Posts

How to position your next project for NSW’s Pre-Sale Finance Guarantee

/in , , , /by

 

Written by David Lovato – CPC Development Lending Solutions

November 2025

 

The New South Wales government’s $1 billion Pre-Sale Finance Guarantee scheme aims to unlock stalled housing projects by helping developers secure construction funding sooner. It is a major shift designed to tackle one of the biggest challenges facing small- and mid-sized developers: meeting strict pre-sales thresholds set by lenders. 

But, not every project, or every developer, will qualify. And while the guarantee removes a key barrier, it doesn’t replace the need for sound feasibility, credible delivery partners and up-to-date documentation. 

Understanding how to position your application from day one could mean the difference between unlocking finance in months or watching competitors secure the limited pool of guarantees first.

How it works

Under the $1 billion Pre-Sale Finance Guarantee, the NSW government will guarantee up to 50% of eligible off-the-plan dwellings in approved residential projects of $5 million to $50 million, where the dwelling value doesn’t exceed $2 million per dwelling.

Projects of this size usually require 60-80% pre-sales for lenders to consider finance. By underwriting up to 50% of your dwellings, the government effectively halves your sales risk, allowing you to commence construction with a lower private sales threshold.

Projects must begin construction within six months of approval, and developers will pay a line fee – similar to loan interest – for the duration of the government’s guarantee.

If guaranteed homes remain unsold by completion, the developer can call on the government to purchase them at a reduced price. This discount should be at least 10% of the independently assessed market value.

Who can benefit from the scheme?

The scheme is aimed at shovel-ready, mid-scale residential projects that already hold planning approval. It’s not for speculative or early-concept developments. 

Based on the $5-50 million range for project size and the $2 million cap per dwelling, this will likely be between 10 and 100 units. This helps ensure the scheme targets attainable housing rather than luxury stock.

Developers who will benefit are likely to be those with robust track records, credible delivery teams and projects that demonstrate genuine market demand. 

However, the scheme could also benefit smaller or newer developers who might not have the financial track record of a larger business. If you have secured a quality site, sound feasiblity and a high-quality construction team, the guarantee offers the chance to use the state’s backing to gain lender confidence.

What will lenders and the government assess?

To qualify for the Pre-Sale Finance Guarantee, projects must meet both lender and government requirements. While there’s some overlap, each party has its own focus:

  • Feasibility and project merit: Realistic construction timelines, adequate contingencies and alignment with housing-supply priorities.
  • Developer capability and credibility: Financial stability, track record, governance, fixed-price contracts and experienced consultants.
  • Creditworthiness and security: Ability to service debt, pre-sales achieved, land value, developer contribution and a clear exit strategy.
  • Genuine need: The government, in particular, will assess that finance was otherwise unavailable or delayed due to unmet pre-sale targets.
  • Timing: A government requirement is that construction must begin within six months of approval.
  • Value protection: To meet the state’s requirements, dwellings are independently valued, with the state’s purchase commitment at a minimum 10% discount to market value.

Together, these assessments ensure projects supported under the scheme are both commercially viable and aligned with NSW’s housing priorities.

Mistakes you can’t afford to make

With the scheme now open for expressions of interest, developers need to be strategic from day one or risk missing out entirely. Common mistakes include:

1. Not engaging a specialised broker soon enough

Once you have secured NSW planning and development approval, contact a broker like CPC Lending Solutions right away. As the process for securing a guarantee will involve both your application to government as well as a lender’s application, leaving finance structuring or eligibility assessment too late can limit lender options and delay your application.

2. Miscalculating feasibility

Developers occasionally forget to include certain expenses when calculating their project’s feasibility. This can include loan application and establishment fees.

Under the government’s guarantee scheme, there will also be an ongoing annual line fee that should also be included in your overall expenses to model your project’s profitability accurately.

Similarly, the 10% minimum discount on government-purchased dwellings must be factored into your feasibility from the outset. Projects with tight margins will struggle to absorb this risk. To accurately predict even the worst-case scenario, run a test where all 50% of units guaranteed by government sell at the discounted rate and ensure your project still delivers acceptable returns. 

3. Ignoring the remainder of the pre-sale requirements 

The guarantee covers up to 50% of dwellings, but you still need a credible strategy to achieve genuine pre-sales for the remainder. Projects in weak markets or with poor sales fundamentals won’t suddenly become viable just because half the risk is underwritten. Projects where the non-guaranteed portion appears unlikely to sell will likely not be accepted by government, or by a lender.

For developers looking for a detailed roadmap, CPC Lending Solutions has compiled a comprehensive Development Lending Guide, providing the latest insights on structuring finance, eligibility and accessing government-backed schemes. You can download the guide here.

Ready to turn your approved project into a funded, government-guaranteed reality? 

CPC Lending Solutions specialises in guiding developers through every step, from assessing eligibility and structuring finance to preparing your application and negotiating with lenders. Get in touch today at info@crowdpropertycapital.com.au or fill in this form to discuss your next development and see how CPC can help you access the guarantee with confidence.

