Background
The client is an experienced property developer with a proven track record across residential projects. With multiple successful developments completed, they were focused on continuing to scale their pipeline while maintaining capital efficiency and momentum across active projects.
Project Overview
The project consists of an 8-townhouse development located in a well-established residential suburb in Newcastle. The design focused on delivering practical, modern townhouses suited to owner occupiers and investors within a tightly held local market.
While the underlying demand for this product remained strong, the project required a funding structure that accurately reflected its fundamentals to enable progression.
Key Metrics
Loan Amount: $6,431,645
Loan to Value Ratio: 75%
Loan to Cost Ratio: 88%
Presales: None required
Interest Rate: 10.90% blended
The Challenge
The project had stalled due to issues arising from the initial funding approach. The valuation obtained was not reflective of current market comparables, which directly impacted the achievable loan amount and overall leverage.
At the same time, the deal had been positioned with lenders who were not aligned with the project profile. This created resistance around key aspects of the transaction, particularly the absence of presales and the level of leverage required.
As a result, the proposed funding structure required the developer to contribute approximately $1 million in additional equity. This significantly reduced project feasibility and placed unnecessary pressure on capital allocation.
Without a revised approach, the development risked remaining inactive despite having strong underlying fundamentals.
DFP’s Strategic Solution
Development Finance Partners undertook a full reassessment of the project, focusing on identifying the root cause of the funding breakdown. It became clear that the issue was not the project itself, but how it had been structured and presented to the market.
DFP repositioned the transaction by aligning valuation methodology and lender selection with the true strength of the asset. A new valuation was coordinated through a valuer with deep local market knowledge, resulting in a figure supported by relevant comparables.
To maximise leverage and remove the need for additional equity, DFP structured a blended senior and mezzanine construction facility. This approach allowed the capital stack to better reflect the project’s risk profile while accommodating the no presales position.
DFP also streamlined the process by coordinating the reassignment of the existing Quantity Surveyor report, reducing both time and costs associated with obtaining new documentation.
Through established lender relationships, DFP sourced a funding partner comfortable with higher leverage and no presales, ensuring the structure aligned with both credit requirements and the developer’s objectives.
Results and Benefits
DFP successfully secured a $6.43 million construction facility at 75% LVR and 88% LTC, with a blended interest rate of 10.90%.
The revised structure removed the requirement for additional equity at settlement, allowing the developer to preserve capital and maintain flexibility across their broader pipeline.
With funding aligned to the project’s fundamentals, the development was able to proceed immediately. The approval and settlement process was completed within two weeks, eliminating further delays and holding costs.
Beyond enabling delivery, the solution improved the overall feasibility and return profile of the project. The developer retained control of their capital position while progressing a well-located residential development in a strong market.
Conclusion and Developer Insights
This case demonstrates how valuation positioning and lender alignment directly influence funding outcomes in construction finance.
Even well-located projects can stall when funding structures do not reflect market conditions or lender appetite. When structured correctly, however, developers can achieve higher leverage, reduce equity requirements, and maintain project momentum.
The key takeaway is that access to funding alone is not enough. The way a deal is structured and presented ultimately determines whether a project progresses efficiently or becomes constrained by capital.
What This Means for Developers
- Strong projects can still stall without the right funding structure
- Lender alignment is critical, particularly for no presales transactions
- Structuring can unlock leverage and preserve equity
- The way a deal is positioned can materially impact feasibility and timing
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.
