Overview
A small-projects property developer had been cash funding the site acquisition and construction of all of his projects, due to it having been too hard to get banks to approve funding for speculative industrial projects. Having to cash fund their projects was severely limiting the number of projects they could undertake.
The timeframes it takes banks to get to approval was also an issue – being relatively small projects, the DA, Building Approval and construction tendering process can be pretty quick. They just didn’t have time to wait around.
STAC’s Solution
As STAC is constantly negotiating debt funding deals with banks as well as private lenders, as part of our standard process (particularly with new clients), we ran through the potential options – including banks – which we were confident we would be able to arrange, but with that time issue. Gearing wasn’t really the client’s issue, noting they had been cash funding the entirety of projects to date – maximizing an LVR was a matter of choice, not necessity.
Having run through bank vs private options, with the developer’s focus being on moving quickly with no pre-sales or leases on the next project, the decision was made to run down the private finance option.
Leveraging our database of more than 300 private lenders (ranging from private individuals to global fund managers), a deal was struck with a single private individual investor, with whom one of STAC’s Directors held a 15+ year relationship, who had a strong understanding of industrial property and construction, as well as the subject property’s local market.
The Outcome for the Client
One of the great advantages of a single private investor being the lender, is the complete lack of any formal credit committee process – no second-guessing as to whether the person you’re talking to is making the final decision – there’s one person and one person only.
With the approval decision having been made extremely swiftly, legal documents were underway as soon as we were able to write up the terms sheet, with the only real Conditions Precedent being for the QS to do their inspection and certify the works to date and cost to complete.
The Outcome for the Client
If your development pipeline potential is being held back by lenders – whether that be the banks, or even non-bank lenders who seem to act like a bank – get in touch with STAC today to discuss alternative funding options.
