Cheap money – really really cheap

by | 17 Aug 2021 | Business & Corporate, Commercial Property, Property, Property Development

BBSY is pretty much zero, which means that all you’re paying a bank for commercial debt, is their margin & fees.

Long-term commercial property lending, the norm is now 2.0 to 2.5% pa (and we regularly renegotiate clients’ loans into this bracket that were being charged more), really strong deals (low LVR, strong tenants with a long WALE) can be in the 1’s. Pricing is always risk-adjusted, so rates can be in the high 2’s or 3’s, but that’s generally now reserved for properties with higher LVRs, low WALEs or assets that have a bit of a twist to them (e.g. low yield because it’s a future development site or a specialised asset).

Bank development finance usually has an interest rate of just under 2% and a similar line fee.

Business/corporate finance – margins vary significantly because every deal is different, suffice to say though that rates over 5% need to be for good reason (which we have done, e.g. high leverage to facilitate M&A).

Non-bank property development finance has dropped materially – single digits are the norm now, even at 65 to 70% LVR (on GRV). We’ve done a number of “stretch senior” deals around the 75% LVR mark, but even at that level it’s no more expensive than a normal 65% LVR loan was early last year.

Mezzanine debt & Preferential Equity has become far more prevalent – the “wall of capital” chasing double-digit yields has well and truly hit – not only is the cost of this type of funding far cheaper than it used to be (mezz can literally be half the cost of what it was 3 or 4 years ago), but the maximum LVRs are also higher than they used to be.

Home Loans – the norm is also in the 2’syet we still see far too many cases of people being hit with the “lazy tax” that banks love to get away with. If that’s you, get in touch with Anthony now to ask him what might be possible for your loans.