d90fbaf7-ae69-4ec6-bf28-d59f02d37cd6

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>Developers often spend considerable time and money conceptualising projects and little time on structuring and planning the finances. </strong></p><p>Financing property development is a specific skill, similar to site selection, design, managing the approval process, marketing the project and finding the right builder. </p><p>This e-book is a guide for developers, to help make the most of opportunities, think beyond bank funding to get projects off the ground, to market quickly and deliver profitable outcomes. </p><p>And now it’s all yours to download and use. </p><p>“Get Funded” has been developed by Development Finance Partners in partnership with <em>The Urban Developer</em> and is a comprehensive overview of alternative funding options for developers.</p><p style="text-align:center"><a href="https://theurbandeveloper.com/get-funded-e-book-form">Click Here to Download Your Complimentary Copy!  </a></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/db8066ea-5f5e-4ab9-b0d5-a538ad7623fb.jpg" width="1239"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong><em>The Urban Developer</em></strong><strong> is proud to partner with </strong><a href="http://www.dfpartners.com.au/"><strong>Development Finance Partners</strong></a><strong> to deliver this article to you. In doing so, we can continue to publish our free daily news, information, insights and opinion to you, our valued readers.</strong></p></div></div></div></div></div>

  The 3 biggest mistakes developers make, and how to avoid them.

