Helping A Client Get A Higher LVR

Helping a client get a higher LVR (70% of valuation) for Land Bank ACT prior to DA.

As bank conditions tighten for many developers, working with an experienced development finance specialist is helping them overcome funding hurdles. This scenario shows how a specialist financier can add value to developers.

The scenario

A client approached Development Finance Partners (DFP) to assist with providing finance to purchase a development site with a purchase price of $1.82m.  A DA was in the final stages of being lodged for a 16-unit residential development.  A letter had been provided by the architect which indicates that the plans are complicit with the Local Planning guidelines and that a DA is highly probable.

Issues

The client wanted to maximise the loan to value ratio and mainstream funding options are limited for land banks without development consent.

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The solution

DFP was engaged to expedite a funding solution that met the client’s requirements of a lower loan to value ratio.

DFP undertook a detailed analysis of the feasibility of the proposed 16-unit development and take out options for the underwrite. DFP then completed underwriting proposal.

Results

DFP has been able to provide funding from the private market that meets with the client’s requirements. The LVR is 70% of the “as is” value.

This will enable the client to secure the site, obtain DA and refinance the land bank loan into construction.

DFP was able to present the proposal on the basis of the overall financial strength of the client, the minimal planning risk around the DA and the take out options under a construction facility.

What the client says

Daniel Hausman, Managing Partner of Aventis Group, who introduced the client to DFP was very happy with the outcome of his introduction and recommendation. “The land had the relevant zonings but a DA had yet to be lodged. My brief, on behalf of the developer, was to organise a land bank facility for the raw land and a high LVR. I called DFP because I knew they had the contacts and expertise to do it. DFP were able to get us 87.3 per cent TDC, with a component of PE [preferential equity] at a very reasonable rate – which my client was delighted to take because it meant they could keep that extra money for other deals.”