Provision of Commercial Loan for 55% of Valuation, Potts Point NSW

Provision of Commercial Loan for 55% of Valuation, Potts Point NSW

Background

An existing DFP client owned two adjoining properties in Potts Point (funding of which was secured by DFP previously). They exchanged a contract to purchase a third property adjoining those two.  The existing Underwriter was unable to fund the third property as they had exceeded their prudential limit per Obligor.  The ultimate goal is to produce an amalgamated development site so the client turned to DFP to assist with funding to help them realise their goal.

Issues

  • The property is commercial and the ground floor tenancy makes up a considerable part of the total rental income. In addition the weighted average lease expiry (WALE) is short dated.
  • The serviceability on rental alone is 1.1 times.
  • Mainstream funding options are limited for commercial properties with a short dated WALE and where the serviceability on rental alone is as tight as 1.1 times.

Scope

  • DFP was engaged to expedite a funding solution that met the Client’s requirements
  • DFP undertook a detailed analysis of the tenancy profile including discussions with a local agent as to the potential of the amalgamated site
  • DFP developed a complete underwriting proposal

 

Results

  • DFP has been able to provide funding from the Private Market that meets with the Client’s requirements. The interest rate at 8% is very attractive and the LVR of 55% was a compromise that the Client was happy to make given the overall metrics of the proposal
  • This will enable the Client to secure the site and subsequently consider the development opportunity
  • DFP was able to present the proposal on the basis of the overall serviceability of the Client and the underpinning of the value in the property, particularly given the overall development potential.

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