DFP Feature Image

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>The development market has undergone some significant shifts over the past 12 months, and 2018 is expected to see these changes solidify with constraints on liquidity and changing buyer demographics becoming the norm over the next 12 months.</strong> </p><p>Although growth figures may appear to be slowing (with the three months to December 2017 seeing a 0.3 per cent fall in national dwelling values), the 2018 market will likely begin evening out from the unsustainable growth period of the last three years. </p><p>Coming in to 2018, developers can expect similar market conditions to what was experienced in Q3-4 2017 – specifically more run-on effects from the APRA constraints and stable interest rates (with the RBA’s cash rate to remain in the proximity of 1.5%). </p><p>However, the market is likely to be impacted by shifting buyer demographics and limited geographic oversupplies.</p><h2><strong>APRA Constraints</strong></h2><p>In March 2017 the APRA macro-prudential measures came into full force tightening lending on &quot;riskier&quot; projects, and left the development industry to figure out how to fund their projects – and 2018 is going to play out in much the same way. </p><p>Throughout 2018, we can expect APRA to continue constraining liquidity, and developers who are accustomed to borrowing 80 per cent with 20 per cent equity are going to feel these constraints the most. Typically, developers are going to need more equity with the APRA regulations – which means they’re likely to be down to 60 per cent borrowing capacity. </p><p>A common breakdown of market risk and pricing for developers’ finance options in this market will look similar to this:</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/82cf0dbc-5626-4eac-82d8-7829e0dfd408.png" width="940"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Developers are quick to lash out at banks for their new lending policies, however it is not the banks that are to blame – they’re just adhering to the APRA constraints. Banks will also see some more regulations come into play as the proposed BASEL IV guidelines may further alter the banks approach to risk-weighted assets. </p><p>These regulatory changes will see a lot of secondary development funders emerge, and developers will continue to seek out alternative finance options for their projects in 2018 – such as joint ventures, mezzanine lenders or private funds – to ensure their project gets to market. </p><p>The APRA constraints are going to take some of the steam out of corporate developers, however it is the smaller, independent developers (that are generally borrowing up to 80% with equity) that will need to amend their financial processes throughout the year to ensure they maintain their viability under the tougher lending criteria.</p><h2><strong>Hot Spots</strong></h2><p>As with any market outlook for the residential property market, people are searching for the next &quot;hot spots&quot;, and 2018 will definitely provide certain pockets with high growth and rental yields for developers to capitalise on. </p><p>Where these hot spots are located is going to be determined by whether the area has a relatively strong economy, strong migration levels and a relatively low available housing stock – and developers should be looking for geographic areas that meet all of these criteria. </p><p>The industry must also bear in mind that there are geographical oversupplies where developers may see further compressions on rental yields – and vacancy taxes (like what we are seeing in Victoria with the <a href="https://theurbandeveloper.com/articles/vacant-residential-property-tax">Vacant Residential Property Tax</a>) may begin having a severe impact on developers trying to push investor stock in oversaturated markets. </p><p>In Victoria alone the Vacant Residential Property Tax (VRPT) is a 1 per cent tax on the capital improved value of the taxable property, and is expected to raise approximately $80 million for the government in a bid to free up currently vacant properties and lower average rental prices. </p><p>But, on the opposite side of the spectrum, developers should bear in mind that rental rates did increase by 2.7 per cent nationally over the 12 months to December 2017 – showing that there is still growth in the market. Combined capital city rents are 2.6 per cent higher, and combined regional market rents are up 3.0 per cent – showing us that developers, when they focus on delivering the right stock to the right demographic, can be extremely successful in this coming market.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/c55ce15b-bd17-444e-9edc-4dfbdf614638.png" width="939"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><h2><strong>Buyer Demographics</strong></h2><p>Buyer demographics are expected to continue shifting toward cash based buyers (baby boomers or those sitting on large windfalls) as interest-only lending reaches an all-time low at 16.9 per cent in the September 2017 quarter. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/8e111d98-9a6c-470c-b6a0-47d6bf5fe964.jpg" width="620"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>This is the lowest quarterly value of new originations since the March 2009 quarter – showing us that buyers are now taking a more prudent approach to purchasing and investing.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/c30da115-8e72-4125-a8ea-2b223ebc8781.png" width="535"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Owner-occupiers and first home buyers are the growing demographic of buyers to watch, and they now take up close to 40 per cent of the market. The number of first home buyer housing finance commitments is now the greatest since December 2009 (accounting for 18% of all owner occupier finance commitments) due to reduced associated costs like stamp duty.</p><p>Alongside the first home buyer, another demographic that can’t be ignored is the baby boomers (those aged around 55 – 64).