Three financing challenges for off-the-plan developments, and how to overcome them

/in , , , /by

Written by David Lovato – CPC Lending Solutions

October 2025

Off-the-plan projects can be a smart way for developers to manage cash flow and secure early sales, but getting finance for them isn’t always straightforward. With construction costs, market confidence and lender appetite all shifting over the past few years, developers face a unique set of challenges when trying to get a project off the ground.

Here are three common financing challenges and practical strategies to overcome them.

1. Demonstrating project feasibility and profitability

Lenders have become increasingly cautious following the construction cost surge during COVID-19, when many projects became unviable due to rising expenses and stagnant sale prices. According to the Australian Bureau of Statistics (ABS), the average cost to build a house jumped 6.7% annually from 2019-20 to 2023-24.

This combination of rising costs and unpredictable market conditions led many lenders to tighten their lending criteria, requiring more robust feasibility and pre-sale evidence before approving funding.

The good news is that conditions have improved since then. Lower interest rates are boosting borrowing capacity and apartment prices have outperformed house prices across many capital cities over the past year. Cotality’s home value index for September showed apartment prices increasing more over the last 12 months than houses in Brisbane, Adelaide and Perth. 

For developers, this shift is important: Stronger apartment values improve project feasibility by widening profit margins, supporting higher-end values and helping to offset the impact of higher build costs. It also increases lender confidence, as projects are more likely to achieve sales prices that align with or exceed forecast levels.

Lenders will still want to see a detailed feasibility study demonstrating that a project is viable and profitable. Your feasibility should clearly show how your project capitalises on these improving conditions, with realistic cost estimates and conservative sale price assumptions.

Working with an experienced broker can help ensure your figures are accurate and presented in a way that builds lender confidence.

2. Managing volatile construction costs

While construction costs have stabilised compared to the extreme volatility of the pandemic, they continue to rise modestly. Cotality’s latest Cordell Construction Cost Index recorded a 2.5% increase in residential construction costs over the 12 months to September 2025, down from 3.2% over the same period last year. 

The current rate of growth is under the pre-pandemic decade average of 4.0%, but labour shortages and strong public infrastructure demand are likely to keep upward pressure on prices. This means that although construction cost growth is below long-term averages, margins remain tight. Material and labour costs are still elevated, and competition for skilled trades remains strong amid record infrastructure spending.

You should always enter into fixed-price building contracts where possible, or at a minimum, secure detailed quotes with realistic contingencies of 10-15%. 

Working with established builders who have weathered recent market volatility also demonstrates prudence to lenders. 

3. Meeting pre-sale requirements

Most lenders require a percentage of pre-sales before releasing construction funding. Traditionally, developers have needed to pre-sell between 50% and 80% of dwellings to qualify for loans – a significant hurdle that often delays or stalls projects.

However, many lenders also favour boutique-style apartment developments, typically between four and 20 units.

Developers who “meet the market” – through design, pricing and location – are more likely to secure pre-sales early. This offers an opportunity for smaller projects to secure funding over larger, more risky developments. 

For instance, the luxury apartment market continues to perform well, driven by downsizer demand. According to Longergan Research, 40% of respondents in New South Wales and the ACT aiming to downsize in the next five years say they are looking for an apartment and 23% of respondents say they will switch to a smaller home but at the same price as their current house. 

This demographic shift is underpinning strong demand for premium, low-maintenance apartments in desirable suburbs, helping you achieve faster pre-sales and improve your eligibility for construction funding.

In NSW, you may also benefit from the state government’s new $1 billion Pre-Sale Finance Guarantee scheme, designed to ease funding bottlenecks by helping eligible off-the-plan projects access finance with lower pre-sale thresholds. The scheme, which launched officially in September 2025, could provide additional flexibility for developers meeting at least half of their pre-sales targets.

CPC will take a closer look at how the scheme works – including eligibility criteria, benefits and potential lender impacts – in next month’s detailed analysis.

Seizing the opportunities 

Off-the-plan developments remain an attractive opportunity for experienced developers and small building companies. The key is balancing project feasibility with lender expectations, and that starts with having the right finance partner.

An experienced broker can help you identify lenders that are open to smaller or boutique projects, navigate pre-sale requirements and structure funding to suit project timelines. We can also negotiate flexible terms and ensure you are well-prepared to meet lenders’ criteria from the outset.

CPC Lending Solutions is a property development and residential finance specialist. Whether you’re a developer needing funding for land, construction, or residual stock, or a buyer looking for the right mortgage, we’re here to help. Contact us at info@crowdpropertycapital.com.au or fill in this form.

Lender in focus: Goodland Capital

/in , , , , /by

Written by David Lovato – CPC Lending Solutions

September 2025

In property development, finding a lender who truly understands your perspective can transform the entire project experience. While many lenders focus purely on numbers and rigid criteria, others take a more empathetic approach that puts the developer’s needs at the centre of every decision.

In the latest instalment of our “Lender in focus” series, we’re profiling Goodland Capital, a boutique lender with a clear niche in small-scale property developments.

