Background
Development Finance Partners (DFP) was engaged by a repeat client to secure funding for a 17-lot subdivision in Bray Park, NSW. The project aimed to develop vacant land into a desirable residential area. Given the unique market conditions and the client's strategy to maximise sales value closer to completion, the client sought a funding solution that did not require presales.
The Project
This project aimed to develop a 17-lot subdivision, enhancing the property’s value and marketability. The funding secured would cover the construction and development costs, ensuring the project stayed on track for timely completion.
The Challenge
The primary challenge was securing a development loan that met the client's requirements of zero presales. This approach is uncommon in property development due to the increased financial risk. Additionally, the client needed to achieve a favourable LVR to make the project financially viable.
DFP's Strategic Solution
To address these challenges, DFP leveraged its extensive network and strong relationships with capital partners. Here's how DFP managed to deliver a successful solution:
- Negotiation with Capital Partners: DFP negotiated terms with a preferred capital partner to secure a 12-month funding facility.
- Zero Presales: The facility was structured to avoid pre-sales, allowing the client to maximize sales values closer to the project's completion.
- Favourable LVR: DFP secured an LVR of 47% of GRV and 60% of TDC, providing the client with the financial leverage needed for the project.
Results and Benefits
The strategic financing solution provided several key benefits:
- Maximised Sales Value: By avoiding presales, the client could capitalize on higher sales prices upon project completion.
- Financial Flexibility: The structured facility ensured the client had the necessary financial stability to complete the development without immediate pressure to generate sales revenue.
- Favourable Loan Terms: The negotiated LVR provided a balanced approach, reducing the financial risk while ensuring adequate funding for the project's success.
Conclusion
DFP's proactive and strategic approach in securing the development facility for the Bray Park project highlights its commitment to client success. By navigating the complexities of development finance and leveraging strong capital partner relationships, DFP provided a tailored financial solution that ensured the project's viability and maximised its financial success. This case study underscores the importance of adaptive finance strategies in the dynamic property development sector.