Case Study | DFP Secures $22M and No Presales for Industrial Development Project

Background 

A property developer sought funding for a high-quality industrial project featuring 28 premium warehouse units and a cafe' in a well-connected industrial precinct. Each unit was designed with roller shutter doors, mezzanine spaces, kitchenettes, and modern amenities to meet the needs of industrial and commercial tenants.

However, securing finance for a project of this scale presented significant challenges, including no presales, specialised loan terms, and last-minute lender withdrawal, requiring an expert financial solution to keep the development on track.

The Project

The $22 million development was strategically positioned to leverage strong market demand for industrial spaces. The project aimed to:

Deliver high-spec warehouse units with modern amenities.
Capitalise on the prime location and transport connectivity.
Provide investment opportunities through a mix of sales and retained stock.

Key Financial Metrics:

• Loan Amount: $22 million
• LVR Against Valuation: 65%
• Presales Required: None
• Interest Rate: Under 11%

The Challenge

Despite the project's strong fundamentals, the developer faced three major financing obstacles:

1) Securing funding with no presales – Most lenders require presales to mitigate risk, making it difficult to obtain approval.
2) Avoiding additional line fees – The client needed to minimise interest costs to maintain financial viability.
3) Consent for a second mortgage – The existing lender’s withdrawal at the last minute left the developer with limited options and days to secure alternative financing.

Complications

• The unexpected lender withdrawal jeopardised the expiring land facility, putting the project at risk of breaching terms.
• The favourable build pricing was at risk, potentially increasing development costs.
• The requirement for specialised loan terms (no presales, second mortgage) made it more challenging to secure a lender willing to support the project.

Client Concerns

• Avoiding additional interest costs from the expiring land loan.
• Retaining favourable build pricing before potential cost escalations.
• Securing financing without the equity injection typically required for no-presale projects.

The developer needed an urgent, flexible, and cost-effective financing solution to keep the project on schedule.

How the Client Found DFP

Having partnered with DFP on several previous projects, the client trusted their deep market expertise and ability to craft bespoke financing solutions. DFP was already familiar with the project, having arranged the land bank facility for the site previously.

The client recognised DFP’s ability to:

• Navigate complex financing conditions with tailored strategies.
• Secure lenders willing to accommodate specialised loan terms, including no presales and a second mortgage.
• Act swiftly under tight timeframes to prevent project delays.

DFP's Strategic Solution

With deep market expertise and a proven track record in securing complex financial solutions, the developer turned to Development Finance Partners (DFP) for a tailored funding strategy. DFP took a proactive approach by:

• Negotiating a three-month extension on the expiring land loan to prevent penalties and provide breathing room.
• Structuring a $22M construction loan with:
  
  No presales required, allowing flexibility in the sales strategy.
  No line fees, reducing overall interest costs.
  Consent for a second mortgage, ensuring financial stability.
  Competitive interest rate under 11%, optimising project profitability.

This strategic approach ensured the developer could move forward without financial strain or project delays.

Implementation Strategy

Land Loan Extension:

• DFP immediately negotiated an extension with the existing lender to prevent a breach of terms, providing critical breathing room for construction finance approvals.

Construction Finance:

• Partnered with a trusted construction lender willing to meet the client’s non-traditional financing needs.
• Prepared a comprehensive credit proposal, outlining the sponsor’s experience, project viability, and specific terms required.
• Worked closely with the lender’s credit team and valuation panel to structure a funding table, security arrangement, and loan conditions that addressed all stakeholder concerns.

Results and Benefits

DFP’s expertise enabled the developer to secure funding on their terms, ensuring the project’s success.

Financing Achieved:

• $22M Construction Loan at 65% LVR.
• No presales required, allowing flexibility in the sales strategy.
• No line fees, reducing overall interest costs.
• Consent for a second mortgage, preserving the client’s financial position.
• Competitive interest rate under 11%, improving the project’s financial viability.

Client Benefits:

• Avoided breaching the expiring land facility, preventing penalties.
• Retained favorable build pricing, ensuring the project remained cost-effective.
• Secured a tailored funding solution without requiring an additional equity injection.

Client Testimonial

"DFP turned a high-risk situation into a seamless financing success. Their expertise, lender network, and commitment to finding the right solution made all the difference. We couldn’t have done it without them!"

Conclusion and Advice for Developers

DFP’s strategic financing expertise allowed this industrial project to proceed without presales, line fees, or delays, ensuring a profitable and efficient outcome.

Advice to Developers:
“Engage with financing specialists like DFP early in your project. Their tailored solutions can help you secure funding—even in the toughest conditions.”

Whatever the size of your development plan, DFP have a wealth of experience and strong relationships to help you succeed. Contact us to explore your tailored finance options.