What sets Goodland Capital apart?

Goodland Capital’s key differentiator is its empathetic, developer-first approach. Unlike larger institutions that typically apply one-size-fits-all solutions, Goodland Capital takes the time to understand not just what you’re building, but why you’re building it – and what obstacles you might face along the way.

This problem-solving mindset means they’re not just a lender, but a partner who understands the realities of development projects.

A focus on smaller developments

Goodland Capital specialises in smaller-scale projects, including land subdivisions, duplex constructions and single-house builds, with particular expertise in projects that are midway through construction. They do not finance large apartment complexes or major development projects, but their targeted focus means they have deep expertise in this space.

By concentrating on smaller developments, they’ve built an in-depth understanding of exactly what these projects need to succeed. This means you benefit from a lender who truly understands the requirements and risks of smaller, high-potential projects.

Unique policies that matter to developers

Goodland Capital offers several features designed specifically for property developers. 

First, their early involvement in due diligence is especially valuable. This allows them to participate in preliminary assessment phases and use their broad market knowledge to identify potential issues before they become costly problems.

Second, they provide a high degree of funding certainty. Once Goodland Capital commits to a project, you can count on them to deliver. This matters most for developers and provides peace of mind throughout the development process.

Finally, Goodland Capital prioritises a personalised problem-solving approach. This means that rather than just providing capital, they also work closely with developers to find practical solutions to challenges as they arise.

Why developers choose Goodland Capital

There are several reasons why property developers value working with Goodland Capital:

  1. Genuine partnership approach: The team thinks like developers, offering practical guidance and support rather than creating obstacles.
  2. Funding certainty: Reliable and consistent finance allows developers to plan and proceed with confidence.
  3. Specialised focus: Concentrating on smaller developments means they have in-depth knowledge and expertise in this sector.
  4. Responsive and personal service: As a boutique lender, developers have direct access to decision-makers. This means you get quick, personalised responses to queries.

The right fit for the right developer

Goodland Capital is an ideal partner for developers who value more than just access to funds. Their empathy-driven approach, deep understanding of smaller-scale projects and reliable funding make them a standout in the development finance market.

Of course, every developer’s needs are different, and what works perfectly for one project may not suit another. That’s where CPC Development Lending Solutions comes in. We work with a broad range of lenders to match each client with the right financing solution for their specific project. Whether you’re just starting a new subdivision or looking to finish a partially completed build, we are here to help you find the right financial partner.

Contact us at info@crowdpropertycapital.com.au or fill in this form to find out more. 

Everything you need to know about NSW’s Housing Pattern Book

/in , , , /by

Written by David Lovato – CPC Lending Solutions

August 2025

In an effort to fast-track new housing and tackle New South Wales’ affordability crisis, the state government has launched the NSW Housing Pattern Book – a collection of architect-designed plans available for as little as $1 per design, complete with a streamlined approval pathway. 

What is the Housing Pattern Book?

The Pattern Book features eight architect-designed templates for terraces, townhouses, semis and manor homes. These are the “missing middle” housing types that bridge the gap between detached houses and high-rise apartments. 

The designs were created by respected architects and are standardised for efficiency, yet adaptable to different site conditions and client preferences, including varying room formations and layouts.

These designs are backed by the NSW Low and Mid-Rise Housing Policy which encourages development particularly near town centres and transport hubs.

The state government says these designs can be approved via a Complying Development Certificate (CDC) in as little as 10 days, cutting months off the traditional development application process.

What does the Housing Pattern Book include?

The Pattern Book offers ready-made designs and quick approval times, but it is not a full-service solution. You’ll still need:

  • Site-specific engineering
  • Energy assessments
  • Bushfire, soil or flood adaptations
  • Compliance sign-off and construction documentation

And while it reduces red tape, it also does not address high land costs, labour shortages or rising prices of building materials – all factors impacting housing delivery in the state.

What does a home from the Housing Pattern Book cost?

The plans are currently available for $1 until January 2026, after which they’ll be priced at $1,000. The state government said this is considerably lower than the upwards of $20,000 developers and investors typically spend on custom architecturally designed homes. 

But the bigger question is how much will they cost to build?

According to Rider Levett Bucknall, residential construction costs in Sydney in 2025 range from $2,500 to $7,600 per square metre. With Pattern Book home sizes ranging from 90 to 140 sqm, that puts base build costs somewhere between:

  • $225,000 to $350,000 (lower range)
  • $684,000 to $1.06 million (upper range)

These ranges exclude the cost of land. The Urban Development Institute of Australia found the average cost of a vacant lot in Greater Sydney was $666,670 in 2025.

The above costs also exclude site-specific modifications, compliance documents and construction certificates. But it provides a baseline. The standardised design and construction methodology could help keep costs down, especially if developers can build at scale.

While the government hasn’t put a specific price on the build cost of these homes, a government official told The Guardian that using the pattern book could result in construction cost savings of 5% to 17% compared to other non-pattern book designs.

What does the Housing Pattern Book mean for securing finance?

