CPC Secures Development Funding in Melbourne’s Brunswick West

 

 

 

 

15th June 2020 

CPC recently secured a $3.6m acquisition and construction facility for a boutique townhouse site in Brunswick West.

This deal had numerous challenges. 

CPC managed to obtain for our client a single facility without any pre-sales or a building contract in place. This allowed the developer to reduce risk around timing and focus pre-sales during construction.  

The boutique size of this project being 6 inner city edgy townhouses was a big plus for this lender.

 

Deal Metrics

  • Facility Limit $3.6m – As complete 70% LVR
  • DA Approved 6 Townhouses mix of 2 and 3 bed
  • Zero Pre Sales
  • Interest rate 6.5%
  • Line Fee 3.45%
  • Term 15 months

Our client exchanged on the site in February 2020 prior to COVID and needed to settle the site in May 2020. We agreed with our lender a single facility. The key challenge was to achieve a panel approved valuation that looked beyond current market conditions and forecast sale prices over the coming year.

By ensuring the valuer only looked at direct comparable sales on premium surrounding stock the “as complete” valuation came in at similar levels to original assumptions made by our client earlier in the year. This was critical to ensure developer equity and stock pricing was maintained despite no pre-sales in place.

Despite the high LVR (70%) our lender committed to construction funding at site settlement stage and closed the deal confident the recent COVID disruption will not have a material impact on the successful completion of the project.

With a 15 month time frame this deal has substantially de risked this project for our client and now  allows focus on maximising sales revenue during construction.

 

ABOUT CPC’s SERVICES

CPC provides a valuable service to developers by working with you up front to understand your project and development objectives.

Our network of lenders deeply understand risk and property cycles – they are open for business and adjusting their lending criteria to strengthen their loan quality book in  this current market cycle.

To confidentially discuss your bespoke funding solution contact us today on email info@crowdpropertycapital.com.au or phone +61 434 932 634

 

 

 

5 Key Metrics Private Lenders are focused on during the COVID-19 Pandemic

 

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28th April 2020 

 

These are unprecedented times with no one  able to predict the future, prudent lenders are adjusting risk profiles and being selective to only do business with financially stable developers. 

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 so a reduction in max LVR from 65% to 55% is GRV has recently occurred and is now the new normal. The lower the LVR to more likely the deal will go ahead. 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. A bird in the hand is much better than a forecast  sale price that may need to be revised downwards in 6-12 months time. 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.

 

ABOUT CPC’s SERVICES

CPC provides a valuable service to developers by working with you up front to understand your project and development objectives.

Our network of lenders deeply understand risk and property cycles – they are open for business and adjusting their lending criteria to strengthen their loan quality book in  this current market cycle.

To confidentially discuss your bespoke funding solution contact us today on email info@crowdpropertycapital.com.au or phone +61 434 932 634

 

 

 

Lower LVR’s – The New Normal for Developers

 

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23rd April 2020 

 

The COVID-19 pandemic is reshaping economies around the globe with the local lending environment for development projects changing rapidly since March.

The property industry has already seen major impacts with lenders passing on riskier projects resulting in a substantial reduction in deal flow. One of the key changes over the last few weeks is the reduction in Loan to Value Ratios (LVR’s).

Lenders are requiring more equity from developers to protect their loan investment. We have seen a general reduction in risk/gearing with increased pricing. There are genuine post COVID deals being done now giving us and our clients the benefit of real time risk and pricing benchmarks.

If you are in the market for project funding there are options available as long as your  project generally sits within the following criteria :- 

  • First mortgage funding only 
  • DA approved projects preferred with minimal planing risk
  • Experienced project sponsors with access to additional equity
  • Loan size $3m to $10m max 
  • Gearing to a maximum of 55% LVR against GRV 
  • Postcodes with no actual (or perceived future) oversupply
  • Purchaser demographic – local owner occupier focused, not reliant on investors 
  • Generally 15 month max loan period 
  • Zero pre-sales still available for smaller projects (2 – 10 dwellings)

Projects that sit outside of the above criteria may find it challenging in the current climate to secure funding. Some of our lenders at the moment are carrying out internal valuations as they reduce reliance on external valuer reports instead relying on their in house lending expertise and committees loan decision making.