</p><p> According to McCrindle research, the average Australian household aged over 55 have a net worth exceeding $1 million, and due to rising property prices over the last few years they are also seeing the fastest wealth increases of any demographic in Australia. </p><p>Alongside their primary residence, baby boomers’ parents are now beginning to transfer their net wealth to their children – giving the baby boomer demographic an even larger boost in cash/net wealth to draw upon when purchasing property. </p><p>Another demographic to keep an eye on for 2018 is the 2+1: two young executives with a baby. These buyers are looking to take advantage of stamp duty savings as first home buyers, and they want houses with a bit of space while still remaining affordable. This demographic is generally what’s pushing growth in house and land packages in outer suburbs. </p><p>So, this shows us who developers should be targeting, but what buyers shouldn’t developers be thinking about?</p><p>Generally, developers should avoid targeting foreign investors (specifically the Chinese market with Chinese capital restraints heavily slowing this buyer segment) and self-managed super fund investors – since these buyer groups have the most barriers to enter the market and represent only a small segment of buyers.  </p><p>According to CoreLogic research, investors on variable mortgage rates are now starting to pay 60 basis points more than owner occupiers (with higher premiums for interest-only loans) – which is a significant contributor to the slowing investor market. </p><h2><strong>Interest Rates</strong> </h2><p>Coming into 2018, it appears interest rates are going to remain steady with the RBA’s cash rate set to stay near 1.5 per cent for at least the next 12-18 months. This is in line with the lack of growth (with inflation stubbornly remaining below 2%), and the lack of wage growth (at only 2.0% over the 12 months to September 2017). </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/cbefdb0e-eccd-4ba3-91c3-d5ec08c04bf3.png" width="941"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>With wage growth remaining slow (only 0.1% away from the historic low of 1.9%), it doesn’t make sense for there to be a rise in interest rates. Especially when a 5 per cent increase in interest rates amounts to a 25 per cent increase in mortgage repayments – heavily impacting household cash flow across the board.</p><p>Looking at the macro-prudential guidelines it’s clear to see that we’re not in bad shape economically, but we’re not in great shape either. Businesses are increasing their profitability (with the Australian economy growing by 0.8% over the second quarter of 2017) but they seem to be spending the majority of their extra cash on automation and processes instead of increasing wages. Making it seem clear that interest rates aren’t going to move much over the course of 2018.</p><h2><strong> The ‘Bubble’</strong></h2><p>The &quot;housing bubble&quot; is the buzz word the media is throwing around when it comes to the residential market, but don’t let the sensationalist headlines fool you into believing the &quot;doomsday&quot; is upon us in 2018. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/a4346a10-23b5-4fb5-9381-c8cbb67fcea5.png" width="940"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>You can read more of our in-depth thoughts on the &quot;bubble&quot; <a href="http://www.dfpartners.com.au/blog/">here</a>. But, economically speaking, there can’t actually be a property bubble – we simply don’t approve enough dwellings nationally to create the large bubbles that the media is hyping. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/5eb0a0c1-1933-4a0e-8522-e1cb0157a8ed.png" width="939"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Instead, in 2018 we may begin to see smaller geographical bubbles occur where there is a systemic oversupply of stock in an area that is seeing low interest. These bubbles are likely to only have a microeconomic impact. </p><p>There is also an increased infrastructure spend that is helping connect new suburbs to large city centres. </p><p>Leppington (approximately 50km southwest of Sydney’s CBD) is one example of this, where the government has invested in a train line, local amenities and schools (an investment in excess of $1.8 billion) to help ensure the location is ripe for growth (especially with the 2+1 demographic discussed above). </p><p>This is mitigating the risk of an over-hyped macro housing/property bubble, and providing more opportunity for buyers to come in at entry. </p><h2><strong>What Developers Should Do</strong></h2><p>Based on the economic and financial outlook for 2018, developers need to shift their thinking toward catering for baby boomers, first home buyers and other owner occupiers. The mentality of building projects and assuming buyers will come is not going to be a successful strategy for 2018. </p><p>The best thing that developers can do in 2018 is move away from investor stock and begin thinking about how to create unique and different projects that will appeal to both future buyers and financial lenders.</p><p>Not a lot of banks are looking to lend for development sites – given that they’re concerned about the stock coming online in approximately 2 years – but that doesn’t mean that developers have no options. Financing is available for developers, but they just need to ensure that their project is positioned correctly to be successful in this shifting market.</p><p>Draw inspiration from developers that are offering spacious, high-quality apartments that are catering for the demands of the baby boomers and owner-occupiers as a benchmark of success. Also, look at locations that are still experiencing positive growth, and vehemently avoid any areas that are experiencing a geographical oversupply.</p><p>Although we may be seeing growth even out in 2018, the market is still strong and developers with the right approach and the right financing can still capitalise on the market conditions.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><em>The Urban Developer is proud to partner with </em><a href="http://www.dfpartners.com.au/"><em>Development Finance Partners</em></a><em> to deliver this article to you. In doing so, we can continue to publish our free daily news, information, insights and opinion to you, our valued readers.</em></p><p>For more on DFP visit their <a href="http://www.dfpartners.com.au/">website</a>.</p></div></div></div></div></div>

