Scenario Central has access to Private Funders who will consider almost any Development Finance scenario.
We have access to non-bank lenders, private equity and private lenders who do not normally require any presales at all. They will also approach a project from a different angle to the major banks.
These Funders have a different philosophy to Development Finance and most will work off the Gross Realisation Value (GRV) of the project as opposed to the more traditional Total Development Cost (TDC).
The keys aspects that these Funders will consider are:
- The Development – does this project make sense? Things to consider are location, the type of building, costings, etc. Some Funders will have reservations on some locations. The project should be in a desirable location with high demand for the development
- Profitability of the project – the main rule of thumb is a return of at least 15% - 25% (depending on the project)
- The sponsor - who is involved in the development? Are they experienced or are they using an experienced Project Manager?
How Does Gross Realisation Value (GRV) work?
- Most lenders will lend up to 65% pf the gross realisation value (under First Mortgage)
- Up to 100% of construction costs (as per fixed price building contract)
- 5% Contingency Costs (reflecting 5% of building costs)
- Interest can be capitalised for duration of project
- Some presales may be required (depending on the Feasibility)
- Usually using this method the client ends up with more funds than TDC
Characteristics of Development Finance Loans:
Interest Rates will vary from Funder to Funder. However please note that rates can range from 8.35% to 15% (based on location, overall risk)
- Establishment Fees between 1.25% + GST to 2% + GST
- Legals from $3,500 (depending on structure and project size)
- Commitment Fees (usually to cover initial QS and valuation fees and other search fees) between $10,000 - $20,000 or more depending on project size and location
- Progress Payment Management Fees: from $15,000 (covers progress valuation inspection, QS and Funder’s processing costs)
- Auspac Mandate from 1% to 1.5% + GST
Development Finance types we can consider:
- Residential property developments
- Commercial property developments
- Industrial property developments
- Mixed-use development
- Land subdivisions
- Land bank
Other lending scenarios we can consider:
Short Term Lending: We can also entertain other Business and Commercial scenarios. We have access to short term lenders who offer short term financial solutions to your clients and can fund some loans within 48 hours. These can be achieved through Caveat loans and Second Registered Mortgages.
These short term loans are charged at a monthly rate of between 1% and 4%. Application fees apply and interest is usually capitalised. Establishment fees can also be capitalised (usually between 1% - 4% of the loan amount). Maximum loan term is 6 months.
We have access to Second Registered Mortgages, which can be placed usually behind a main stream lender. These rates vary from Funder to Funder, starting from 15% p.a to 24% p.a. These are usually capped at max LVR of 75% (that is based on the First Mortgage and the Second Mortgage). These are usually interest only for 6 months to 12 months.
Mezzanine Funding: If your client has a gap between their development funding costs and first mortgage borrowing, we have access to Mezzanine funding to ensure your client can settle on time. These are usually secured with a second mortgage, against the development project.