Development Vendor Financing Rises As Banks Pull Lending

Australian property developers are turning to vendor financing for foreign buyers in order to fill the gap in foreign funding that the national banks have left, according to The Australian Financial Review.

Melbourne developer Beulah International, Sydney’s Eklipse Capital, and Queensland’s Golden State Property Developments are reportedly all offering financing to foreign buyers, particularly Chinese buyers when they acquire their apartments.

Melbourne’s Beulah is offering a facility, through the use of licensed brokers, to provide long-term loans to foreign buyers. The loans will be sourced from the developer’s balance sheet and other private high-net-worth backers including those from overseas.

An agreement was signed by Beulah and Malaysia’s largest bank, Maybank, for a bridging loan facility for the Gardenhill condo project in Melbourne.

Beulah Managing Director Jiaheng Chan said the international support is a reflection of the confidence Maybank has in Gardenhill.

“It’s a great confidence boost when the largest bank in Malaysia and one of the top banks in South East Asia places its trust in your project, particularly as this is Maybank’s first few Australian project.”

Jiaheng signed the lending agreement at a signing ceremony, alongside Maybank Corporate Banking Managing Director Caroline Teoh.

After all the big four banks stopped foreign lending amid claims of false mortgage documentation and unsubstantiated income sources, buyers sought alternative funding. Developers have responded to the rush through alternative financial structuring to allow the continued flow of foreign funding.

Golden State Property Developments states on its website that its business model is sculpted to suit joint venture arrangements, and its “modus operandi is to contract opportunities on ‘prime’ sites, secure a viable development approval and then bring in a capital partner. We do not expose our joint venture partners to any approval risk,”  while adding that the company has in-house capabilities to “source and secure bank funding” for developments.