Land and construction funding for 16 residential villas in Shoalhaven NSW

Land and construction funding for 16 residential villas in Shoalhaven NSW


 Project Background

The site has DA issued for 16 residential strata villas and 1 café. DA issued May 2013, expiring May 2018.

Location of Project – Regional NSW

Shoalhaven Heads NSW 2535 (146 kilometres south of Sydney CBD).

The Development – Strata Titled Tourist Villa Site

The development is to comprise of the construction of a strata titled tourist villa site with café/bar, pool and landscaping.
Upon completion, the development will overall comprise of eight buildings which will house sixteen tourist pavilions and a mixture of fourteen x one bedroom and two x two bedroom attached villas and a single detached café/ bar. Each villa is constructed over a single level and provides a typical level of accommodation plus common amenity such as a common swimming pool and an additional at grade parking area.
Council planning documents the subject property is SP3 Tourist under the provisions of the Shoalhaven Local Environmental Plan 2014.

About the Property Developer

The developer has been in the building trade since 1998. Has had various levels of business interest and partnerships, involving several completed high-end developments and master built homes in and around Sydney’s North Shore and Northern Suburbs. The developer has related family interest in the Shoalhaven and a resident of the Shoalhaven, and realised a potential for the site and enter into an option to acquire the site in 2013.
He then began the process to obtain development approval culminating in the current use and development. The developer had long term relationships with his principal bank, a major, however, was unable to get them to secure the purchase of the land. In 2014 DFP assisted with the eventual purchase via a non-bank lender on a 3 year term.

The Brief – Refinance the Property Asset, Secure Construction Funding

October 2016: Developer sought refinance of the existing lender to provide time to work up a construction funding package and or sell the site.
DFP was retained to provide advice and ascertain on a best endeavours basis how best to refinance this regional asset.

  • Stage 1: Orderly refinance of the existing land bank facility to stabilise the position, whilst working through the various steps to achieve a construction funding outcome and or provide time to sell the site. DFP to manage the process with the outgoing lender.
  • Stage 2: Engage the private Underwriter to consider the construction funding for total development.

The Financing Issues Faced – Tightening of Lending Criteria

Given the tightening of all Major Banks in the development space in and around Late 2016, the developer found it increasingly difficult to refinance the existing land bank facility with any major banks due to its regional location and development use – SP3 Tourist zoning and less that 120% pre-sales to debt cover.

The Solution – Refinancing via Private Underwriter, plus Construction Funding

Stage 1

DFP via it’s associate Director Bronko Kozel, ascertained appetite from a respected regional private underwriter to secure a land bank refinance proposal. DFP also positioned the 2nd stage being the construction funding with the underwriter.
Based on a well-presented submission from the client, detailed analysis from DFP and a number of credit workshops with the underwriter an agreement was reached to issue an approval in the first instance to complete stage 1 to fund the initial requirement of the land refinance to stabilise the position with the outgoing mortgagee.

Stage 2

Following the land refinance DFP continued discussions with the private underwriter to issue a construction funding proposal and worked with the private underwriter, met with principals on site together with the underwriter to underpin its primary submission and goals and to engage both sides. The quality and experience of the developer was evident to the private underwriter which provided them the confidence to continue to explore construction funding options and ultimately make recommendations to their investment committee to support a construction funding proposal.

The Results DFP Delivered:

Stage 1

  • Land Bank Refinance – Secured, Terms Agreed Late November 2016, Settled Late January 2017
  • Loan Amount – $700k
  • As is Value $1,275
  • LVR 55%
  • Term 6 months

Stage 2

  • Construction Finance – Secured, Terms agreed Late April 2017 Settled Mid June 2017
  • Loan Amount – $3,750
  • GRV – $5,963
  • LVR – 63%
  • Pre-sales – $2,918 or 78% of debt covered
  • Term – 15 months

The client is now very happy that the construction funding is in place and work can commence knowing that funding is secured.

What the Client Says

After working with DFP a few years back on the initial funding for the project, I knew who to turn for help when I hit funding hurdles for the second stage.
After spending some time talking to the major banks for the construction funding for the second stage, I became increasingly frustrated in getting the lenders to see the project’s potential and was under some time pressure settle the vacant land.
DFP were instrumental in facilitating conversations with the outgoing mortgagee, working with the new incoming mortgagee to refinance the land and subsequently arrange construction finance. 
DFP were a critical partner in the process.  I knew I could trust them to get the result I needed and they did not disappoint me.  I have no hesitation in recommending them.
Tom Bishop, Evolve Building Group

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