From a financing perspective, the most powerful benefit of the Pattern Book is the reduction in time and uncertainty. By offering pre-approved designs and a fast-tracked approval pathway, the Pattern Book brings a level of predictability that has direct financial benefits, including:

  • Potentially lower holding costs from faster approvals
  • More accurate feasibility assessments due to predictable input costs
  • Improved cash flow from lower upfront design costs
  • Easier comparisons of builders’ quotes thanks to the standardised designs

For lenders, this increased certainty is a big plus. When the design, planning pathway and cost inputs are largely known upfront, it can be easier to assess project risk and funding requirements. That can improve confidence in the numbers, reduce the back-and-forth during loan assessment and, ultimately, make it faster and simpler to secure finance.

Headline image: Terraces 01 by Carter Williamson, one of the eight approved designs. Credit: planning.nsw.gov.au 

CPC Lending Solutions is a property development and residential finance specialist. Whether you’re a developer needing funding for land, construction, or residual stock, or a buyer looking for the right mortgage, we’re here to help. Contact us at info@crowdpropertycapital.com.au or fill in this form.

 

NSW unlocks housing projects with $1 billion developer guarantee

/in , , , /by

Written by David Lovato – CPC Lending Solutions

July 2025

The New South Wales government’s 2025–26 state budget has given a significant boost to residential property development by announcing a $1 billion Pre-Sale Finance Guarantee scheme. 

This initiative aims to unlock stalled housing projects across the state by helping developers secure finance earlier, speeding up construction and increasing housing supply.

Financing bottleneck

This scheme, an Australian first, addresses a critical bottleneck that has plagued developers: the strict pre-sale requirements imposed by traditional lenders. 

Traditionally, banks and lenders require developers to pre-sell between 50% and 80% of dwellings in a project to qualify for loans. This high pre-sale threshold has been a major hurdle, particularly for medium-density developments and apartment projects, often causing delays or indefinite stalling of many approved housing developments.

In fact, recent research by SuburbTrends, commissioned by MCG Quantity Surveyors, revealed that one in six approved unit projects around the country fail to get built. This results in “phantom towers” – approved projects that remain unbuilt for years, contributing to the state’s housing shortage.

The new Pre-Sale Finance Guarantee scheme aims to tackle this obstacle between approvals and construction.

How the scheme will work

Developers who have secured planning approval and have lender terms that require pre-sales to commence construction, can apply for the guarantee. 

In it, the government will act as guarantor for up to 50% of eligible off-the-plan housing projects, providing between $5 million and $50 million per development.

Once approved, construction must begin within six months. If the project’s dwellings sell out as planned, the government’s guarantee is dissolved, and the funds are recycled back into the scheme for other projects.

But if homes are not sold, the developer can call on the guarantee, selling the unsold homes to the government at a discounted rate (at a minimum of 10% of the market value). The government can then sell, rent or convert them into affordable or social housing, ensuring that some form of housing supply is delivered regardless.

To qualify for the program, developers will need to undergo the state government’s credit assessment process. This will take into account the merits of the project and the capacity, capability and credibility of the developer and their delivery team.

Developers will pay an application fee to have your project assessed. If successful, you will also be charged a line fee for the duration of the government’s financial exposure.

This line fee is similar to the interest you’d pay on a loan facility. It’s calculated as a percentage of the amount the government is guaranteeing and reflects the cost of having that financial backing in place. The exact rate will be pre-determined and applied annually until the guarantee is extinguished.

The scheme is expected to come online later this year, with initial applications anticipated to be accepted from October 2025.

The fund will support up to 5,000 apartments, which is projected to unlock the construction of 15,000 new homes over the next five years. 

Other budget announcements

In addition to the Pre-Sale Finance Guarantee scheme, the NSW government announced several other initiatives aimed at improving housing supply:

  1. Permanent build-to-rent tax concession: A 50% reduction in land value for eligible projects will now apply indefinitely, encouraging more high-quality rental developments. This concession was previously due to end in 2039. 
  2. Works-in-Kind credit: An offset will be available for approved infrastructure costs, such as roads or land for schools, against the Housing and Productivity Contribution. 
  3. $145.1 million for Building Commission NSW: A funding boost will support stronger regulation, more inspections and improved construction quality. 
  4. $3.4 billion skills investment: This investment will train over 23,000 new construction apprentices and offer up to 90,000 fee-free training places. 
  5. $122 million to streamline planning approvals: This aims to increase planning resources, support infrastructure delivery and accelerate housing approvals.

CPC Lending Solutions is a property development and residential finance specialist. Whether you’re a developer needing funding for land, construction, or residual stock, or a buyer looking for the right mortgage, we’re here to help. Contact us at info@crowdpropertycapital.com.au or fill in this form.

5 key lender considerations when seeking development finance

/in , , , /by

Written by David Lovato – CPC Lending Solutions

July 2025

When applying for development finance, understanding how lenders assess risk can significantly improve your chances of approval. Beyond the numbers, they evaluate the project’s viability, your experience and the safeguards in place if things don’t go as planned. 

