Background
Development Finance Partners (DFP) was engaged by a client to facilitate the acquisition of a 5-acre rural-zoned future residential development located at Orchard Hills, within Sydney’s South Western Sydney Growth Corridor. The objective was to assist the client through the expected 12-month rezoning process to medium-density residential, which would subsequently allow for the application for Development Consent.
The Project
The project entailed the extension of a Land Bank Facility, originally secured for 12 months with a total amount of $7,063,000. The goal was to ensure continuous financial support through the rezoning process, anticipated to conclude by the fourth quarter of 2024.
The Challenge
The primary challenge arose from unforeseen delays in the State Government's rezoning process, which meant that the necessary consents would not be in place by the original facility expiry date. This delay posed a significant risk of financial strain on the client, who required an extension of the loan to cover the extended rezoning timeline and associated costs.
DFP's Strategic Solution
DFP retained its client and undertook complex negotiations to extend the existing facility. The strategy involved securing an increased loan amount based on an updated valuation. This extension allowed for additional prepaid interest and fees to be capitalised into the facility. By ensuring the financial stability of the project through the prolonged rezoning period, DFP effectively mitigated the risk posed by the delays.
Results and Benefits
The strategic extension of the Land Bank Facility yielded several key benefits:
Financial Continuity: The client was able to maintain financial stability throughout the extended rezoning period without facing liquidity issues.
Increased Loan Amount: By negotiating based on the uplift in value from the updated valuation, DFP secured a higher loan amount to cover additional costs.
Capitalised Interest and Fees: The ability to capitalise interest and fees into the facility reduced the immediate financial burden on the client.
Project Viability: Ensured the project remained viable and on track for rezoning approval expected in Q4 2024.
Conclusion
DFP's proactive and strategic approach to securing an extension of the Land Bank Facility at Orchard Hills, exemplifies 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.