it comes to funding your development projects, Development Finance Partners can provide expert advice and solutions.
For expert advice:
Level 3, 31 Alfred St
Sydney NSW 2000
P / 02 8916 6246
Level 30/35 Collins Street,
Melbourne VIC 3000
P/ 03 8692 0082
Level 18, 175 Eagle Street
Brisbane QLD 4001
P / 07 3041 4136
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