Here are five core considerations:

1. What level of security can the borrower offer?

Security gives lenders protection if the loan isn’t repaid. In development finance, this usually includes:

  • First mortgage over the site – This is the main form of security, giving the lender the right to sell the land if the loan defaults.
  • General Security Agreement (GSA) – Covers broader business assets like equipment, IP, and income rights.
  • Directors’ personal guarantees – Adds extra assurance by making you personally liable if the company defaults.

The stronger the security, the more favourable your funding terms are likely to be.

2. What experience does the borrower and project team have?

Lenders prefer borrowers with a proven track record. They’ll assess your past projects and your team’s experience, including the builder, project manager, and consultants. A capable, experienced team gives lenders confidence that the project will be delivered on time and within budget.

3. What level of funding is required?

Be clear about how much funding you need and how it compares to the project’s value and cost. Lenders look at:

  • Loan-to-Value Ratio (LVR)
  • Loan-to-Cost Ratio (LCR)

Lower ratios mean lower risk, which can lead to better terms. Having your own equity invested is also viewed favourably.

4. Is the project profitable?

Lenders want to see that the project has a healthy profit margin. A well-prepared feasibility, supported by budgets, timelines and market data, helps build confidence. Pre-sales can further strengthen your case by showing demand and providing a clearer loan repayment pathway.

5. Are there contingencies and an exit strategy in place?

Lenders want to know you’ve accounted for risks like delays, cost overruns, and planning issues. A clear exit strategy – whether through pre-sales, asset sales, or refinancing – is essential. Strong risk management and a defined loan repayment plan go a long way in securing approval.

Need expert guidance? CPC Lending Solutions specialises in development finance for land, construction, and residual stock. We help structure your application and connect you with the right lender. Email us at info@crowdpropertycapital.com.au or contact us here.

What you need to know about the new federal Labour government’s housing industry policies

/in , , , /by

Written by David Lovato – CPC Lending Solutions

May 2025

With the election now behind us and interest rates set to fall in the coming months, lenders are adjusting their criteria to win new business in the housing sector.

The re-elected Labor Party has some ambitious plans for the country’s housing and construction sectors. It is a multipronged approach that aims to assist the demand for housing from the supply side (developers have more certainty in their end buyers), as well as allowing consumers into their homes faster (particularly first home buyers) by lowering entry barriers to property ownership.

These policy changes are significant for property industry professionals and borrowers alike, as they will have a profound impact on the housing market.

What you need to know about the new federal Labour policy settings 

1. Boosting homeownership for first home buyers

Labor has pledged $10 billion to construct 100,000 new homes over eight years, specifically for first home buyers, reducing competition from investors. 

From 2026, the government will remove income limits for the First Home Buyers Guarantee, allowing all first home buyers to purchase a home with a 5% deposit without needing lender’s mortgage insurance (LMI). 

Additionally, the Help to Buy shared equity scheme will expand, letting the government cover up to 40% of a home’s purchase price.

Lenders will target first home buyers and offer extremely competitive loans, they will want to get market share as the government policies will fuel loan security and longer-term capital growth.

Developers that provide exclusive new housing stock will qualify for construction funding with lower hurdles around required developer equity and presales. 

2. Addressing the tight rental market

Labor’s Build to Rent (BTR) scheme includes tax incentives for developers who deliver BTR apartments with a portion of units set aside at below-market rents. 

Developers will be encouraged to take on smaller BTR projects in established areas and provide more housing where needed. These include projects like new age boarding houses, short-term accommodation and larger BTR development. 

3. Tackling housing supply constraints

Labor’s broader housing strategy includes a $78 million investment to fast-track the qualification of 6,000 apprentices, $54 million for prefabricated and modular home manufacturing, and $120 million to incentivise states to remove red tape around housing approvals.

Developers are already seeing an easing of construction costs through a combination of factors, for example, material cost decreases, off-site manufacturing, efficiency in site programs and stabilisation of wage growth.

Red tape around dwelling approvals and construction certificate approvals is starting to be cut as the industry gets to a better equilibrium between authority/approval costs, quality of construction and weeding out from the industry the dodgy developers and builders.

4. Managing foreign investment

From April 2025 to March 2027, foreign investors, including temporary residents, will be restricted from buying established dwellings.

The government has tightened its already restrictive policies around foreign ownership. This move around new product restrictions will be further welcomed by locals getting frustrated by missing out on home ownership.

5. Focusing on social housing

The government aims to deliver 55,000 social and affordable homes through the Housing Australia Future Fund and has allocated $1.2 billion for new crisis and transitional housing for vulnerable groups, including older women, young Australians, and those escaping family violence.

For developers in this space, this initiative will be a big driver of project starts. There are numerous state grants also available for affordable housing as governments try to do more to assist vulnerable people in a competitive housing market.

What is the expected impact on the market?

The overall impact is one of growth. These policy settings will increase activity in the property sector. Combined with lower interest rates moving into 2026, we will see more developers bringing projects to market and more homeowners and investors getting back into the property market.

