5 Key Metrics Private Lenders are focused on during the COVID Pandemic
August 2021
These are unprecedented times with no one able to predict the future, CPC has summarised 5 of the key metrics private lenders are currently focusing on to ensure they are investing in the right projects suitable to the current climate. To ensure you can secure funding for your next project look at these metrics closely and see how your project stacks up.
Metric 1 – DEVELOPER EXPERIENCE
Private lenders want to partner with experienced developers who have cut their teeth on past projects and learnt from their mistakes and experience. They are ready to back project sponsors who can demonstrate its not their first project and have runs on the board.
Metric 2 – PROJECT LOCATION
Middle ring suburbs with median price points, close to the CBD, excellent existing infrastructure (not promised). With foreign buyers are temporarily out of the local market and immigration suspended there is a renewed focus on a local catchment and established suburbs that have had recent gentrification and infrastructure investment. Locations that appeal to families, downsizers, retirees are strongly preferred by lenders.
Metric 3 – PROJECT SIZE
Lenders are spreading risk by project diversification. A loan book with more projects at a lower investment value per project is much more attractive than a loan book with the same FUM made up of one or two large projects. Smaller boutique style projects make a lot of sense to lenders, less stock to shift, more competitive build environment and generally less project risk. If your project is from 2 to 15 dwellings you are more likely to get funding and your project started sooner.
Metric 4 – DEVELOPER EQUITY
Key loan to value ratios have shifted post COVID-19. Senior debt secured by 1st mortgage remains the focus for quality stable lenders. Generally lenders will require developers to put more equity into projects upfront, GRV around 65-70% is current senior. Mezz is available but is still expensive. Developers also need to ensure they are not to heavily reliant on cash flow from other project completions.
Metric 5 – PRE SALES
Lenders will typically favour projects that have exiting pre sales purely due to the potential impact of COVID-19 on property prices. Having presales also proves to a lender you have a sales process in place that is delivering in these challenging times. Sales revenue remains one of the biggest risks to all projects moving forward.
OUR PROCESSESS
CPC Development Lending Solutions secures market leading finance on your behalf – we get projects funded.
Working closely with our developer clients we are that new set of eyes that stress test your feasibility and project assumptions around revenue and costs.
We examine presales targets, project delivery team, transaction structure, funding request and timings. This allows your project to be presented professionally and takes it to the front of the queue leveraging off our strong non bank lending relationships.
Engaging CPC allows you to focus on managing your project and driving your consultant team. If you are looking to break ground in 2022 get in touch now. Its never too early.
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