Securing Development Funding Pre-DA On A Complex Project in Cheltenham, VIC

Securing Development Funding Pre-DA On A Complex Project in Cheltenham, VIC

A repeat client of Development Finance Partners (DFP) engaged the business to advise on, and secure funding for the acquisition of an older style office building on a future residential development site in Cheltenham, Victoria.
The site did not have development approval for the proposed ultimate residential development use, and the lease agreement providing the holding income was from a related party to the Borrowing Group.  For planning reasons, the borrowing entity was changed several times since the original contract was signed, and time frames were becoming compressed.
The ability of the Borrowing Entity to show loan servicing without recourse to the related-party rents was not evident, and the Director of the special purpose vehicle (Borrowing Entity) lacked experience in a project of this size and type.

The Key Issues Faced by this Site Acquisition

  • Complex Borrowing Group;
  • Related-Party Lease;
  • Lease at above-market rent; and
  • Older office building with potential asbestos/environmental concerns; 

Development Finance Partner’s Scope

In providing guidance and recommendations to the client, DFP assisted the client with deal structuring to mitigate the issues above with the site, its valuation, and the related-party lease.  Funding was secured on terms agreeable to the client, and settlement was effected promptly.

Site Finance: The Results Delivered

  • DFP secured unconditional finance approval to acquire the development site;
  • DFP advised, arranged and settled the purchase transaction with a mortgage fund at interest rates just above bank rates;
  • DFP assisted with and advised on the valuation and quantity surveying process, ensuring acknowledgement of the purchase price and comparable sales, as well as the adoption of appropriate levels of insurance cover; and
  • Ensured the requirement for an additional environmental report (at a cost of time and money to the client) was waived.

What the client says

“DFP have direct access to a number of specialist Lenders that will consider deals that are a little ‘out of the box’.  The team were understanding when it came to some revisions we had to make to the borrowing entity, as well as the challenging nature of the tenancy agreements over the property.
The property acquisition was set on bank-like terms and within the time frames the Vendor had sought.”
Nicholas Smedley, Steller Group
 

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