Background
Development Finance Partners (DFP) was engaged by a repeat client to facilitate the funding for a construction and development project in Maroubra, NSW. The client aimed to build two high-quality, strata-titled luxury duplexes over two levels.
The Project
The project required a construction and development facility amounting to $5.35 million with a 12-month term. The client sought to undertake the development without the necessity of presales, intending to capitalise on higher sales values as the project neared completion.
Challenge
The primary challenge was securing a construction loan that met the client's requirements of zero presales, which is uncommon in property development due to the increased financial risk. Additionally, the client needed to achieve a 79% Loan-to-Total Development Cost (LTDC) and a 65% Loan-to-Gross Realisation Value (LGRV).
DFP's Strategic Solution
DFP leveraged its long-standing relationships with capital partners to negotiate favourable terms for the client, and successfully secured a construction facility with a 79% LTDC and a 65% LGRV without the need for presales. This arrangement provided the client with the flexibility to maximise sales values closer to the completion of the development, aligning with the high quality and unique positioning of the duplexes.
Results and Benefits
Our strategic finance solution provided several benefits:
- High Loan-to-Cost Ratio: Achieving a 79% LTDC allowed the client to cover a significant portion of the development costs through the loan.
- Zero Presales: This enabled the client to avoid the pressure of selling units before construction was complete, allowing for potentially higher sales prices upon project completion.
- Financial Flexibility: The client was able to maintain financial stability and focus on completing the development to a high standard without the immediate need for sales revenue.
Conclusion
DFP's expertise and strong relationships with capital partners facilitated the successful funding of the Maroubra development project. By securing a construction facility with favourable terms, including zero presales, DFP enabled the client to achieve their development goals and maximise the project's financial success. This case study exemplifies DFP's commitment to providing tailored financial solutions that meet the unique needs of its clients in the property development sector.
What DFP Delivered
Type of finance: Construction and Development Facility
Term: 12 months
Amount: : $5,350,000
LVR: 65% of GRV and 79% of TDC