Background
A property developer in Sydney’s metropolitan region engaged Development Finance Partners (DFP) to source a strategic refinance solution for a recently completed townhouse project. The client’s existing finance structure included cross-collateralised loans secured by a broader portfolio of residential properties.
The primary objective was to lower borrowing costs and restructure debt to support the orderly sell-down of residual stock while maintaining flexibility across the wider portfolio.
Project Overview
The development comprised a completed townhouse project in a sought-after Sydney Metro location. With multiple unsold units remaining, the client sought a high-LVR facility that would allow interest capitalisation during the sales period, while also restructuring debt tied to other residential holdings.
DFP was tasked with delivering both a first and second mortgage solution to meet these goals.
Key Metrics
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Total Facility: $15.45 million
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Loan Type: Residual Stock Refinance & Second Mortgage Facility
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First Mortgage: $12.26 million
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Second Mortgage: $3.20 million
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Combined LVR: Up to 80%
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Location: Sydney Metro, NSW
The Challenge
The client faced several challenges that limited their ability to refinance through traditional channels:
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Cross-collateralised residential assets and development stock
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Need for capitalised interest to support the sell-down period
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Desire to release funds to the second mortgagee as sales occurred
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Requirement for a competitive rate and flexible loan structure
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Existing bank loans totaling $11.5 million, ranking ahead of any new second mortgage facility
DFP had to deliver a dual-layered solution that would not only meet the client’s immediate funding needs, but also provide flexibility during the sales and debt reduction process.
DFP’s Strategic Solution
DFP structured a two-tier lending solution:
1. First Mortgage Facility – $12.26 million
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Structured to 80% LVR (Senior tranche to 65%, Second tranche to 80%)
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Capitalised interest, reducing immediate outgoings and supporting the sales strategy
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Facility based on a 6-month-old valuation, avoiding delays
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Proceeds release agreement: Once the first mortgage was reduced to 65% LVR, partial sales proceeds were earmarked for the second mortgagee
2. Second Mortgage Facility – $3.20 million
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Geared to 75% LVR, sitting behind existing $11.5M in senior bank loans
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No formal valuation required – approved based on lender inspection only
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Highly competitive rates and fees, negotiated through DFP’s funding network
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Interest capitalised for the full term
Results and Benefits
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$15.45 million total debt facility secured
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Lowered borrowing costs across the portfolio
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Enabled a strategic sell-down of completed townhouses
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Capitalised interest improved cash flow and reduced pressure during sales
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Flexible structure ensured part-sale proceeds supported staged debt reduction
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Settlement successfully coordinated across two tranches and multiple lenders
Conclusion
This transaction demonstrates DFP’s ability to structure layered debt solutions for developers holding residual stock. By delivering a dual-tranche facility with capitalised interest, high gearing, and flexibility to manage sales proceeds, DFP helped the client reduce borrowing costs and maintain control of their sales strategy.
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