The development market has undergone some significant shifts over the past 12 months, and 2018 is expected to see these changes solidify

0d3eca54-b552-47e2-99d2-2721b64386f4

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong>The build-to-rent property model is increasingly garnering interest from property developers across the country.  </strong></p><p>Developers such as Grocon, Lendlease and Mirvac are all looking at implementing the model in Australia.</p><p>Prooperty finance experts Development Finance Partners have investigated the build-to-rent model in the context of Australia’s financial systems and taxations structures.  </p><p>The build-to-rent model is increasingly gaining popularity in the US and elsewhere internationally, however in Australia developers are faced with some unique hurdles to implement the model In Australia successfully.</p><p>There are some key challenges that the Australian market faces when it comes to successful build to rent development.</p><h2><strong>There are significant differences when it comes to international markets and Australia</strong></h2><p>Build-to-rent&#x27;s financial success in the US is made possible partly because of the financial system in the US, particularly the banking and debt systems.  </p><p>The market in the US is primarily driven by private capital.  </p><p>The US build-to-rent market has also delivered projects aimed at capturing tenants across all income levels.  </p><p>In the UK, build-to-rent has also started to thrive. Taxation laws have been adjusted which has actively incentivised the market.</p><p>These tax changes are shaping the market and preparing it for growth. The build-to-rent sector is proving instrumental in providing affordable housing options in the UK.</p><p>Comparatively, in Australia, the current market conditions mean that a large-scale build-to-rent model will only work if it caters primarily to high-level rentals.  </p><p>Our conservative, stringent and regulated banking sector also does not have the evidence of the model working yet in Australia to support funding this type of asset.  </p><p>Additionally, Australia doesn&#x27;t have the low rental supply that has driven success in other International markets.  </p><p>The taxation landscape for build-to-rent assets is also currently unfavourable to institutional investors that are looking at investing in this asset class, creating a lack of patient, low-cost capital for developers.</p><h2><strong>Recent announcements now classify build-to-rent assets as Management Investment Trust Assets </strong></h2><p>Prior to 2017, build-to-rent assets could be accessed through a Managed Investment Trust (MIT), where institutional investors would be taxed at 15 per cent of profits – allowing institutional capital to compete on a local level. </p><p>However, the Australian Taxation Office has recently suggested that build-to-rent assets (and residential property in general) are no longer allowable within a MIT structure. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/ae01d0bc-370f-423b-bab6-b030cbe01437.png" width="1360"/></picture><div><span style="align-content:center;opacity:0.8">JLL Research, Real Capital Analytics (Transactions larger than $5.0 million, includes entry-level transactions)</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>According to JLL research, this decision was based off the fact that a build-to-rent investment is not primarily for the income generated, but instead it is reliant on capital growth. </p><p>The only exception to this ruling is affordable housing, which is still allowable within a MIT structure. </p><p>Up until very recently this meant that institutional investors investing in build-to-rent assets would be taxed at the company rate between 27.5 per cent and 30 per cent instead of being taxed at 15 per cent under an MIT ownership structure. </p><p>On 26 July this year Scott Morrison announced long awaited reforms to the legislative framework that govern how build to rent projects are treated by the Federal Government from a Managed Investment Trust “MIT” perspective. </p><p>The new rules will provide certainty to local and international institutional investors who wish to invest in both the development and long-term hold of build to rent assets. </p><p>The new rules will also allow MIT’s to staple together active asset investments (development assets) with the completed passive build to rent assets under the one ownership structure with each part of the business taxed appropriately. </p><p>This move has been welcomed by the property industry as it provides even greater certainty to MIT investors which will help encourage the growth of this embryonic asset class in Australia. </p><h2><strong>Purpose Built Student Accommodation as an example</strong></h2><p>Purpose Built Student Accommodation (PBSA) has begun to thrive in the past 5-10 years in Australia.  The model is very similar to build-to-rent; however, there’s fundamental similarities and differences between the two asset classes that both investors and developers need to understand.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/8e76f8b4-3bc5-4125-8958-878aaaa53338.png" width="1533"/></picture><div><span style="align-content:center;opacity:0.8">Purpose Built Student Accommodation (PBSA) have begun to thrive in the past 5-10 years in Australia.</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>While the PBSA and student accommodation, in general, is the closest comparison to build-to-rent in Australia, investors can’t overlook the clear differences between providing accommodation for students and creating long-term rentals for the Australian population in general.  </p><p>Both rely on different market factors, including population growth, rental demand and investment yields.</p><h2><strong>The future of the sector</strong></h2><p>Despite the challenges the Australian market presents, the asset class could still grow organically over the next 5-10 years. </p><p>Some developers are using build-to-rent as a means to bring their projects online in current market conditions (as a way to hold onto stock as pre-sales become increasingly difficult).  </p><p>This could create a flow-on effect of slow and organic growth for build-to-rent. However, it is unlikely that it will ever reach the heights it has in international markets until market conditions become more favourable in Australia.</p><h2><strong>An alternative to build-to-rent</strong></h2><p>There are alternatives to the build-to-rent model that developers should still be looking at.  </p><p>Specifically developments based on a build-to-sell model while retaining some stock within a development specifically for a build-to-rent purpose. </p><p>Developers can then sell down debt with pre-sales while holding their profit in a balance of stock.</p><h2><strong>Want to know more? Download the comprehensive whitepaper</strong></h2><p>This article is a summary of an in-depth 18-page whitepaper for download at the Development Finance Partners website.  </p><p>Access the whitepaper for an in-depth analysis on the differences between Australian and international markets, how student accommodation compares, current case studies the feasibility of build-to-rent as well as detailed funding tables and models.  </p><p><a href="https://www.dfpartners.com.au/the-reality-of-bringing-built-to-rent-to-australia/"><strong>Click here</strong></a><strong> to download the whitepaper.</strong></p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong><em>The Urban Developer</em></strong><strong> is proud to partner with </strong><a href="https://www.dfpartners.com.au/"><strong>Development Finance Partners</strong></a><strong> to deliver this article to you. In doing so, we can continue to publish our free daily news, information, insights and opinion to you, our valued readers.</strong></p></div></div></div></div></div>

The Build To Rent (BTR) property model is increasingly garnering interest from property developers across the country.  