CPC has a solid network of reliable private lenders who understand risk and property cycles – they are open for business and adjusting their lending criteria to strengthen their loan book in  this current market cycle. The private lending market for developers remains active in pockets and generally excited by opportunities this dislocation is providing.

 

To confidentially discuss your bespoke funding solution contact us today on email info@crowdpropertycapital.com.au or phone +61 434 932 634

 

 

 

Understanding the true development potential of your vendors property

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In real estate sales vendors are relying on the exclusive agents’ ability to understand their properties  “highest and best use” – in a tough market even more so.
 
Historically local agents have shied away from researching and fully understanding planning controls such as site FSR, height limits and permitted uses under current zonings. This should be part of any agents core skill set, providing additional services around town planning and development to better assist their vendor is key in adding value.
 
A few years ago I enquired with a local agent about a prime dual fronted site in an exclusive beachside suburb of Sydney. The agent didn’t even mention the redevelopment potential of the block even though a few doors up the exact same sized block was under construction to build a duplex. This agent didn’t take the time to research his listing to its full extent, not fully marketing to developers really sold the listing short.
 
Agents need to ensure the best outcome for their vendors and fully understand and actively market the development potential of their listing if applicable. Simply placing STCA on your signboard should only be the start of your marketing plan to developers.
 
Attending local community events on potential rezonings, understanding the local LEP and DCP controls and having a good understanding of state government’s mandated growth areas will ensure you can advise your vendor of the potential current and long term value of their asset.

Having a go-to town planner that can look at your listing and provide you with a quick planning overview is also a great way to ensure you haven’t missed anything.

 

Your vendor will appreciate you explaining all of their options and providing them with as much information as possible so they can make informed decisions. You may be able to assist them with a short term equity release solution to allow them to hold their asset until the market improves.

If your vendor is open to development upside risk you could discuss the strategy of selling the site with DA approval. An alternate strategy could be to examine the “optioning up” of the property to a developer which could maximise the sale price in today’s market.

You can be sure they will appreciate your advice given you have demonstrated you haven’t just gone for the hard sell option.

 

Our mission is to provide greater opportunity to property industry stakeholders through financial technology. Our platform links like-minded property investors, developers and financial professionals allowing superior networking and business reach resulting in better deals. Contact CPC to better understand the full development potential of your site to maximise the value of your asset.

1st Mortgage Debt Deal Southern Sydney Development Site

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15th December 2017

A registered first mortgage funding opportunity exists to fund a development project 11kms south of the Sydney CBD.

This opportunity is lead by highly experienced property development executives who are able to better assess risks and provide funding on loans with Loan To Value (LTV) ratios and Covenants that are reflective of the specific projects risk profile. The maximum LTV on this loan is 42% secured via first mortgage.

The developer has acquired the site for $26.5M in 2016 (100% equity funded). The total required facility of $11M is secured against the existing five lots. The maximum LVR is assumed to be 42% (subject to valuation).

The development is a 6,000m2 site yielding 168 apartments and is located 11km from the Sydney CBD. The site is 350m from the train station and 2km from Sydney Airport.

The exit strategy for this loan is the developer completing his current project in another suburb of Sydney. The developer has a solid track record of delivering apartment projects in Sydney (2012-2016 delivered 480 units over 5 projects, GDV $213M).

The minimum investment is $1.1M and interest is 10% paid monthly in arrears. This opportunity is open for a limited time only, further details are below.

 

INVESTMENT DETAILS*

Loan Facilty Type Registered 1st Mortgage
Interest Rate (investor) 10% per annum
Total Loan $11M
Minimum Investment $1.1M
Loan Term 12 Month Facilty from settlement date
Max Loan to Value (LTV) 42% (subject to valuation)
Targeted Financial Close Settlement occurred 1st September 2017

WHO CAN INVEST?

