Background
Development Finance Partners (DFP) partnered with a borrower to acquire a vacant residential site in Austral, NSW. The site was pending a Development Application (DA) for a 28-lot subdivision. Due to market improvements since the land transaction in 2022 and the recent DA, the borrower needed funding for 90% of the purchase price.
The Project
The project involved extending a Land Bank Facility, initially secured for 12 months with a total amount of $5,400,000. The goal was to provide financial support through the approval and commencement of subdivision works, expected to begin in the fourth quarter of 2024.
The Challenge
The primary challenge was securing funding at 90% of the purchase price and managing delays in the subdivision commencement due to pending approval from Sydney Water. The initial facility was due in early June 2024, and the borrower needed an extension to cover the extended timeline and associated costs caused by these delays.
DFP's Strategic Solution
To address these challenges, DFP leveraged its expertise and relationships with capital partners by:
Securing a 12-month funding facility at 65% of the 'as is' value and 90% of the purchase price.
Ensuring the lender was open to funding the subsequent subdivision works once a connection allocation from Sydney Water was obtained.
Negotiating an extension of the existing facility as delays with Sydney Water persisted.
Basing the extension on 65% of an uplift in value confirmed by an updated valuation.
Allowing the increased loan amount to cover additional prepaid interest and fees, thus ensuring the borrower had the necessary financial stability while awaiting Sydney Water's approval and the commencement of development works.
Results and Benefits
Financial Continuity: The borrower maintained financial stability throughout the extended approval period without facing liquidity issues.
Increased Loan Amount: By securing an increased loan amount based on the uplift in value, DFP covered additional costs.
Capitalised Interest and Fees: The ability to capitalize interest and fees into the facility reduced the immediate financial burden on the borrower.
Project Viability: This approach ensured the project remained viable and on track for subdivision commencement expected in Q4 2024.
Conclusion
DFP's proactive and strategic approach in extending the Land Bank Facility for the Austral development project highlights its commitment to client success. By navigating the complexities of rezoning delays and leveraging updated valuations, DFP provided a tailored financial solution that ensured the project's continuity and future success. This case study underscores the importance of adaptive finance strategies in the ever-evolving landscape of property development.