A DFP client needed financial support to acquire a 5-acre, rural zoned, future residential development. Despite resistance from lenders, DFP secured site acquisition finance of $6 million for this Orchard Hill development.
Development Finance Partners, (DFP,) was engaged by its client to assist it in acquiring a 5-acre rural zoned future residential development parcel at Orchard Hills in Sydney’s emerging South Western Sydney Growth Corridor.
The key issue in sourcing funds for this site acquisition
The zoning status was the key challenge of this transaction.
Sited within 400 metres of the under-construction Orchard Hills Railway Station, the subject is identified as a development site within the proposed Orchard Hills precinct, apropos the NSW Government’s draft precinct plan which is expected to be finalised in late 2023.
Indications from the Government's working documents are that this neighbourhood is favoured for a range of development densities, from townhouses, to 15 storey mixed-use residential developments.
While acknowledging the upside potential of the site, the valuation supported an ‘as is’ value well below the purchase price. This had been negotiated by the client under an initial 24-month option agreement, who at the time, was applying for finance subject to an exchanged contract of sale.
DFP's role
Due to the perceived rezoning risk, there was resistance from a number of lenders. Despite this, DFP was successful in negotiating a loan approval with a long-term capital partner based on 60% of the ‘as is’ valuation. The facility provided a 12-month term with interest fully capitalised, enabling the client to move through the rezoning process and apply for Development Consent.
Finance Terms
Type: Site Acquisition
LVR: 60% of 'as is' value
Loan amount: $6,000,000
Term: 12 months