CPC Lending Solutions is a property development and residential finance specialist. Whether you’re a developer needing funding for land, construction, or residual stock, or a buyer looking for the right mortgage, we’re here to help. Contact us at info@crowdpropertycapital.com.au or fill in this form.

Understanding financing options in property development

/in , , , /by

Written by David Lovato – CPC Lending Solutions

April 2025

Property development can often be complex as it encompasses everything from land acquisition to construction and fitout.

To ensure that property development projects can be completed and potentially turn a profit, understanding the different financing options is key. By delving beyond means of senior debt, developers can access another level of funding that could prove beneficial both now and in the future.

Taking up their own space in the capital stack are the opportunities of mezzanine financing and preferred equity financing. Understanding the subtleties between these financing options helps developers answer the common question: “which option is more suitable for my project?”.

What is Mezzanine Financing?

Mezzanine financing is essentially a hybrid of debt and equity that sits between senior debt and common equity in the capital stack. As such, it is often viewed as an option for developers who are looking to bridge a funding gap. 

To understand the intricacies of mezzanine financing and how it might be applicable to a property development project, it’s essential to also acknowledge common terms such as senior debt and capital stack.

As such, senior debt is defined as borrowed money that a company must repay first. As this type of debt has the highest priority, it bears the lowest risk which, in turn, results in lower interest rates. The most common type of senior debt is from financing institutions like banks.

In relation to the capital stack, this is a term used to refer to the layers of capital that have gone into a project. The capital stack highlights who will receive funds or profits and in what order this will take place. 

With this in mind, mezzanine financing is often referred to as the middle layer in the capital stack as it falls between senior debt and any equity. As the debt is secured and falls in this middle layer, such a loan will carry a higher risk profile, resulting in higher interest rates. 

Despite the associated higher interest rates and the potential of lenders imposing stricter borrowing conditions, mezzanine financing is a viable and common option for property development projects. Especially when you consider that it is non-dilutive.

What is Preferred Equity Financing?

Preferred equity is another common financing option utilised by property developers. Preferred equity financing involves the developer giving the lender a stake in the project. In relation to the capital stack, preferred equity sits above common equity but below debts such as mezzanine. 

With this positioning in the capital stack, the provider of preferred equity financing will receive profits and have their debts repaid before common equity stakeholders such as the developer themselves.

This level of ownership also affords the lender or the investor with the ability to be involved in a decision making level. There is also the ability to take control of the project if things are not following the outlined plan.

Key Differences Between Mezzanine and Preferred Equity?

Where mezzanine financing is viewed as bridging the funding gap, preferred equity is seen as sharing the risk and reward of a project. As such, there are many key differences between mezzanine and preferred equity financing for property development funding.

Mezzanine Financing  Preferred Equity
Risk Profile As the middle layer in the capital stack, mezzanine funding falls between senior debt and equity. While the risk profile is high, mezzanine has a higher claim on assets than preferred equity. Its position in the capital stack means that preferred equity is subordinate. Therefore the risk profile is higher than debt but lower than common equity.
Control Rights Mezzanine lenders do not get involved with the progression of the property development project. Preferred equity investors may negotiate voting rights and therefore have a say in how the project progresses.
Return Structures Mezzanine loans require interest payments and due to the risk profile, the interest rates are higher than those associated with senior debt.  Preferred equity investors will receive a fixed return or dividend based on their stake in their project. 
Collateral Requirements As a second ranking mortgage a mezzanine loan is secured.  Preferred equity, unlike debt, is typically not secured. However, returns are secured through the lender or investors stake in the project.

Where mezzanine financing is viewed as bridging the funding gap, preferred equity is seen as sharing the risk and reward of a project. As such, there are many key differences between mezzanine and preferred equity financing for property development funding.

Benefits and Drawbacks of Each Financing Option

As financing options for property development both mezzanine and preferred equity financing have positive and negative aspects that need to be considered. Understanding the intricacies of both will help developers choose the right method of alternative financing for their specific project.

Mezzanine Financing

One of the main benefits of mezzanine financing is the ability to secure funding without having to dilute the share of equity. Additionally, as this method of financing acts as a second mortgage of sorts, there are fixed repayment terms. This helps to provide predictability which plays a large role in having the money set aside to make the payments. It is also worth noting that interest payments may be deducted as an expense, making them tax deductible.

With mezzanine financing there are also negatives to consider, namely, the fact that due to the increased risk, interest rates will be higher. This leads into another negative as with mezzanine financing there is a larger risk involved because of the increased debt and interest obligations. As a secured form of financing, mezzanine lenders have the right to collateral in the case of default which can lead to foreclosure.

Preferred Equity Financing

Preferred equity financing can be a viable option for property developers looking to finance their latest project without increasing debt ratios. For example, this type of financing can be structured flexibly so that investors do not receive additional profits if returns outperform expectations. It’s also worth noting that mandatory interest payments can be deferred during the construction phase to help developers increase cash flow at such a pivotal point in the project.

