Background

The client was a first-time developer seeking to enter the property development market through the acquisition of a site in Kensington, an established inner-city suburb of Sydney. The long-term objective was to redevelop the property into a high-end duplex, capitalising on the area's strong demand and premium end values.

While the client had a strong understanding of property and development through family connections, this represented their first development project and required a funding solution that would support both the acquisition and early planning stages of the project.

Project Overview

The project involved the acquisition of a residential site with an existing dwelling in Kensington, NSW. The client intended to redevelop the property into a duplex and required sufficient time to complete project design, obtain approvals and finalise construction costings before progressing to the next stage of development.

To support this strategy, the funding structure needed to provide acquisition certainty while preserving liquidity and allowing the client to progress the project through the planning and approval phase.

Key Metrics

Loan Amount: $3.292 million
Location: Kensington, NSW
Project Type: Future duplex development
Facility Type: First mortgage acquisition facility
Purchase Price: $4.4 million
LVR Against Valuation: 75%
Term: 12 months
Interest Structure: Capitalised interest facility
Presales: Not required

The Challenge

Although the client had a clear development strategy and strong financial capacity, securing funding presented several challenges.

As a first-time developer, the borrower had limited documented development experience, requiring lenders to assess both the project's merits and the client's ability to successfully execute the proposed development.

The client also required a structure that would provide sufficient time to progress design work, approvals and project planning before moving into the construction phase. Achieving the right balance between leverage, flexibility and lender comfort was critical to securing a successful outcome.

DFP’s Strategic Solution

Development Finance Partners undertook a detailed assessment of the client's objectives and development strategy before identifying a lender aligned with the project's requirements.

DFP structured a first mortgage acquisition facility totalling $3.292 million, providing funding at 75% LVR and incorporating a 12-month term. This gave the client sufficient time to finalise project costings, progress approvals and prepare the project for future construction funding.

The facility also incorporated capitalised interest, helping preserve liquidity throughout the planning phase and allowing the client to retain a substantial cash buffer while progressing the project.

Settlement timing became an additional challenge when the preferred lender experienced processing delays due to a significant application backlog. Drawing on established lender relationships, DFP worked closely with all parties to expedite approval and settlement, maintain clear communication throughout the process and ensure the acquisition remained on track.

Results and Benefits

Development Finance Partners successfully secured the $3.292 million acquisition facility, enabling the client to complete the purchase and move forward with the next phase of the project.

The funding structure provided both certainty and flexibility, allowing the client to focus on design development, approvals and project planning without placing unnecessary pressure on available capital. The capitalised interest feature further supported cash flow management throughout the planning phase.

Most importantly, the transaction enabled a first time developer to secure a premium development site in a highly sought after Sydney market and establish a clear pathway toward delivering their first duplex project.

Client Testimonial

 "Mark understood my position from the very first conversation and structured a facility that worked around my constraints. His knowledge of how lenders would view my profile meant the hard questions were anticipated and answered upfront. His communication was clear, concise and consistently proactive throughout. As first-time developers I couldn't have asked for a better result, and I see this as the first of many projects with Mark and DFP."  

Conclusion and Advice

This transaction demonstrates the important role specialist development finance can play in helping first time developers enter the market.

While experience remains an important consideration for lenders, the right project, appropriate funding structure and strong advisory support can create pathways to finance that may not be available through traditional lending channels.

By aligning lender expectations with a clear development strategy, DFP was able to help the client secure their first development site and establish a foundation for future growth.

What this Means for Developers

• First time developers can secure development funding with the right project, structure and lender alignment
• Acquisition facilities can provide valuable time to complete project design, approvals and construction planning
• Capitalised interest may help preserve liquidity during the early stages of a development project
• High quality development sites can attract funding even where borrowers have limited documented development experience
• Specialist lenders can provide greater flexibility than traditional funding sources when assessing first time development opportunities
• Early engagement with an experienced development finance advisor can improve lender access and funding outcomes for new developers
  
  

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.