Case Study | DFP Secures Zero Presales Funding with an 85% LVR for Pottsville, NSW project

Background 

A client with a decade-long relationship with Development Finance Partners (DFP) sought funding for a construction facility at Pottsville Beach, QLD. The client required the loan facilities to be provided with no presales and additional funding beyond standard loan parameters due to the development's unique positioning and high quality. 

The Project

The Solis Villas project involves the construction of eight luxurious, three-level boutique villas designed for premium coastal living. The villas are built in a duplex configuration across four lots, offering modern architecture and high-end finishes. The development aims to provide an upscale, low-maintenance lifestyle in the desirable Pottsville Beach area.

Challenge

The primary challenge was to secure financing without the customary presales requirement, which is typically used to mitigate risk for lenders by ensuring there is a guaranteed market for the completed properties. The client also sought additional funding beyond what is usually provided within standard loan parameters. This required DFP to find a capital partner willing to provide a higher loan-to-value ratio, significantly reducing the client’s equity contribution.

DFP's Strategic Solution

Leveraging its long-term relationships with capital partners, DFP successfully negotiated favorable terms with a preferred capital partner. This allowed DFP to:

• Achieve an LVR of 85% of Total Development Costs and 72% of Gross Realisation Value
• Reduce the client's required equity contribution
• Secure the facility with zero presales, enabling the client to maximize sales values closer to project completion

Results and Benefits

• Reduced Equity Contribution: The client benefited from a significantly reduced equity contribution, enabling more efficient allocation of capital.
• Zero Presales Requirement: The financing arrangement with zero presales allowed the client to hold off on selling until the development was closer to completion, maximising potential sales value.
• Optimised Financial Structure: The customised financing solution provided by DFP ensured the project could proceed smoothly without the typical financial pressures associated with pre-sales requirements.

Conclusion

DFP delivered an innovative and tailored financing solution that met the unique needs of the client, ensuring the successful completion of the high-quality Solis Villas development. By securing funding with an 85% LVR and zero presales requirement, DFP demonstrated its expertise in optimising development potential and maximising profitability for property developers.