Global Capital Commercial was Established in 2001 and through the years we have successfully originated deals well in excess of aud$10bn.

We were approached by a family who owned a retail showroom / warehouse property in the CBD, originally purchased in 1988.

Our client, based in Hong Kong, contacted us to provide advisory – and to assist in the development of the potential project.

Our client had no prior property development experience. They wanted to develop the property. However, there were not sure, whether the re-development should have been for residential or commercial use.

The first challenge we faced was finding the best (highest value) use for the property given its location, market and potential approval challenges.

Our Approach

We worked with the client, and after several discussions between our team of experts and theirs’, agreed that a mixed use, 19-level residential apartment complex comprising 260 residential apartments, 172 car parking lot and 5 ground floor retail tenancies would deliver the highest possible value to the project.

This project, represented, at the time, the largest privately developed residential apartment tower in Adelaide.

The borrower needed a facility of approximately $90M to complete the project. TDC was $104 million, GRV was $139 million and presales were at $78.

Obtaining the funding for the project seemed an impossibility in a very challenging market.

We worked with the client to not only obtain the funds they needed, but also to get them ready for construction over a 2-year period.

Solution

We were faced with a range of issues which needed to be mitigated in order to have a chance of getting the deal across the line.

The following is a brief overview of the risks and our actions to mitigate those risks and structure the deal.

Location:
At the time the project was undertaken, it was to be the largest privately developed residential apartment tower in Adelaide.

This meant that the project would obtain significantly more resistance than a similar-sized project in say Sydney, Melbourne or Brisbane.

To overcome the issue of location, we had to make sure all risks were clearly identified, and a strategic plan was put in place to mitigate all the risks.

We also had to ensure that we brought together the strongest possible team to successfully complete the project.

Lack of Development Experience:
Our first focus was to move the project from conceptual stage to ‘ready to build’.

This meant that we covered off the approval stage, successfully implemented marketing and sales with pre-sales achieved at approximately 70% of target.

At that stage we also introduced an experienced development manager for the project that the underwriters were comfortable with.

A Tier 1 builder was selected during the tender process to add weight to the proposal.

Senior Debt:
We facilitated an institutional senior debt-provider comfortable with the structure, and willing to provide 73% of TDC or 60% of GRV on a non-recourse basis

Equity shortfall:
We arranged a mezzanine facility for $13.2M which when combined with the senior debt represented 100% of costs to complete.

The final LVR was 72% of GRV.

Successfully funded in a very challenging market.

OUR ROLE

ADVISORY DEVELOPMENT MANAGEMENT
LEAD ARRANGER MEZZANINE DEBT

Our client owned a commercial site in the metropolitan area of Melbourne on which it was proposed to construct a seven-level, apartment-complex comprising 54 residential units.

The Gross Realisable Value of the project was $25.2M, and presales achieved were 77.38% or $19.15M.

Our client wanted $17.3M in funding to refinance project ‘costs-to-complete’ as well as an existing liability against the development site.

Our client – through their Melbourne-based introducer – had already secured an approval for approximately $16M from a major Australian bank.

This left them with a shortfall of an additional $1.3M to obtain.

Our client did NOT want to offer any additional collateral security. And since the bank would not allow a mezzanine facility, this left the deal on the table – unworkable.

Our Approach

GCC was approached to provide a structured solution that would achieve a funding package on a stand-alone basis to complete the project.

Rather than a structured facility that included Senior and Mezzanine debt, we successfully secured a stretched senior funding package that met our client’s requirements using only a Senior Debt facility.

Outcome

The amount secured was $17.75M in total which included the construction facility of $17.4M and represented an LVR of 85% of TDC & also limited to 70% of GRV.

We also facilitated an additional GST facility of $350k to cover GST commitments through the project.

The LVR which was achieved far exceeds the current LVR offered by the top four major Australian banks.

  • Facility Amount:$17,400,000
  • LVR:85% of TDC & 70% of GRV
  • Rate:BB + 3.65% No line fee
  • Overdraft Facility
  • Amount:$350,000
  • LVR:N/A
  • Rate:10.50%

Our client owned an industrial property in an inner-Sydney suburb in which the surrounding area was re-zoned to allow for high-density residential apartments.

Our client had no prior experience in property development but was looking to develop 110 residential apartments with a $62M TDC and a GRV of $83M.

Our Approach

GCC initially arranged a facility through a non-bank lender to allow repayment of the existing facility and equity release to cover costs associated with DA, marketing, consultants, building contract, display unit etc.

We worked closely with our client to get them ready for construction through the entire preliminary process.

Once final figures were locked down, including building contract, valuation, QS, etc, the client required approximately 92% of TDC to complete the project. There was also a pre-sale shortfall of approximately $10M

Outcome

We were faced with a range of issues which needed to be mitigated in order to have a chance of getting the deal across the line.

The following is a brief overview of the risks, and our actions to mitigate those risks and structure the deal.

