After his dream project got off to a nightmare start, developer Alasdair Baker of Omira Property Group needed some quick footwork to get it back on track for a profitable outcome.
Alasdair Baker was excited when his Omira Property Group managed to secure a prime corner block in a highly sought-after neighbourhood of holiday mecca Byron Bay.
“I loved this project right from the start. It was the first one I’d ever done where I could really allow my creative side to come out,’’ says Alasdair.
His vision was for a Mediterranean-style, architect-designed development consisting of three detached, luxury four-bedroom villas, each with a private pool and courtyard, large entertaining decks and extensive landscaping.
He managed to secure the site with an extended settlement period of nine months, and approached finance experts Development Finance Partners (DFP) to plan raising capital. The intention was to secure the DA, construction certificates and presales before settlement, leaving ample time to raise a construction loan ahead of the building phase of the project.
But he hadn’t factored in the approval process and delays with council.
“Most councils in Australia seem to really be under-resourced and under the pump, it’s a major problem for many developers at the moment, and so it was with us and the local council,’’ he says.
“Our first planner was ready to issue in March of 2021. But he suddenly left and the project fell into a black hole for six weeks before his replacement came on board.
“Then the council’s infrastructure department notified us that they would be doing roadworks out the front of our site and adding parking. They told us we couldn’t have any crossovers and we would have to change our plans – even though the dates showed ours had been submitted before theirs.
“So we went back to council and managed to negotiate an outcome with their engineers and planners. But when they finally did approve the site, they told us, ‘You can’t have swimming pools, and you can’t paint it white’, which I couldn’t accept, so we had to go back in and challenge them again.’’
It became clear during this drawn-out process that the DA wasn’t going to be in place in time for settlement, forcing Alasdair to quickly pivot on his finance plans and seek a land bank loan instead.
“Property development doesn’t always go to plan – in fact, it rarely does,’’ he says with a wry chuckle.
“But I explained the situation to DFP, and within two weeks they had a $3 million land bank facility approved for me. That included three months’ interest and the legal fees capitalised, which really took the pressure off.’’
During the design process, it had also become clear that the market in Byron Bay was really heating up, and Alasdair saw an opportunity to raise the bar on project’s build quality to achieve a better price range.
The resulting design improvements pushed the total development cost $2 million higher than initially budgeted, with an expectation of realising an extra $3 million in sales.
“It was the right move, but it left a potential shortfall on the seed capital I had raised,’’ he says. “So I turned to DFP again for advice and they presented me with two different options, one from a bank and the other from a non-bank lender.’’
The non-bank option of finance for over 80% of Total Development Cost (TDC) avoided the need for more equity but came with a higher interest rate and fees, while the 70% TDC offer from a Big Four bank was cheaper but would require top-up capital. Based on the detailed financial modelling prepared by DFP, Alasdair calculated that his best course of action would be to go with the bank and raise $500,000 in preferred equity.
“Obviously I didn't know that until I had the two offers that DFP had organised on the table. They have the ability to go out to the market and access multiple lenders because their reach is far and wide.
“Finance is such a key part of the development process, but it’s not one size fits all. If you don't get it right, then a project can stall, and once you lose that momentum it can be really hard to get it back. A good project is one you get through as quickly as possible, so you live to fight another day.’’
Marketing of Alasdair’s dream project, Asana at Byron, commenced in August, and all three villas sold within three weeks following very strong interest from local and capital-city buyers. With a $7.728 million construction loan and a fixed-price build contract in place, Alasdair headed into the Christmas break excited about commencing construction in January 2022.
DFP Director Matthew Royal says it’s been rewarding to watch Alasdair develop his identity and brand as a developer.
“Over the eight years we’ve been working with him, Alasdair has really matured in terms of his understanding of the business, his designs and the structures he creates with his investors and partners,’’ says Matt.
“He has found his niche now with premium-quality projects like Asana at Byron, and we look forward to collaborating with him in future as he continues to prosper and grow.’’
Development Finance Partners specialise in property development and construction finance, offering complete end-to-end financial advisory solutions.
We work with property developers looking to finance construction and land-bank projects, and commercial clients seeking to refinance or consolidate their portfolios.