Overview
Our client, an experienced developer, had an Option to purchase an apartment project site on Queensland’s Sunshine Coast and asked us to source them debt AND equity funding for the acquisition of the site and then transition to construction.
With deep experience in Structured Construction Finance, the developer relied on STAC to source and negotiate a multi-tranche funding solution that would allow them to complete the project successfully and achieve a solid development profit.
Challenge
Despite having control of the site under the Put & Call Option, they had their equity capital tied up, spread across several different projects – which meant they needed a highly leveraged capital stack, including debt AND equity funding.
We had to bring in an equity provider, who would need to provide about 100% of TDC (Total Development Costs). The sponsor equity would be limited to the DA costs (about $200,000) and a bit of site value uplift (but not significant).
On top of that, we would also have to bring in a senior construction lender that would be ok with the developer/sponsor’s minimal equity. This isn’t necessarily easy – for example, banks have minimum “real equity” requirements (10 to 20% of TDC is typical).
Solution
Given the numerous moving parts, we would need to have our “ducks in a row” – planning out everything upfront that needed to be done, by whom and by when – good project management. With a deal like this, one thing going wrong or getting overlooked could easily result in the whole deal falling over.
Considering the situation, including the time-sensitive nature of the site settlement and the likelihood that DA wouldn’t be approved until very shortly before settlement, we engaged one of our trusted valuers very early on.
Our deep and broad relationships with all types of funders throughout the capital stack, combined with our proactive and diligent approach, allowed us to move quickly.
This resulted in us securing funding for the site acquisition debt facility and negotiating acceptable terms with a Pref Equity provider, all subject to valuation – which came through in time and at expected levels thanks to the proactive and early engagement.
Ultimately, we successfully navigated the time-sensitive nature of the project and delivered complex funding solutions that allowed our client to achieve their goals and objectives for their project.
We’re looking forward to seeing this project come out of the ground!
Please contact us if you would like to discuss this case study or learn more about our funding solutions.