When opting for preferred equity financing, developers sacrifice both profit and control. With preferred equity, investors will also receive higher returns when compared to mezzanine financing. With preferred equity investors receiving a portion of the profits, developers have to share the reward of their hard work. It’s important to highlight that if preferred equity investors have negotiated voting rights, they can also influence how a project progresses.

When to Choose Mezzanine vs Preferred Equity

When choosing between mezzanine and preferred equity financing it’s important to approach the decision with an outcome in mind. If you’re looking for a tool by which to bridge a gap in funding, mezzanine will be the most obvious choice. For those wanting to share both the risks and rewards of the project with another party, preferred equity is advisable.

The right choice will be dependent upon a variety of different factors as well as project specific features. This is why the risk appetite of the developer and the project’s overall financial profile heavily influence the final decision.

There are situations where one alternative is more suitable than the other. As an example, a project where cash flow is limited may find financing a mezzanine debt difficult. Therefore, rather than going into more debt, the developer leverages preferred equity’s profit participation to access the funds needed to complete the project.

As another example, consider a developer with stable cash flow projections looking to help secure the extra funds needed to help complete a portion of the project that has yet to sell off the plan. Rather than giving up profit participation in the overall project, choosing mezzanine financing means maximising leverage today without diluting ownership tomorrow.

CPC’s Role in Property Development Financing

As a fully independent finance brokerage, CPC Lending Solutions works with developers to find solutions tailored to suit both financial circumstances and the overall goal of the project. All of which lays the foundation needed to structure the right funding mix.

By offering tailored services, CPC Lending Solutions investigates different funding models so that the final outcome – be it undertaking a mezzanine loan, preferred equity financing or a hybrid funding model – is the most suitable for your personal and professional needs.

Development and construction financing models can be complex, however, this highly specialised area of financing is a key skill of CPC Lending Solutions. Our expertise works as a key asset for developers looking to capital stacks to help optimise project returns.

Choosing the Right Financing for Your Project

Funding a property development project can be a complex endeavour. In order to achieve the best outcome possible, developers may need to look at the different layers of the capital stack. In property development financing, key components of the capital stack are mezzanine and preferred equity financing.

While both provide funds to property developers, each financing option has unique characteristics. To choose between taking on a mezzanine loan, which is also referred to as another layer of debt, versus preferred equity financing, where part of the exchange involves sharing control and profits, developers need the right guidance.

CPC Lending Solutions have the experience and expertise to help structure the most suitable financing package for your project, no matter how complex the capital stack may seem. Contact David Lovato on 0434 932 634 or email dlovato@crowdpropertycapital.com.au to explore flexible funding options for your next development project.

Why iCIRT is set to transform the property development industry

/in , , , /by

Written by David Lovato – CPC Lending Solutions

March 2025

If you work in property development, you’ve probably heard rumblings about iCIRT. But what is it – and why does it matter?

In short, iCIRT is an independent, data-driven star-rating system designed to give developers, builders, financiers, insurers and – soon – consumers more confidence in the building industry. It helps identify trustworthy professionals and weed out risky players – making it easier to choose the right people for your projects.

For developers, iCIRT has the potential to be a game-changer – not just for project delivery, but also for financing, insurance and competitive positioning.

What is iCIRT?

iCIRT stands for the Independent Construction Industry Rating Tool. It was developed by Equifax (the credit rating agency) in partnership with government and industry, in response to a clear need for greater trust and transparency in the construction sector.

Each iCIRT rating assesses a business or professional’s ability to deliver safe, compliant, and durable Class 2 buildings (i.e. apartments, townhouses and other multi-unit dwellings). The result is a star-rating from 0 to 5, with 3 gold stars or more indicating a trustworthy operator.

Unlike traditional credit ratings, iCIRT doesn’t just look at the numbers. It pulls in thousands of data points – both public and private – to assess six key areas:

  • Capability
  • Conduct
  • Character
  • Capacity
  • Capital
  • Counterparties

The result is an objective, independent snapshot of a building professional’s trustworthiness, risk level and track record.

Why does iCIRT matter to developers?

In recent years, the development sector has been under scrutiny. High-profile building defects, regulatory changes and increasing consumer scepticism have put pressure on everyone in the supply chain to lift their game.

That’s where iCIRT comes in. It gives developers a practical way to identify reliable consultants, builders and subcontractors – and prove their own credibility too.

Here’s why that matters:

  • Better project teams – Use iCIRT reports to assess the professionals you bring onto your projects. You’ll reduce risk, improve quality and be more confident in your delivery partners.
  • Increased consumer trust – As iCIRT becomes more visible to buyers, being associated with iCIRT-rated professionals (or having your own rating) could become a powerful trust signal.
  • Easier access to insurance – An iCIRT rating can help you qualify for 10-year insurance on your developments, reducing friction with buyers and financiers alike.
  • Stronger market positioning – A high iCIRT rating sets you apart from the pack. It shows you’re proactive, transparent and serious about quality – all of which can give you an edge in a crowded market.

