Background
A prominent investment management firm with over 45 years of experience in the Australian real estate market. Specialising in investment management, project management, and real estate sales, the client primarily focuses on residential development projects.
The Project
The project involves acquiring and developing a 19.591-hectare site in North Western Melbourne. This site is intended for residential use and has the potential for over 220 residential allotments.
However, due to a recent rezoning of the land from rural to urban growth, the project presented significant value creation opportunities. Innovative financing was required to capitalise on this uplift in value and move forward with the development.
The Challenge
The key challenge was securing financing that acknowledged the significant increase in the property’s value post-rezoning, despite the absence of formal Development Approval (DA).
Traditional lenders tend to be conservative in such situations, often requiring considerable equity retention, which can limit a developer's ability to proceed efficiently. The client needed a financing structure that would reflect the enhanced property valuation, allowing them to settle the purchase and release liquidity for future project needs.
DFP's Strategic Solution
The client approached Development Finance Partners (DFP) to manage the debt-raising process, relying on DFP's reputation as a trusted specialist property finance advisor and broker.
DFP has deep expertise in real estate financing and a proven track record, and therefore was the ideal partner to structure a strategic financing solution for the client.
DFP designed an innovative financing solution that included a groundbreaking 101% Loan-to-Value Ratio (LVR) against the purchase price, a testament to the value creation achieved through the rezoning.
This high LVR enabled the client to secure $16.034 million in funding, covering the acquisition and providing significant liquidity for working capital. The facility was structured with a 12-month interest roll-up and capitalised fees, minimising the need for additional equity contributions during this period, thereby easing cash flow pressures.
Results and Benefits
The innovative financing structure enabled the client to proceed with confidence. The $16.34 million facility provided the necessary liquidity to finalise planning approvals and prepare for the next phase of the development. The leverage provided by the 101% LVR maximised the client’s capital efficiency, enabling them to allocate resources to other high- value projects while advancing the North Western Melbourne development.
Conclusion and Advice
With the financing in place, the client is now advancing through the remaining planning approvals, moving closer to the goal of transforming the North Western Melbourne site into a thriving residential estate.
This case demonstrates the importance of innovative financing strategies and the value of partnering with experts like DFP who can navigate complex financial landscapes to deliver exceptional results.