Equity shortfall :

  • We facilitated private equity to cover the shortfall of circa $8M
  • As part of the private equity package, a guarantee to the senior lender facility in full

Pre-sale shortfall

  • A put and call option to cover the pre-sale shortfall

Lack of Development Experience

  • A new SPV with a major developer was established to act as the borrower which effectively eliminated development experience risk
  • Project management for the project to be provided by the major Australian developer
  • Borrowing structure on a non-recourse basis

Senior Debt

  • GCC secured an institutional senior debt provider comfortable with the structure and willing to provide 80% of TDC

 

  • Senior Facility:$49,600,000
  • LVR:80% of TDC & 65% of GRV
  • Rate:BB + 3.00%
  • Mezzanine Facility
  • Amount:$8,000,000
  • LVR:92% of TDC
  • Rate:20%

Our client owns a commercial site in metropolitan Perth on which he proposed to construct an industrial warehouse/office complex comprising 3 units.

It was proposed that our client’s wholesale and retail operations occupy one of the completed units, with the other units either sold/leased on completion.

Total funding required was $6.2M, which included repaying off the existing liability against the development site.

Funding for the original land acquisition was provided by our client’s existing lender – a major bank – and was cross-collateralised with other securities.

Their bank, was not prepared to assist with the construction finance requirement.
Our client, through their Perth-based introducer, was unable to secure funding through any banks on their lending panel.
In response, they approached GCC for a solution.

Our Approach

GCC was successful in securing a combination of Senior and Mezzanine debt to meet the total funding requirement of the client.
Senior Debt was secured through a major bank ($5.36M) for a period of 12 months, at a margin of 3.50% pa over the 30 Day BBSY rate.
The facility represented an LVR of 81% against GRV. However, with additional residential security provided by the borrower – it was approved.

Mezzanine debt ($750K) was procured with collateral security being offered to mitigate the risk.

Solution

  • Facility Amount:$5,360,000
  • LVR:80% of TDC & 65% of GRV
  • Rate:BB + 3.00% 
  • Mezzanine Facility
  • Amount:$750,000
  • LVR:75% of GRV
  • Rate:18.00%

Our client had entered into a contract to purchase a vacant residential development site, situated in a popular Sydney beach suburb for $5.0M.

They paid a deposit of $500k, based on an offer from their existing banker to fund the purchase of the site, and construction of 6 apartments with a GRV of $12.2M.

Our client enjoyed $6.2M of pre-sales (50%) which including one to the vendor.

As settlement drew near, the client’s bank reviewed the ‘offer’ and reduced the LVR to a level that made settlement of the purchase impossible.

In essence, what they did to their offer was withdraw it.

Our Approach

GCC was approached as the “Notice to Complete” was issued by the vendor.

If funding was not arranged urgently, what was clear – the client would lose their deposit.

Solution

GCC arranged a Senior Debt geared to an LVR of 80% of TDC.

Additionally, we introduced mezzanine finance to enable settlement of the property, and to cover the equity shortfall to the tune of $800k.

  • Facility Amount:$8,140,000
  • LVR:80% of TDC & 65% of GRV
  • Rate:BB + 3.00% 
  • Mezzanine Facility
  • Amount:$800,000
  • LVR:75% of GRV
  • Rate:20.00%

Our clients acquired a development site at one of Sydney’s top beaches under an option agreement for a delayed settlement.

In the interim, our client obtained approval to construct four luxury apartments with a GRV of $25.49M.

Our client presold three of the apartments with sale proceeds of $19.6M which would provide more that 100% debt cover for their proposed transaction.

Our client had approached all the major banks, and they all declined the ‘Opportunity to Fund’ as they deemed the project too risky, given their view of the market and our clients apparent lack of experience in the luxury residential market.

Solution

GCC was successful in obtaining approval via a foreign bank, with local representation, for a facility of $13.45M for a period of 18 months – representing an LVR of 70% of TDC.

  • Facility Amount:$13,443,000
  • LVR:70% 
  • Rate:BB + 3.50% 

Our client owns a residential development site in an exclusive suburb of Melbourne with a mortgage of $2.35M to a major bank.

Planning approval was in place for construction of 5 x 2 bedroom luxury residential apartments, such development to be undertaken on an owner/builder basis.

With the existing lender not in a position to assist, there was a refinance requirement ($2.35M) plus construction funding.

Presales were in place covering 96% of the proposed funding.

Solution

  • Facility Amount:$6,150,000
  • LVR:80% of TDC & 65% of GRV
  • Rate:BB + 3.00%

Our client was looking to repay their existing facility with a major bank and to construct a resort style development in South Coast NSW.

Our client had minimum equity to contribute and was therefore looking to maximise borrowing by also utilising mezzanine facility.

Solution

  • Facility Amount:$14,900,000
  • LVR:80% of TDC & 65% of GRV
  • Rate:BB + 3.25% 
  • Mezzanine Facility
  • Amount:$3,100,000
  • LVR:75% of GRV
  • Rate:20.00%

Our client was looking to repay their existing facility with a major bank and to construct a mixed use residential and commercial development in the far North Coast of Queensland.

Our client had previous approvals in place with previous lenders however they all had fallen through.

Solution

  • Facility Amount:$16,500,000
  • LVR:80% of TDC & 65% of GRV
  • Rate:BB + 3.00% 
  • Mezzanine Facility
  • Amount:$350,000
  • LVR:75% of GRV

Request a call back