Development Finance
We are specialists in structuring complex financing solutions for commercial and residential property development.
PFG has the capacity to structure effective acquisition and construction facilities from $1M to $200M+. We have a strong reputation amongst funders of delivering well structured finance packages.
We can provide construction and development finance that provides innovative and strategic alternatives to conventional development finance. Our consultants are trained to provide you with innovative finance solutions aimed at ensuring you maximize the return on your investment.
PFG also has a strong capability in financing Retirement and Aged Care Facilities having originated the financing of some of NSW’s prominent projects.
Through our banking, institutional and non-bank relationships, PFG has credit enhancement products that can be used to assist with development finances such as:
• Development site (land bank) finance to assist with securing your next project
• Construction Loans (including senior stretch finance) to enable you to deliver your next project
• Mezzanine debt options designed to assist with the “topping up” of debt required beyond the first mortgage construction loan
• Preference equity finance which also assists with bridging the gap to the first mortgage construction loan
• Residual stock finance enables you to re-finance unsold stock from a construction loan and provide time to sell in a timely manner at normal commercial interest rates
• Retirement and Residential Aged Care Funding. PFG is very experienced in this specialised sector of the market. We can provide the necessary acquisition, development and liquidity funding for your Villages and Aged Care Facilities.
If you are looking for any finance option required to deliver your next development project talk to us and find out how we can help you.
Development Site
(Land Bank) Finance
Development site finance enables you to secure your next development site prior to construction.
Generally, you can obtain loans up to two years to enable you to secure a DA approval, prerequisite presales for your construction loan or nominate a builder and complete the Construction Certificate.
Typical loan parameters are as follows:
• Loan amounts from $1,000,000 – >$50,000,000
• Facility limits:
o Banks – up to 50%
o Non Banks – typically 65% but up to 75%
• Pricing:
o Banks from 4%
o Non Banks from 6%
• Locations: all metropolitan locations and major regional and sub-regional locations
• DA approved or unzoned land
Construction Loans
Construction loans enable you to deliver your project on a cost to complete basis.
Nominating the right lender for your construction loan is vital in delivering a successful project and we are experts at structuring the right loan to suit you project.
Typical loan parameters for a construction loan are as follows:
• Loan amounts from $2,000,000 – >$200,000,000
• Facility limits:
o Banks – up to 60% LVR and 65% in some cases
o Non Banks – up to 70% LVR
• Maximum Loan to Cost (LTC) Ratio is 80%
• Pricing:
o Banks from 1.50% margin and 1.50% line fee
o Non Banks from 2.50% margin and 2.50% line fee
o Mortgage Funds from 9.00% no line fees
• No or minimal pre-sale requirements available for selective projects
• Locations: all metropolitan locations and major regional and sub-regional locations
Stretch Senior Construction Loans
A stretch senior construction loan has the same framework as a construction loan.
However, the main difference to a typical construction loan is that gearing for a stretch senior construction loan is increased to LVR’s up to 75% and LTC’s to 90%+.
A stretch senior construction loan generally combines a construction loan and mezzanine finance into one loan facility without the need for debt subordination.
These types of loans are typically offered within the non-bank market are pricing parameters generally commence from 3.00% margin and 3.00% line fee.
Mezzanine Finance
Mezzanine finance is also referred to as a second mortgage and or subordinated debt finance. PFG has established a strong record of structuring mezzanine debt facilities that has assisted many clients that would otherwise have had to source expensive equity to projects.
Mezzanine debt finance assists the client in bridging the gap between the first mortgage finance offered and the funds required to complete a transaction. It is priced at a higher rate to reflect the risk of the funds in the transaction; however, when coupled with the overall finance cost of the transaction it is a very useful and relatively inexpensive resource for financing property development, large Investment transactions and bridging arrangements.
We have a bank of Private Investors, Institutions and Investment Banks that actively invest in this form of finance. Given PFG’s experience in packaging mezzanine debt arrangements this form of finance is readily available for appropriate transactions and with its proper use can easily add considerable value to a client’s project and or transaction.
Typical loan parameters for mezzanine finance are as follows:
• From $5,000,000 – >$50,000,000
• Facility Limits: up to 75% LVR or 90% LTC
• Pricing: from 12% – 18%
• Locations: all metropolitan locations and major regional and sub-regional locations
Preferred Equity
Like mezzanine finance, preferred equity enables the client to bridge the gap between the first mortgage finance offered and the funds required to complete a transaction. It is also priced higher than a first mortgage loan due to the higher risk of the transaction.
Preferred equity can be structured in many forms from registered mortgages on title and company shares to unregistered mortgages. Each client’s individual appetite and company structure will typically determine the form that preferential equity is applied to a project.
Preferred equity investments can commence at a 50% pari passu arrangement or up to a disproportionate equity investment of 80% of the equity required to complete the project. Investor returns range from a straight coupon return on their equity to apportionment of project profit.
Loan sizes for preferred equity typically commence from $2,000,000 – $100,000,000
Residual Stock Finance
Residual stock finance enables you to re-finance unsold stock from a construction loan and provide time to sell in a timely manner at normal commercial interest rates.
Finance parameters for a residual stock facility vary vastly between a banking institution and non-bank lender.
A bank will undertake a serviceability assessment to determine the suitability of finance and also require a valuation to be undertaken on a ‘in one line’ basis. This will ensure much lower gearing than typically feasible for a client but will ensure that the bank can sell all units in a fire sale scenario without losing their principal loan amount.
Whereas a non-bank lender will assess any loan requirement on the basis of the directly market conditions and determine if the loan should be maintained via interest servicing or capitalisation. A non-bank lender will also allow a valuation to be undertaken on a gross realisation basis and provide a higher LVR than a bank. Whilst their interest cost will be higher than a bank, the overall loan parameters a generally more feasible when refinancing residual stock.
Most banks will also restrict the rate of sales of residual stock whereas a non-bank lender is much more flexible.
Typical loan parameters for residual stock finance are as follows:
• From $1,000,000 – $100,000,000
• Facility Limits:
o Banks – up to 50%
o Non Banks – typically 65% but up to 75%
• Pricing:
o Banks from 4%
o Non Banks from 5.50%
· Valuations:
o Banks – “In One Line” Market Value
o Non Banks – “Gross Realisation” Market Value
• Interest Coverage (ICR):
o Banks – from 1.5 times
o Non Banks – from 1 times
• Loan Servicing:
o Banks – from direct rental cashflow
o Non Banks – from direct rental cashflow or interest capitalised
Retirement Village and Aged Care Acquisition
Funding for Acquisition and or Refinance is usually delivered on an average of 65% of the following value categories:
• Going Concern Owners Interest Value
• The In One line Value of Unsold Stock (ILU`s)
• RACF net of Refundable Accommodation Deposits (RAD) liabilities
Development Funding
Funding in the range of 65-70% of the “as is” land values not exceeding 65% of the Staged Gross Realisation and Residual Land Value
Conditions:
A level of pre commitment for development in the range of 50% would be required normally in the form of $1-10,000 deposits.
• Due diligence on operators , licenses etc
• Ongoing management of interest cover , LVR covenants
• Ongoing monitoring of Liquidity covenants
• Ongoing Management of DMF registers
Pricing
Banks: Interest Margin of 1-1.5% p.a. , Line fee of 1.25-1.5% p.a.
Non Bank: Approx 1 % higher than Bank Funding.
*Please note that the loan parameters should be treated as a guide only and each individual loan is assessed on its own merit.