How to get 95% finance for the purchase price of a Land Bank project

Often developers are unaware of the various finance options and expertise available to them beyond traditional bank funding.

Working with a finance specialist who specialises in development finance can make all the difference when it comes to developers being able to access finance that helps them preserve their equity and realise development profits faster.

A recent project by finance specialists,

Development Finance Partners (DFP) illustrates what can be achieved when developers look further afield for finance.

Finance Scenario:

DFP’s client had approval for funding for a Land Bank project in Gordon NSW for $5.25m. A DA for the project was lodged with council for 48 residential units. DFP’s client had an option and wanted to obtain funding based on the valuation of $7.5m rather than the purchase price of $5.5m.

Issues with obtaining finance

• DFP’s Client had secured an option over the site and lodged a DA for 48 residential units.

• Settlement for the option was approaching and the Client wanted to borrow against the uplift in the value of the property when compared with the Purchase Price that had been negotiated 18 months earlier.

• There was a perceived Planning Risk given the Development Consent was yet to issue.

• The site would then subsequently be developed by the Client, however funds were required to secure the site pending the DA.

How DFP sought to resolve the finance issues

• DFP was engaged to expedite a funding solution that met the Client’s requirements.

• DFP conducted a thorough due diligence of the Town Planning issues and status of the Development Application

• DFP also arranged to review the valuation

• DFP then built a case to mitigate the Planning risk based on the support of Council and Complying DA

• A complete due diligence on the Client’s overall financial position and other projects on- stream was also undertaken to support the finance application

• DFP also created a simple debt / equity model for a Land Bank

Results

• DFP secured a 12 month Funding Solution ($5.6m) during which time the DA will issue

• The Facility acknowledged the valuation of $7.5m and was geared to 70 per cent of that sum.

• The loan was therefore 95 per cent of the Purchase Price

• The facility was secured in 7 days

Why work with a specialist development financier?

Managing Director of DFP, Baxter Gamble is an advocate for developers.

“At DFP we understand all the obstacles that developers face, day in day out when it comes to financing their projects. Our team also have significant banking experience so we understand how the banking environment works, what evidence they need to release funding and mitigate risks.” “We take that knowledge and experience and find ways to turn obstacles into opportunity”.

If you are looking for specialist advice and skills when it comes to financing your development contact Development Finance Partners

Delivered in partnership with Development Finance Partners

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