598b388e-d796-4786-be26-da41a937799d

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>The coronavirus crisis is creating an unprecedented “new normal” for workplaces globally—including property developers and those providing funding for projects.</p><p>According to leading financiers Development Finance Partners (DFP), daily updates from its lenders have allowed the business to create three tiers in order to categorise pressing needs.</p><p>The first tier, known as “short funded”, are private lenders who arrange individual investors to fund individual projects on a case-by-case basis. </p><p>The majority of these lenders have pulled back all lending on loans yet to settle.</p><p>The second tier of lenders are “institutional fund managers” who have long-term committed funding lines and whose appetite for new development and construction finance has significantly reduced to low or zero levels.</p><p>The third are “institutional fund managers who are well-capitalised” with high capability who have a mandate from their shareholders to counter-cyclically lend to quality credit risk in order to increase their market share.</p><p>In doing this fund managers create new lending relationships with high-end builders and developers who they can support during this challenging time.</p><p>So, what should you be doing if you are currently in the process of a development and are trying to navigate these uncertain times?</p><h2><strong>Prepare for an increased level of reporting</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>Property developers and investors need to get ahead of requests for information from their financiers to adequately manage their financing risk.</p><p>Construction delivery timelines actuals versus forecast, pre-sales settlement risk, on-completion sales value risk and Covid-19 management plans are all high priorities.</p><p>Financiers will be using this information to assess what is the impact on their lending safety, which will be assessed against potential breaches of your approved loan terms.</p><p>Considerations include potential loan covenant breaches such as loan to value ratio on comp or loan to cost, the impact of project delays on an approved loan term, pre-sales risk on approved capitalised interest budget, approved loan term and project feasibility.</p><p>“We highly recommend you consider all of these factors in order for you to communicate your risk management strategy to your financiers,” DFP managing director Baxter Gamble said.</p><p>“This will help them become comfortable that you have considered and understood the risks, and they will be assured that you are already managing the risks well.” </p><p>Relatively minor potential breaches in approved loans are also likely able to be negotiated without too much stress or risk. </p><p>“More significant potential breaches of approved loan terms may need some higher level of strategic thought and advice required to vary, restructure or refinance your existing financing structure at both a group level and individual project level.”</p><p>“This is especially true if the majority of your loans are interlinked with the same lender.”</p><h2><strong>Consider all of the following financing risks at the moment</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>“Find out which of the three categories mentioned earlier that your financiers are in,” Gamble said.</p><p>“Ask them if they remain committed to settle any approved but undrawn finance approvals whether they be at indicative of formal approval stage?”</p><p>An early approach will enable developers to understand where they stand in order to obtain finance approval either as a backup if your existing financier can’t give you a firm undertaking that they will settle. </p><p>“Don’t leave this until the last minute especially if you have to settle a land purchase contract.” </p><ul> <li><p>What loans do you have that expire within the next 3-12 months? </p></li><li><p>Any loans that expire in the next year have re-approval risk.</p></li><li><p>How much risk do you have with the same lender?</p></li><li><p>How are your loan covenants tested and when are they due to be tested? i.e. revaluation (LVR’s) and loan servicing risk (ICR’s).</p></li><li><p>Any testing or scheduled reviews occurring within the next 12 months present a potential loan covenant breach which could trigger events of default and a cascade of other resulting risks.</p></li></ul><p>Now is the time to create additional liquidity via releasing equity in your group’s assets into approved lines of credit secured against your passive assets (such as your residual stock, land assets or income producing assets). </p><p>Cash is king in volatile and opportunistic markets like we are experiencing now. Cash gives you the ability to solve all sorts of risk and be in a position to counter-cyclically invest. </p><h2><strong>Stay in close communication with your trusted advisors, especially your accountant</strong></h2></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/aa78be35-23af-4d78-ba49-9fddbec9a3f8.jpg" width="1365"/></picture><div></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>This will ensure developers are able to take advantage all of available stimulus measures being progressively introduced by all levels of government. </p><p>Developing cashflow focused 30-, 60- and 90-day plans would be a valuable way to focus attention in a very scattered environment. </p><p>“Knowing where a business stands with its existing financiers and having access to as many alternative financiers has never been more important than now to ensure you are able to successful manage your financing risks,” Gamble said.</p><p>Several category three financiers have given DPF a mandate to grow the volume of new loans written during this period.  </p><p><a href="https://www.dfpartners.com.au/contact/">Development Finance Partners</a> can assist with pragmatic and highly strategic risk management plans to help businesses work through the current challenging climate. </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong><em>The Urban Developer</em></strong><strong> is proud to partner with </strong><a href="https://www.dfpartners.com.au/"><strong>Development Finance Partners</strong></a><strong> to deliver this article to you. In doing so, we can continue to publish our free daily news, information, insights and opinion to you, our valued readers.</strong></p></div></div></div></div></div>

The coronavirus crisis is creating an unprecedented “new normal” for workplaces globally.

