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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cpc-logo  February 2019

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.

Developing Property in 2019? 5 Key Headwinds – What you need to know in this market

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cpc-logo  February 2019

As we move forward into a new year strong headwinds have emerged for developers on many fronts, here are 5 key issues if you are considering developing in 2019.
  1. Development finance – availability and costs
  2. Planning delays
  3. Lack of qualifying Pre-Sales
  4. Price stagnation
  5. Construction Cost Increases

Development Finance

Reset your Project Feasibility and be more pessimistic

The lending environment has changed with banks exiting and private lenders emerging. If your current feaso assumes low-interest rates and optimistic timelines do yourself a favour and bite the bullet.

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).

Forget working with the major banks they may offer a good headline rate but will at some stage move the goalposts on you causing further delays and impact on your bottom line.

Revise your feaso to be more pessimistic, its no time for optimism your only kidding yourself.

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 buyers gone?

Smaller boutique projects in established locations will be well positioned into 2019.

Presales are a numbers game, smaller projects mean less required for finance approval. With banks tightening their criteria for construction funding qualifying presales are taking longer to achieve.

Private lenders who understand property are now gaining market share by offering competitive interest rates and lower presales (some offer construction funding with zero presales). Privates will work with you to ensure your project revenues are not capped and will allow flexibility if market conditions keep changing.

You may have to pay private lenders higher interest rates but getting your project under construction on reasonable terms will give you more options at completion. You should see your lender as a project partner at all stages of the development journey.

Pricing Stagnation

Know your market reset expectations and be cautious 

Momentum continues to slow in Sydney as the market reaches balance. Recent sales indicate prices are flattening out and falling in pockets of oversupply. A soft landing is forecast in Sydney, however, developers should be cautious in the pricing of unsold stock.

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 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.

 

 

About CPC

 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.

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

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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

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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