Case Study: Apartment Development Site Acquisition

by | 30 Nov 2021 | Case Study, Property, Property Development, Residential

An experienced developer engaged STAC to seek site finance for their acquisition of a development site in a premium inner-city suburb.

Overview

The site “as is” was two industrial sheds with an overlapping DA for residential units. With a short WALE (weighted average lease expiry) on the shed leases, the holding income didn’t tick banks’ boxes. They also wanted to maximise leverage on the acquisition as they had several other developments requiring further capital injections.

The Approach

Knowing this asset wouldn’t tick a bank’s boxes, our focus was to source a lender that would be comfortable with the asset’s profile “as is” and lend against a “highest and best” use analysis.

The Outcome

We negotiated a form of “Stretch Senior” facility, comprising a blended first and second mortgage from one lender, at a 75% LVR and an interest rate of 8.75%.

Given the property had passing income (albeit less than one year remaining), we also negotiated an interest provision of fewer than 6 months, which thereby maximised the net advance available at settlement – in turn reducing the amount of cash equity contribution required.

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