10 Durbar Avenue, Kirrawee NSW 2232

<div class="row" data-reactroot=""><div class="cell cs12 cx12"><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p>After testing the market with a small-scale affordable housing development in Sydney, property advisory group Development Finance Partners (DFP) is tapping investors for $5 million for a further three, small-scale developments.</p><p>According to DFP principal Baxter Gamble, there is a significant appetite among many investors, in particular the trustees of self managed super funds, looking for low-risk, quick turnaround projects that deliver yield.</p><p>“Our first foray into the affordable housing market was the development of a small eight townhouse project in Kirrawee, Sydney,” Baxter said.</p><p>“DFP sourced finance and took equity in the development.  </p><p>“Its success and the fact that it reflects the core of our group’s social values prompted our involvement in a further two projects.</p><p>“For each project or group of projects, we seek discrete investment and to date, three projects have been fully subscribed.” </p><p>In southern Sydney, a seven townhouse project has been completed and sold in the suburb of Kirrawee.</p><p>In neighbouring Miranda, DFP has two projects—one features eight townhomes and is under construction and with five pre-sales, and another, also with eight properties, has development approval.  </p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><div><picture><img src="https://tud-prod-tudmedia-oj9w2zshuo0o.s3.amazonaws.com/raw/images/27cce559-dab0-4adf-b290-8f81cb921426.jpg" width="800"/></picture><div><span style="align-content:center;opacity:0.8">▲ 10 Durbar Avenue, Kirrawee. Image: DFP</span></div></div></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><br>“In total, our first three projects feature 23 townhouses with six allocated for affordable rent or purchase. </p><p>“We are now looking to raise $5 million for a further three projects.  The minimum investment is $50,000.”</p><p>DFP has opted for small-scale developments as they offer investors:</p><ul> <li><p>A shorter time frame for returns—about two years</p></li><li><p>An attractive 12 per cent return and potential profit share</p></li><li><p>Cost certainty which is generally assured in small-scale projects.</p></li></ul><p>For purchasers and affordable rent tenants, the attractions are:</p><ul> <li><p>Location: sites must be within a reasonable distance of a business district </p></li><li><p>The quality of accommodation:  townhouses are highly appealing</p></li><li><p>The right price point.</p></li></ul><p>Despite its success to date, DFP holds to the view that although there is potential for affordable housing to become a mainstream property class in Australia, many tax, financial and regulatory hurdles must be overcome in order for this to occur. </p><p>“We assert that Australia presents a unique set of hurdles that keeps institutional investors away from the local market.”  </p><p>“Australia’s rigid banking sector, stringent tax laws and an inflexible financial system that lacks innovation all combine to ensure that affordable housing  on a large scale will not thrive in this country without significant changes.”</p><p>In the meantime, we focus on small-scale developments that minimise risk, offer an attractive return for investors and assist in the goal of improved social cohesion.</p><p>“We realise that our involvement makes only a small dent in badly needed affordable housing, but it is surely worthwhile to enable well-located accommodation for workers in industries on which we all rely.”</p><p>DFP is currently presenting its investment case to accounting firms and investment advisers in three states—New South Wales, Victoria and Queensland.</p><p>“Few of the people to whom we present are informed about the investment potential in affordable housing and there is some initial reluctance to recommend investment to clients as property development is viewed as moderate to high risk.</p><p>“But, demonstrably, the demand for affordable housing is there and the business case stacks up well in an era of exceptionally low interest rates.”</p><p>For more information on Affordable Housing Investment opportunities visit the <a href="http://dfpfundsmanagement.com.au/">DFP Funds Management website</a>.</p></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><hr/></div></div></div><div class="row ci"><div class="cell cs12 cx12"><div class="ci cl"><p><strong><em>The Urban Developer</em></strong><strong> is proud to partner with </strong><a href="http://dfpfundsmanagement.com.au/"><strong>DFP Funds Management</strong></a><strong> to deliver this article to you. In doing so, we can continue to publish our free daily news, information, insights and opinion to you, our valued readers.</strong></p></div></div></div></div></div>

Development Finance Partners (DFP) is tapping investors for $5 million for a further three, small-scale developments.

