Non-Bank Lending Jargon Explained

 

 

Written by David Lovato September  2021

 

National “Drop the Jargon Day” for the healthcare industry is on Tuesday 20th October so here’s some meanings around jargon that exist within the non-bank lending space.

 

Working in development finance you come across many personalities and a lot of ego’s. Eliminating jargon actually makes you appear more intelligent than less.  For now we need to live with jargon so here’s a cheat sheet of terms used in our industry.

 

The bottom line is no one knows everything so when someone tries to bamboozle you with industry jargon ask them to explain what they mean.

 

Download the CPC Lending Guide by clicking below for more insights into the non-bank lending space for development projects.

 

 

 

Non-bank lending guide jargon

 

 

 

 

 

HOW WE PROVIDE VALUE TO OUR DEVELOPER CLIENTS

CPC Development Lending Solutions secures market leading finance on behalf of developers – we get projects funded.

Working closely with our 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 with 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.

For more information about CPC Development Lending Solutions check out our FAQ page 

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 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.

For more information about CPC Development Lending Solutions check out our FAQ page 

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

 

 

 

Breaking Ground in 2022? Start your development funding journey now!

 

June 2021

I always get asked by developers when should I start seeking construction funding for my project? Every time my answer is – As early as possible!

Its never too early to be seeking finance  in this current climate and this is why.

Our industry like many others is going thru a COVID related shift. Development professionals (architects, engineers, valuers, QS, lenders) are choosing to work more remotely from home, taking on more work and perhaps not working as efficiently as before. This remote working shift may ultimately become more streamlined as technology and management mindsets change – but we are not there yet.

Currently property industry businesses are finding it hard to onboard and employ additional staff. As demand increases processes and reports are taking longer to finalise. For example lending valuation report timeframes have recently doubled from normally 3-4 weeks to now 6-8 weeks. Some companies are refusing new work as they struggle to keep up.

The bottom line is to expect longer lead-in times to get your project commenced. Try to de-risk all aspects of your project that you have control over. The earlier you start the important process of securing project funding the better off you’ll be. You might not have your DA approved, appointed a selling agent or engaged your preferred builder – it doesn’t matter, its never too early.

 

Get in touch now and get your journey started.

 

David Lovato 

Managing Director

CPC Development Lending Solutions

+61 434 932 634

dlovato@crowdpropertycapital.com.au

crowdpropertycapital.com.au

 

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.

For more information about CPC Development Lending Solutions check out our FAQ page 

 

 

 

 

 

Developing Property in 2021? 5 Key considerations to prepare for in the current market

 

 

 

 

 

As we move forward into the back half of 2021 the market remains strong in pockets but getting projects off the ground remains challenging.

Here are 5 key issues if you are considering bringing your development to market.
  1. Development finance 
  2. Planning delays
  3. Lack of qualifying Pre-Sales
  4. Price stagnation
  5. Construction Cost Increases

Development Finance

Reset your Project Feasibility and try to be more pessimistic

Its hard for developers to be pessimists but sometimes you should be. If you haven’t had a valuation carried out for funding purposes you should be cautious on your projected revenues. If your current project feasibility  assumes low-interest rates, bullish sales off the plan and optimistic timelines do yourself a favour and stress test your assumptions. Run some more conservative numbers to see the effect this has on your bottom line profit. 

Smarter developers are allowing higher finance costs and factoring of common delays to reach you project milestones (e.g increased presales timeframes and push back of construction start dates).

Remember its always good to under promise and over deliver!

Planning Delays

Steer clear of sites with rezoning and infrastructure risk

If you are a small to mid-sized developer right now you should avoid developing sites that require rezonings or significant developer (or government) contributions towards key infrastructure.

Governments are constantly in flux and key service providers (e.g Sydney Water, RMS) are inefficient and disinterested in your infrastructure problems. Many government announcements are made for political reasons but not all projects are funded and virtually none get delivered on time.

Focusing on areas that don’t rely on rezonings or major infrastructure will provide you with tangible outcomes.

Lack of Qualifying Presales

Where have all the off the plan buyers gone?

With a lot of completed developer stock on the market buyers now have a choice between buying new (generally owner occupiers) or buying off the plan (generally investors hoping for price growth before settlement).

With the foreign investor market flat theres generally not as many off the plan buyers around at the moment. Smaller boutique projects in established locations will be well positioned to break ground in these challenging times as lenders agree to fund construction without debt cover via exchanged contracts.  Try and secure your construction funding with a zero presales condition even if you plan to sell off the plan, it gives you more pricing control and potential uplift once the projects completed. 