  • An investment of $1,100,000 or more by any Australian resident or non-resident.
  • Any business that is not considered a small business (less than 20 people)
  • Professional & sophisticated investors
  • An Australian financial services licensee
  • A body regulated by APRA include banks, building societies, credit unions, and life and general insurers.
  • A trustee of a superannuation fund
  • An approved deposit fund,
  • A pooled superannuation scheme
  • A listed entity, or a related body corporate of a listed entity.

To obtain further an Information Memorandum (IM) for this investment please contact dlovato@crowdpropertycapital.com.au  or ph. 0434 932 634. *Refer to IM for additional information.

 

Selling your Development Site? 5 Things you should consider…..

 

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September 2017 

Written by David Lovato

More and more developers these days are asking themselves should I sell one (or more) of my sites and consolidate operations? Why would a developer sell their lively hood? Are they in trouble? Are they too stretched? What’s happening to their business?

There are many reasons why a developer may consider selling a site (raw or approved) but they have usually decided to curb expansion plans or had unforeseen delays on existing sites or need to free up capital to complete other projects. If the developer goes about it the wrong way it can greatly tarnish their brand and market perception.

Here are 5 things to consider before listing your development site with an agent:

1. Is there any demand for my site?

If your site is located in an area of future oversupply be prepared to not find a buyer. Banks and private lenders are ruling out funding certain suburbs of Sydney. Limited ability for an incoming developer to obtain finance means your pool of buyers is extremely limited.

2. What’s my pricing strategy? Can I still make money on the site?

If you have purchased a site within the last few years and got a DA approval then you know exactly how much the site owes you.  Site values peaked in 2015 so many sites bought at the peak may not re sell for the same value. You should trying put aside your emotions, agents will always pump up the sale price but talk to valuers and development managers. They know how much a site is worth, you should be ready to accept a fair price. Don’t get greedy or your strategy may backfire.

3. Do I really want to advertise this sale with a major agency?

Signing an agency agreement with one of the big agents is like pulling your pants down. You are exposing your business to speculation that things are not going as planned and you will pay for the privilege. You will be assured of a vast database of buyers (none qualified) and you will run an expensive print and media campaign. A scattergun approach that exposes your business in this delicate situation is not the answer. A targeted and swift off market campaign is a better strategy to keep you divestment plans private, find qualified buyers and free up your capital ASAP.

4. My site is DA approved, it must be worth more?

In todays market more often than not developers are looking for raw sites, the market has peaked and smart developers are looking at sites for the next cycle. Expert developers will have their own brand and strategy and your DA adds no value to the transaction. The time and effort spent on getting the approval has no doubt been considerable but putting emotions aside and seeing it through the buyers eyes will help manage expectations.

5. Understand your buyers financial position

Once your site is for sale you will receive a wide range of offers. Some will be high and others extremely low and opportunistic. You should take a vested interest in reviewing the companies behind all of your offers, you must understand your bidders. It is likely a high bid is from an operator who is willing to pay more to ride out the cycle, the risk is their financial capacity to settle. Most land banking developers will not need finance and they will not pay over the odds – they are probably your underbidders.

 

Written by David Lovato from Crowd Property Capital, CPC is a peer 2 peer platform providing capital funding channels for Australian property development. For more information visit www.crowdpropertycapital.com.au

 

 

 

 

 

 

 

The new Chinese investors about to make Australian foray

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Written by Michael Cranston, AFR July 2017

 

At least 10 Chinese investors and developers who are yet to make their mark on Australia’s property scene are preparing to make an entry despite a recent slowdown in corporate activity driven by China’s upcoming National Congress and tougher foreign investment restrictions imposed by Chinese regulators.

New federal and state taxes on foreign buyers and tighter lending restrictions have also created negative sentiment for potential Chinese developers and investors. However, JLL’s head of China desk, Michael Zhang, said many Chinese real estate companies were still very serious about investing here.

“Australia continues to be a major investment destination for Chinese capital and many Chinese real estate companies are serious about having some footprint in Australia,” Mr Zhang said.

In a report called The Future of Chinese Residential Developers in Australia, JLL conducted analysis into the 10 largest residential developers yet to enter the Australian market.

