Case Study | Preston, VIC

Case Study | Preston, VIC

Senior Debt loan $7.45m for the construction of 22 Residential Apartments at 68% of the Gross Realisation Valuation (Ex. GST) in Preston, Victoria.

Background

The developer sought finance to assist with the purchase of the site and construction finance for the 22 construction and development of 22 residential apartments. They had started marketing and presales and wanted to move forward with construction finance during the process.

Scope

Development Finance Partners (DFP) worked through the project feasibility with the client to firm up build costings and confirm internal margins.

Upon assessment of the project feasibility and discussions with the client, a formal service agreement was entered into and DFP was engaged to provide a funding solution for the townhouse construction project in Preston, Melbourne.

Challenges

Given the tightening from the major banks in the development space over the last 3-4 years, the developer found it problematic to finance the construction component of the build, given they were also the builder, particularly with lower than 100% debt cover from presales which is generally the minimum in the current market with major Banks.

Result

DFP arranged and settled an 18-month construction facility for $2m, representing 68% of the project gross realisation value, exclusive of GST.
DFP ascertained appetite from a preferred DFP underwriter to secure construction finance terms, following which a valuation was undertaken on an ‘as is’ and ‘as if complete’ basis.

Based on the detailed analysis from DFP and understanding of the transaction, DFP secured support from its underwriter to fund the transaction for the construction component based on an LVR of 68% of GRV (excl. GST) and 65% debt cover from presales.

• Loan amount: $7.45m at LVR 68%
• Term: 18 months
• Presales: 10 sales at time of credit application, providing 65% net debt cover

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