Senior Debt loan $2m for site refinance and construction of 6 Townhouses at 65% of the Gross Realisation Valuation in Lilydale, Victoria

Senior Debt loan $2m for site refinance and construction of 6 Townhouses at 65% of the Gross Realisation Valuation in Lilydale, Victoria

Project Background

Knockdown of existing residence and construction of 6 double level dwellings.

 

LOCATION OF PROJECT

Lilydale, VIC

 

DEVELOPMENT DETAILS

The development will comprise 6 luxury townhouses with a mixture of 2 and 3 bedroom residences.

 

THE DEVELOPER

Owner builder with an extensive background in building and construction, obtaining his Certificate 4 in Construction Management in 2006 and subsequently establishing his own construction and development business, which has been operating successfully since.

The company has undertaken a range of projects and contract engagements during that time, including cottage building, renovations and extensions, subdivision development and medium density projects.

The Brief: Construction Finance Approval

Following the purchase of the site which was settled with a major bank, the Developer sought finance to assist with the purchase of the site and construction finance for the 6 residences. They had started marketing but wanted to move forward with construction finance immediately without having to wait for presales.

Following the initial discussion around the project, DFP worked through the project feasibility together with the client to firm up build costings and confirm internal margins as they also would deliver the build via their building company. Upon assessment of the project feasibility and discussions with the client, a formal service agreement was entered into with the client and DFP. Shortly thereafter, DFP secured finance terms to undertake the project.

 

THE ISSUES: ACHIEVE PROJECT FUNDING

Given the tightening of all 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 low presales.

The Solution: Refinance of existing mortgage and construction finance

Development Finance Partners (DFP) was engaged to provide a funding solution for the townhouse construction project in Lilydale, Melbourne.

DFP arranged and settled a 12-month site acquisition and construction facility for $2m, representing 65% of the project gross realisation value, inclusive of GST.

DFP ascertained appetite from a preferred DFP underwriter to secure site refinance and construction finance proposal 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 both the land refinance and the construction component based on 1 presale which was achieved during the process.

The Results DFP Delivered:

  • Finance – Secured, Terms Approved Late June, Settled less than a month later, in early July 2019
  • Loan Amount Tranche 1- $2,077 GRV $3,190 (including GST) LVR 65%
  • Term – 12 months
  • Presales – one

The client is now very happy that the construction funding is in place and work has commenced immediately following settlement.

 

What the client says:

“I was struggling to get finance through traditional banks at the moment – I was looking for other options. I was a little bit skeptical working with someone new, who I hadn’t heard of or dealt with much.

I found that they were very good at keeping me well informed about the other options for finance. They gave me a lot of confidence that they knew what they were talking about it.

We managed to get the funding for our 6 unit project over the line with a finance company.  I would recommend them to other developers.”

Health C. Marshall, Director, Peppercorn Homes

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