Our client had owned and operated out of an industrial property located in inner Sydney. The immediate surrounding area was rezoned to a high density residential area.

Our client was not a property developer but wanted to develop his site in to a 110 residential apartments on the site and came to us for advise at an early stage.

The first step was arranging a land bank facility to cover the preliminary costs of the project such as marketing, DA, professional fees, etc

We worked with our client through the entire process including preliminary design, marketing, pre sales, and builder selection.

When the project feasibility was finalised by the valuer and QS our client needed circa 92% of costs. Pre-sales were strong however there was still a short $10M of the required level.

Solution

There were a range of challenges which had to be overcome in order for us to successfully complete the project:

Equity shortfall
• We introduced private equity to cover the shortfall of $8M at 20% pa
• We secured a guarantee to the senior debt provider to completely mitigate the senior lenders risk in full

Pre-sale shortfall
• We mitigated the pre-sale shortfall by implementing a put and call option

No Previous Development Experience
• A new SPV was to be formed in conjunction with a major property developer to act as the borrower with our client to provide the land as the equity. This effectively mitigated development experience risk.
• Design Management agreement to complete the project
• Borrowing structure – non-recourse with no personal guarantees

Senior Debt
• We facilitated a senior debt facility to 80% of TDC

Overall Cost
Considering all costs such as mez/equity interest costs, presale option costs, Joint Venture agreement, Design Management and project management costs our client was to retain close to 65% of project profits. This was due to the fact that we had packaged the project to the point where it was ready to start and the parties we introduced came in right at the end of the process.

Senior Facility:$49.6M
LVR:80% of TDC
Rate:BB + 3.00%
Mez / JV Amount:$8M
LVR:92% of TDC
Rate:20%

 

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