Presales are a numbers game, smaller projects will get funded with zero presales and allow you to sell during construction. 

Non-bank lenders will work with you to ensure your project revenues are not capped and will allow flexibility if market conditions keep changing.

You should see your lender as a project partner at all stages of the development journey.

Pricing Stagnation

Know your market and be cautious of predicting bullish price increases

Momentum continues to shift in Sydney as house and townhouse  prices are booming but only pockets of apartment prices are rising. Recent sales indicate prices are flattening out and falling in pockets of oversupply.  Developers should be cautious in the pricing of unsold stock and look to residual stock loans so they don’t flood the market with product upon completion.

Allow in your feaso for contingencies such as incentives, increased sell down periods and completed stock holding costs. If you rate of sale has slowed or stopped altogether your price point needs review.

Construction Costs

The only way is up

In Sydney year on year tender inflation is  +4.5% this equates to a +25% increase in building costs over the last 5 years. This is a big risk to your projects quality and feasibility. Be wary of builders who are providing you with seemingly cheap pricing – do your research on their track record and financial stability prior to signing a contract.

If you are unsure about the construction costs in your market engage a QS early on to provide you with high-level current cost information so you can have a better idea of pricing expectations prior to design finalisation and tender stage.

 

 

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.

For more information about CPC Development Lending Solutions check out our FAQ page 

Lower LVR’s – The New Normal for Developers

 

cpc-logo

 

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

 

 

 

Planning Alert NSW – Back down on Housing Affordability as 47 Council areas fail to introduce Low Rise Housing Legislation

 

2056 Greater Sydney Commission - 3 cities

2056 Greater Sydney Commission – 3 cities

cpc-logo  July 2018

NSW Planning Update

Legislation designed to allow developers clarity around low rise housing has spectacularly failed to deliver in 47 LGA’s – providing a major blow to housing affordability in Sydney.

Sydney needs 41,250 new homes each year over the next 20 years. This move will impact supply resulting in more people continuing to be priced out of Sydney.

The state governments back down to allow local government’s further time to assess the impacts of the New Medium Density Housing Code is yet another example of the lack of cohesion between the local and state government departments. 

The perfect storm of planning approval delays, lack of planning certainty and tightening credit markets are all impacting developers bottom line feasibilities and profits. These all add up to challenging times in the development space.

What you need to know

The below is a list of LGA’s with and without deferral for further information click here

screen-shot-2018-07-07-at-6-17-12-am

The benefits of the new Low Rise Medium Density Housing Code include:

  • increasing the supply of housing across NSW, especially in Sydney, which will help improve housing affordability;
  • better meet the needs of our changing population by providing a broader range of housing options to suit different lifestyle needs;
  • help to maintain the local character of neighbourhoods with a storey height limit. This will ensure the size and scale of development will fit into established streetscapes and new release areas; and
  • ensure a consistent approach to the good design of medium density housing across NSW.

 

Contact CPC to better understand the full development potential of your site to maximise the value of your asset. Email: info@crowdpropertycapital.com.au

Private Lending – The Future of Development Finance


cpc-logo  March 2018

Rates from 7.5% p.a*
Flexible Presale Terms
LVR 65% on completion

As we move well into 2018 significant trends that align both investors and developers are emerging in the private lending space.

Private lenders entered the market in a big way last year, they were seen as the expensive option of last resort. This is now changing as the private lending market is taking a bigger share of overall development funding.

Why go private? The many benefits include flexibility with LTV ratios, lower presales hurdles and flexible repayment terms. Speed to settlement and funding decisions are made on the spot and can be relied upon.

Most developers have recently been hit with a perfect storm of events. Whether it’s lack of funding to settle sites under option or construction stage most developers are experiencing restrictive levels of developer equity. The realities are starting to bite.

Presales are slow, site holding costs are eating into profits and construction costs continue to rise.

Many developers have been forced by the banks to lower pricing on off the plan sales to reach high presales hurdles. This results in project revenue becoming capped in turn damaging bottom line profits.

Savvy developers are benefiting in many ways from these less onerous private funding channels.

Privates are becoming true business partners who will likely back not just their current project but also their future pipeline.

CPC provides developer advisory services to determine our clients short and long-term funding needs. We are connecting investors and developers with cost-effective opportunities that weren’t around months ago.

See below for our latest offerings and contact us today to discuss private lending options if you want to get your project ahead of the curve.

Contact – David Lovato
M +61 434 932 634
E: dlovato@crowdpropertycapital.com.au
W: www.crowdpropertycapital.com.au
* Rates will vary depending on the projects location, stage of development and private lenders appetite for risk.

