STAC recently had quite an impressive achievement with a funding approval that, to be frank, we expect that many people may not believe – because it’s a good deal even in the good times, let alone the current funding environment.
The developers of an inner-city project had recently completed stage 1, comprising more than 100 apartments, nearly all of which settled successfully to clear out the bank’s construction facility. However, when they sought funding for the construction of the stage 2 tower, the incumbent bank’s appetite had pulled back significantly – to the point whereby it would be impractical to be able to meet the conditions of approval, which was certainly not a reflection of how things went in Stage 1 for both the Developer and Bank.
STAC Capital were engaged to seek an alternative solution for the construction of stage 2, which carried with it some significant hurdles, including a large number of Chinese FIRB buyers, a new builder, combined with clear instructions to seek funding from a Bank.
What helped made it a Deal?
There were however many arguments to support the project funding, including:
- successful settlements of FIRB buyers in stage 1 (and the manner in which the developer managed the buyers pre-settlement)
- holding 20% deposits on FIRB sales
- the support of the bank-panel valuer for the project, supporting & evidencing no decline in values amidst a softened apartment market
- reduced construction risk thanks to work completed in stage 1
How STAC got it done
Working through a detailed credit analysis and negotiation process with multiple Banks, jumping through many hoops and over many hurdles, a formal approval was issued by an Australian Bank at the level of debt sought by the developer, with a very high allowance for FIRB buyers as qualifying pre-sales, roughly double what is typically allowed and even higher than what were usually the limits even in the boom times of a few years ago when banks were throwing money at developers on generous terms.
No, the LVR was not absurdly low. It wasn’t pushing against the LVR limits of the bank’s normal policies, but getting this deal across the line came down far more to negotiation and arguing the many strengths of the project – as well as its risks – to get the ultimate bank comfortable with the final terms.
This deal just goes to show that the banks are still open for business, and terms that can be achieved are not necessarily as hard and fast as what bankers may tell you straight off the bat.
Project GRV: $55,000,000 (approx.)