Step 2: Find the money (structured & negotiated optimally, of course).
Step 1: Make sure all the ducks are in a row, so that step 2 goes to plan.
Most people try to jump to step 2 too quickly. In our experience, deals that have problems – whether getting declined by banks, or a lack interest from investors – are almost always because step 1 was rushed or overlooked.
With our experience of seeing what causes the problems at the pointy end, we prefer to get involved at the front end to help get things right. We set out a scope, charge fees at milestones for the work we do (just as with any professional services firm). We’re absolutely positioning ourselves as part of our clients’ professionals team, as opposed to a finance broker that just comes in at the end wanting to get a big comm as quickly as possible.
So are we finance brokers? Well, yes and no. We’re building STAC’s modus operandi to be of absolute professionalism, truly client-centric, with our experience and approach to set us apart.
Why get us involved?
The current financing market presents many challenges – it is a complex climate to say the least. Banks have and are continuing to tighten policies, appetites are reducing significantly, the goal posts are constantly moving. Non-bank lenders, whether “private lenders” or Fund Managers, are – as a result – getting so many opportunities come across their desk, that they are picking and choosing the best and safest deals to write. Simple case of supply and demand.
So our role, as a professional adviser – is to help our clients navigate this challenging climate, assist to prepare, structure, source and negotiate a funding package, which supports business (whether growth or otherwise), property development, commercial property investment and private asset goals and ambitions.
What have we been working on?
Most of our work in the last few months has been for property development. No surprise really that developers are seeking assistance, given just how hard banks have been pulling back in this sector. That doesn’t mean the banks are closed for business – in fact we’ve been successful in getting credit-sanctioned terms from a major bank, just north of $40m, for an inner-ring high-density residential development of over 100 apartments. So much for the inner-city apartment market being dead, right? (Again, that’s a “yes and no” issue, but we’ll save that for another day!)
At the smaller end of the development game, non-bank finance sub $10m is where there is plenty of action. The increased cost of finance is outweighed by reduced sales commissions (up to 10%, seriously) and being able to start sooner (without even thinking about potential to sell for more when buyers can “see, feel, touch”.
There is mezz money out there, but it’s getting more conservative – on one hand it’s a case of caution in this market, on the other it’s a case of “coz we can”.
From an advisory perspective, a few examples as to what we’ve been doing:
- Projects 1-2 years out from needing funding, working together with professionals such as lawyers, accountants and consultants, to ensure that step 1 is done right (remember – all of the ducks in a row!), before the time comes to find the money.
- Assisting a developer transition into the childcare sector, including bringing in one of the industry’s most highly respected and sought-after consultants, starting to piece together what an optimal mix of childcare and retail will look like on a site.
- Early discussions with an off-shore optical retail & manufacturing business looking to expand rapidly in the market, requiring debt as well as an equity partner (let us know if you know someone interested/experienced in that space).
Where can you find us?
Someone has to do the hard-yards keeping abreast of everything macro and micro as it relates to funding… so you’ll naturally find us having a coffee (well, Mark having a Peppermint Tea…) in one of the many fine coffee shops located in and around the city, or occasionally over a beer (it’s not THAT often!).
Seriously though, we’ve taken up residence at Level 14, 100 Edward Street, Brisbane CBD. It’s great to have a central office in close proximity to many professional services firms and bankers; for those that aren’t in the city, we know coming in can be a pain (Australia’s most expensive parking?!), so we’re regularly jumping in the car to drive out to see people.
Let’s not forget the modern world – you can of course find us at:
Watch this Space:
Shortly, we will be putting together video blogs and industry insight blogs, providing short updates on what we’re seeing out there.
Stay tuned to The Capital Stack, by STAC Capital!
– Mark Trayner & Dale Sparke