Planning Alert NSW – S96 Submission will now be a S4.55 Modification


cpc-logo  March 2018

NSW Planning Update

Legislation regarding the Environmental Planning and Assessment Act 1979 has introduced a major change to the numbering of sections. From March 1st, 2018 terminology has changed – below is a cheat sheet of updates 

For Example 

  • A S96 Modification has become a S4.55 Submission
  • An S94 Contribution has become s S7.11 Contribution

screen-shot-2018-03-08-at-6-44-44-am

Contact CPC to better understand the full development potential of your site to maximise the value of your asset. Email: info@crowdpropertycapital.com.au

$20B Plan for Western Sydney’s Economic Powerhouse


cpc-logo  March 2018

Article by The Urban Developer

A $20 billion plan to transform Western Sydney into an economic powerhouse replete with an airport city, aerospace institute and North-South rail link was announced by Malcolm Turnbull, NSW Premier Gladys Berejiklian and eight local council mayors on Sunday morning.

The “historic” partnership has been signed off by all three levels of government and involves a multi-billion-dollar plan to invest in infrastructure as the region’s population grows from two million to three million people by the early 2030s.

At the heart of the 20-year plan is the Western Sydney Airport at Badgerys Creek, which will adjoin a fully-intergratedaerotropolis” – creating a metropolitan centre that develops its own infrastructure, land use and economy.

The federal government has pledged a $5.3 billion investment in the Western Sydney Airport.

Prime Minister Malcolm Turnbull said that the airport will be the catalyst for 200,00 new jobs for the region.

 

North South Line

Under the plan the federal and NSW governments have committed to fund the $7 billion North-South rail link, from St Marys to Badgerys Creek via the new airport, 50-50.

Turnbull said that “the objective is to have the rail open and operating when the airport opens” in 2026, describing it as part of the government’s commitment to nation-building infrastructure.

The NSW and federal governments will jointly fund a $100-million business case to investigate possible station sites for the new rail link from St Marys to the airport site at Badgerys Creek, 50 kilometres west of Sydney’s CBD.

The Badgerys Creek Aerotropolis, part of which will include commonwealth land at North Bringelly, is a metro area adjacent to the western Sydney airport zoned for manufacturing, research, medical, education and commercial activities.

NSW premier Gladys Berejiklian said the deal was a nationally significant announcement: “This is about putting western Sydney on the map globally. We open a new chapter here”.

“When people stand in Parramatta, they won’t be looking East for the best jobs, they’ll be looking West for the best jobs.”

NSW Premier Gladys Berejiklian

The plan includes the introduction of smart digital technology, STEM-education facilities to train skilled workers for the airport city, rapid bus services linking Liverpool, Penrith and Campbelltown with the aerotropolis and an investment attraction office to attract investment.

The government also announced a new planning regime to cut development costs and boost housing supply.

Western Sydney Leadership Dialogue chairman Christopher Brown said that the north-south connection was a steel spine for the region.

“Badgerys Creek Airport represents a new era for the region and it is vital that our booming cities in the south-west and north-west are connected to it, from the outset. This is, after all, not Sydney’s second airport, but Western Sydney’s first airport,” he said.

Badgerys Creek Airport

Brown said that the north-south link, along with the West Metro, which connects Sydney to Parramatta, were the two most important transport projects for Western Sydney when it came to employment generation, improved livability, housing affordability and reduced congestion.

In a joint statement Labor’s Shadow Infrastructure Spokesman, Anthony Albanese and state Labor Leader Luke Foley said: “Federal and State Labor have long argued for a Western Sydney Rail Link with a North-South line to boost productivity and improve the quality of life of residents of the region.”

Foley said a State Labor Government would deliver the rail link faster because it would not build the Northern Beaches Mega Tunnel nor waste $2.5 billion on stadiums.

“Our focus is Western Sydney,” Foley said.

Top Tier Developer is on the hunt for their next aquisition

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cpc-logo  January 2018

A client is seeking to acquire its next development project. If you are a site owner considering an exit please get in touch. Site’s being considered have the following characteristics:

  • Located in Sydney/Melbourne
  • Apartment Project – size 150 -500 units
  • Land Project -land subdivision greater than 10 acres
  • Must be in close proximity to EXISTING transport, schools and other amenities
  • DA approved and appropriately zoned 
 
If you own a site and are thinking of selling call David Lovato on m 0434 932 634 or email dlovato@crowdpropertycapital.com.au