How to use iCIRT to your advantage

There are two main ways developers can engage with iCIRT:

  1. Order a report on your project team – If you’re engaging a builder, consultant or supplier, you can request their iCIRT star-rating and report. This helps you assess their credibility before bringing them on board.
  2. Get your own iCIRT rating – You can self-rate your development business through Equifax. It involves a detailed assessment of your history, practices, finances, project delivery and more. The process typically takes 5-10 days and costs between $1,750 and $9,950 (ex-GST), depending on the depth of the report.

Once rated, you’ll receive a detailed report showing how your business compares to others in the industry – including your star-rating, key strengths and areas for improvement.

The bottom line

iCIRT is more than just another compliance tick-box – it’s a tool that smart developers can use to build better, earn trust and compete more effectively.

Whether you’re a large-scale developer or a boutique builder, now’s the time to consider how iCIRT fits into your risk management, procurement and branding strategies. In an industry where trust is everything, a little star power could go a long way.

As adoption grows, iCIRT may well become an industry standard – so getting ahead now could pay off later.

CPC Lending Solutions is a property development and residential finance specialist. Whether you’re a developer needing funding for land, construction, or residual stock, or a buyer looking for the perfect mortgage, we’re here to help. Contact us at info@crowdpropertycapital.com.au or fill in this form.

Does a construction loan include land?

/in , , , /by

Written by David Lovato – CPC Lending Solutions

February 2025

When planning to build a new home, a common question asked by borrowers is “Does a construction loan include land?”. Understanding this and how a construction loan works can impact your financial strategy.

A construction loan is a type of short-term financing designed to cover the cost of building a new dwelling or substantially renovating an existing one. Unlike a conventional mortgage, which provides a lump sum upfront for the purchase of an existing property, a construction loan is paid out in stages as your building project progresses. This is also known as ‘drawing down’ your funds.

One of the key differences between a construction loan and a regular mortgage is that you will only pay interest on the amount drawn down in your construction loan. This can help keep your monthly repayments lower.

It is a common assumption in property development financing that construction loans automatically include the cost of the land, too.

Does a construction loan cover land?

Whether or not a construction loan covers land depends on the lender.

Some lenders allow borrowers to bundle the purchase of land with the construction of the dwelling into one home loan. This single loan covers both land acquisition and construction. The loan will be disbursed in stages, with the first release of funds used to purchase the land. Thereafter, the loan functions as a construction loan, paying out in stages as your build progresses.

But, other lenders do not offer a bundled loan, instead allowing separate financing. This might require you to take out a land loan first and then apply for a construction loan once the building plans have been finalised.

From a lender’s perspective, these two options cover a range of scenarios, including developers or borrowers who already own the land and now just require financing to build the dwelling. 

Additionally, for landowners who have low or no debt on their land, some lenders may offer an equity release option. This allows the landowner to access the equity in their land as part of the construction loan, providing additional funds for the project or even for securing their next development. 

In certain scenarios, the lender may provide a cash-out component at the start of construction, allowing developers to secure their next project while the current one is being built. This will depend on maintaining the overall construction maximum loan-to-value ratio (LVR), but it can be particularly helpful for developers managing overlapping projects.

However, this process varies from lender to lender, so it’s recommended you work with an experienced finance broker who can help you find a loan that suits your current financial situation and long-term goals. 

At CPC, we understand that every project is unique. Our approach to property development financing is to work closely with borrowers to understand their specific circumstances and tailor a financing solution that meets their individual needs. We consider the project as a whole, including the land acquisition if necessary, to find a financing solution that works for you.

Key factors that determine construction loan structure

Lenders will assess several criteria when deciding whether a construction loan can include the land purchase. These may include:

  • LVR: This represents the percentage of the total project cost (including land) covered by the loan amount. A lower LVR means you will need a larger deposit.
  • Borrower’s deposit: If you want to include the purchase of the land in your construction loan, you may need a larger deposit. 
  • Construction timeline: Some lenders require construction to commence within a set period after the land purchase. This ensures that the land is used as intended and that the project progresses as stated in the plans.
  • Land zoning and permits: Lenders often require approved building plans and necessary permits before approving land financing to reduce the risk of project delays or complications.

Construction loan versus land loan: What’s the difference?

If a bundled loan is not an option for you, or there are other reasons you want to separate the two, it is helpful to know what the differences are between a construction and land loan.

Land loan: This is typically used to purchase vacant land without immediate plans for construction. This type of loan often has shorter terms and higher interest rates than construction loans

Construction loan: This will finance the building of the dwelling and is drawn down in stages. Borrowers will likely be required to provide approved plans to the lender.

How CPC helps borrowers finance land and construction

At CPC Lending Solutions, we understand that every borrower’s situation is different. Whether you need a construction loan for land and building, a separate land loan, or alternative financing options, we can help find a solution that aligns with your property development goals.

Our expertise is in property development financing, which allows us to find flexible and tailored loans for your project’s needs. Working with a specialised lender like CPC Lending Solutions means you have access to more knowledge of the industry as well as personalised service. 

If you’re exploring how to finance land and construction, our team at CPC can guide you through the process. Contact CPC Lending Solutions today to discuss your construction and land financing needs.