 

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Among the top 10 are Hong Kong-based Sun Hung Kai with a market capitalisation of $56 billion and Henderson Land, which recently paid a record $4 billion for a car park in Hong Kong. Other names include Evergrande and transportation business China Merchants Group.

“Some of the Chinese residential developers on this list are already showing interest in the Australian market or are involved in Australian industries outside of the residential real estate sector,” JLL senior analyst for residential research in Sydney and author of the report, Vince De Zoysa, said.

“We have already seen some of these firms enter Australia through other industries, in particular infrastructure. This allows them to establish a local presence in Australia in their core industry before moving up the risk and reward curve into residential development.”

A key driver for these developers will be the health of the foreign retail buyer market for new apartments in Australia. The federal budget changed the rules so that developers selling new multi-storey dwellings are now capped at vending 50 per cent of the total development to overseas buyers. Foreign owners will also start to incur a capital gains tax of 12.5 per cent when selling their main residential asset.

Interest from China remains high

“Despite increased taxes, tighter lending measures on development finance and limited availability of senior debt to overseas developers, the level of interest remains high for Chinese developers,” Mr Zhang said.

While Juwai.com has recently forecast Chinese buyers to spend $104.5 billion on global property this year, a significant fall from last year’s record high of $133.7 billion, Mr Zhang said that was not representative of a new wave of Chinese developers and investors.

“Australia continues to be a major investment destination for Chinese capital,” he said. “Australia’s average deal size is smaller than that of the US and the UK, which makes investing here accessible to investors of all sizes.

“Increasingly Chinese developers are seeking ready-to-go opportunities with existing DA or planning outcomes, thereby minimising planning risk and bringing clarity on project life cycle.”

Chinese corporate activity has slowed recently as a result of the upcoming 19th National Congress to be held in October. The tougher foreign investment restrictions imposed by Chinese regulators on $US1 billion-plus deals are still in place.

25 Glasgow Avenue Bondi Beach – Unique Raw Development Site Opportunity

25 Glasgow Avenue is for sale by auction 8th April 2017

25 Glasgow Avenue is for sale by auction 8th April 2017

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A development site with the opportunity to build two executive residences (STCA) is for sale by auction on 8th April 2017. 

Located in the heart of Bondi Beach moments to the sand, surf, boutique shopping, and cafe precincts the property offers investors a solid value proposition.

Key investor information

  • Existing 3 Bedroom house on a 418m2 parcel with 18m frontage.
  • Raw development potential for two executive residences with car parking, extensive landscaping and plunge pool (STCA).
  • Strong rental yields post-acquisition, highly rentable existing 3 bed residence moments from the beach.
  • DA precedent for dual occupation design based on neighboring properties.

Whether your objective is to develop to sell both dwellings or live in one and sell the other this is a compelling investment opportunity.

The below information provides a concept design that has been produced in consideration of existing planning controls.

An artists Impression of the possible redevelopment of 25 Glasgow Ave Bondi Beach (STCA)

An artists Impression of the possible redevelopment of 25 Glasgow Ave Bondi Beach (STCA)

 

Basement and Ground Floor Design

Basement and Ground Floor Design

The concept design allows off street parking for two cars, generous open plan living areas combined with a spacious outdoor rear deck area, plunge pool, and outdoor shower area. The front study could also be used as a 5th Bedroom.

The upper level design includes generous sized bedrooms and an attic level.

The first floor and an attic level.

The first floor consists of three well-proportioned bedrooms, the master and rear bedroom have their own private balcony. Functional use of the roof has allowed a large 4th bedroom or teenage retreat in the attic space.  

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The above table summarises the proposed design based on the current planning controls of Waverley Council.

For further due diligence information on this property:

Email  dlovato@crowdpropertycapital.com.au 

Phone +61 434 932 634

Disclaimer: No enquiries have been made with Waverley Council regarding the suitability or acceptance of this  or any potential Development Approval. While much care has been taken to ensure that the data presented is accurate investors should make their own enquiries. This information should not be relied upon for valuation purposes.

Existing property at 25 Glasgow Ave Bondi Beach

Existing property at 25 Glasgow Ave Bondi Beach