Case Study | DFP Secures $6 Million Site Acquisition Finance for Orchard Hills Development • DF Partners

Background

Development Finance Partners (DFP) was engaged by a client to acquire a 5-acre rural-zoned parcel of land in Orchard Hills, located within Sydney’s South Western Growth Corridor. The site was positioned 400 meters from the under-construction Orchard Hills Railway Station and held significant future development potential, making it a prime target for acquisition.

The Project

The client aimed to acquire the land for future residential development, with plans tied to the NSW Government’s draft precinct plan. This plan, expected to be finalised by late 2023, indicated that the area would support a variety of development densities, ranging from townhouses to 15-storey mixed-use residential projects.

The Challenge

The primary challenge in securing funding was the zoning status of the land, which was still classified as rural. Key obstacles included:

1. Zoning Status: The land was still classified as rural, which reduced its current value and made lenders hesitant to provide financing.
2. Valuation Below Purchase Price: While the site held future potential, its current "as is" valuation was significantly below the negotiated purchase price.
3. Lender Resistance: Many lenders were unwilling to finance the project due to perceived rezoning risks.

DFP’s Strategic Solution

Despite resistance from lenders, DFP leveraged its relationships and expertise to find a solution:

• Strategic Negotiation: DFP negotiated with a long-term capital partner who was willing to consider the rezoning potential. They secured approval for 60% of the "as is" valuation.
• Tailored Financing: DFP arranged a site acquisition loan with a 12-month term and fully capitalized interest, giving the client the necessary time to navigate the rezoning process and apply for development consent.
• Risk Mitigation: The loan structure allowed the client to minimize immediate cash outflows, focusing on the rezoning process without financial strain.

Results and Benefits

DFP’s efforts resulted in a favorable financial outcome for the client:

• Finance Secured: DFP successfully obtained a $6 million loan for 60% of the "as is" value, despite the rural zoning classification.
• Time to Rezone: The 12-month loan term with capitalized interest allowed the client to work through the rezoning process without financial pressure.
• Strategic Advantage: The client was able to secure the land in a highly strategic location, setting the stage for future development as the area’s precinct plan is finalized.

Conclusion

Development Finance Partners demonstrated their ability to secure site acquisition financing for a client’s 5-acre parcel at Orchard Hills, despite significant challenges related to zoning and lender resistance. By leveraging relationships with capital partners and offering a strategic financing solution, DFP enabled the client to move forward with the acquisition and prepare for future development in a rapidly growing area.

No matter the challenge, DFP have the experience and network to help you succeed with your site acquisition. Contact us to explore your options further