Background
The client is an experienced builder developer with a long history delivering both commercial and residential projects. They previously completed a range of successful developments and re-engaged Development Finance Partners to assist with the next stage of funding. Their existing land bank facility was approaching expiry, creating the need for a seamless refinance that would allow them to maintain project momentum and avoid delays. The client wanted a construction facility that offered suitable leverage and aligned with their broader development program in Melbourne’s eastern suburbs.
Project Overview
The site is in a well-established residential pocket within Melbourne’s eastern corridor. Its in-fill position makes it ideally suited for a high-quality childcare centre that supports strong and growing demand within the surrounding catchment. The proposed development consists of a 96-place childcare facility positioned to service a family-oriented community where access to early learning infrastructure remains an important driver of local amenity. A long-term lease is already in place with a proven national operator that runs more than 15 centres across Australia. This provided the project with a strong foundation for delivery and long term performance.
Key Metrics
Loan Amount: $5,365,500
Purpose: Refinance of an expiring land bank facility with construction funding for a childcare asset
LVR Against Valuation: 75%
Loan to Cost: 88.2%
Pre-lease: Yes, to a national childcare operator with 15+ centres
The Challenge
The client wanted to transition directly into a construction facility at refinance settlement, while minimising additional cash equity. A major bank initially expressed interest in providing the facility, however the bank later revised its gearing position and reduced leverage. This change created uncertainty and left the client without sufficient funding to complete the project.
Achieving a 75% LVR was essential to support the client’s capital position. The challenge required a funding partner that understood the childcare sector and was willing to support a higher gearing position without imposing restrictive equity requirements.
DFP’s Strategic Solution
DFP engaged a capital partner with a strong appetite for specialised assets such as childcare and prepared a clear submission that demonstrated the strength of the development and the stability of the pre-lease. By drawing on the client’s demonstrated capability as both builder and developer, DFP presented a well-supported case that aligned with lender expectations for this asset class.
DFP worked closely with the client to reconcile equity spent to date and refine the cost to complete, ensuring that the funding structure was aligned with project requirements. This detailed work created additional facility headroom that could be applied to the refinance, which significantly eased the client’s upfront capital requirement.
Through targeted negotiations and strategic lender engagement, DFP secured a senior stretch construction facility at 75% LVR on an as if complete value basis. This structure supported the client’s next stage of delivery while allowing them to retain capital for other projects within their pipeline.
Results and Benefits
DFP arranged and settled a $5.36 million senior stretch construction facility at 75% LVR timed to match the expiry of the land bank facility. This allowed the client to move directly into construction at settlement and continue the build program without interruption. The structure preserved more than half a million dollars in cash for the client, enabling them to progress another development in their pipeline.
The facility structure reduced financial pressure, strengthened cash flow planning and supported the broader growth of the client’s development business. By securing higher leverage and a smooth transition into construction, the project-maintained momentum and avoided costly delays.
Conclusion and Advice
This project highlights the importance of specialist advisory support when navigating complex refinance and construction scenarios. By securing a funding structure that limited additional equity contribution, the client was able to protect capital and allocate resources toward multiple upcoming projects.
For developers considering similar projects, engaging an experienced structured finance partner early can create opportunities to improve leverage, strengthen cashflow efficiency and maintain development momentum. Ensuring that the funding strategy aligns with the overall capital plan remains essential to achieving sustainable growth across a wider project pipeline.
What This Means for Developers
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Childcare developments can attract higher leverage when supported by strong operators and long-term lease agreements
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Refinancing into a construction facility can help maintain project momentum and avoid costly delivery delays
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Detailed cost reconciliation may uncover additional funding capacity and reduce upfront equity requirements
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Specialist lenders often provide greater flexibility than traditional banks for development projects and specialised asset classes
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Preserving capital within one project can create opportunities to progress other developments within a broader pipeline
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Early engagement with experienced development finance advisors can improve funding outcomes, leverage and cash flow efficiency
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.