Untitled design (5).jpg

<p>Committing to an unconditional $5-million offer is a big gamble for a small property developer with no finance in place, but <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_26854878881644912341398" aria-invalid="spelling" data-mce-highlight-id="mce-cram_26854878881644912341398" data-mce-bogus="1" data-mce-annotation="Alasdair" data-mce-lingo="en_au">Alasdair</span> Baker was banking on his trusted professional partners.</p><p>The small town of <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_63261019791644912341399" aria-invalid="spelling" data-mce-highlight-id="mce-cram_63261019791644912341399" data-mce-bogus="1" data-mce-annotation="Pottsville" data-mce-lingo="en_au">Pottsville</span> on the northern NSW coast is a hidden gem loved by locals for its pristine beaches, and great surfing and fishing, so <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_130992265101644912341399" aria-invalid="spelling" data-mce-highlight-id="mce-cram_130992265101644912341399" data-mce-bogus="1" data-mce-annotation="Alasdair" data-mce-lingo="en_au">Alasdair</span> Baker of <u><span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_204325879111644912341399" aria-invalid="spelling" data-mce-highlight-id="mce-cram_204325879111644912341399" data-mce-bogus="1" data-mce-annotation="Omira" data-mce-lingo="en_au">Omira</span> Property Group</u> was delighted to find a 2000 sq m site for sale.</p><p>“I had just finished a major <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_687870341121644912341399" aria-invalid="spelling" data-mce-highlight-id="mce-cram_687870341121644912341399" data-mce-bogus="1" data-mce-annotation="rebranding" data-mce-lingo="en_au">rebranding</span> and website redesign to position my company as a developer of quality lifestyle homes in beautiful locations, based on the philosophy ‘we believe where you live, should inspire you every day’,’’ Baker said.</p><p>“So, when I first saw this site on the market, I remember leaping around the living room yelling ‘Yes! This is exactly the kind of project I’ve been looking for, this is what it's all about’.</p><p>“It’s in such a great position, with direct access to the beach and a crystal-clear creek, and anybody who’s been to <span class="mce-spellchecker-annotation mce-spellchecker-word mce-cram_429077614131644912341400" aria-invalid="spelling" data-mce-highlight-id="mce-cram_429077614131644912341400" data-mce-bogus="1" data-mce-annotation="Pottsville" data-mce-lingo="en_au">Pottsville</span> knows what a special part of the world it is, with an unspoiled ‘villagey’ feel.’’</p><p>The property had only come on the market that day, but when Baker contacted the agent, he discovered it was already hotly contested.</p><p>“The agent told me I was about the hundredth caller,’’ Baker said.</p><p>“Eventually it came down to a battle between me and three or four other people. My offer was close to the mark, but in the end, I didn't get it. It sold to another developer.’’</p><p>A few weeks later, on an off-chance, Alasdair decided to call the agent for an update and was stunned to learn the winning bid had fallen through and the property was back on the market.</p><p>Without hesitation, he pitched an unconditional offer for the original $5 million sale price plus $5000, which the seller promptly agreed to.</p><p>“So, it went from me not having the site to suddenly my offer being accepted, and I had also committed to a short settlement period to get it over the line,’’ Baker said.</p><p>“That left me very little time to line up investors, draw up agreements, create a special-purpose vehicle, work out how to fit this all into our existing schedule and, of course, arrange finance.’’</p><p>But having worked on several projects with finance experts Development Finance Partners (DFP) in the past, Baker was confident they would also back this one.</p><p>After raising 30 per cent equity, he approached them for assistance to arrange a land bank loan for the balance as quickly as possible.</p><p>“I needed a fast, innovative solution, so I went to DFP because I know what they’re capable of,’’ he said. “They’ve worked with me for years now, and they always deliver.</p><p>“Within three weeks their valuers had been out to the site, their credit department had cleared my application, the documents had been through the solicitors and signed, and the loan was ready for drawdown.</p><p>“That’s an impressive turnaround—any developer who’s ever dealt with a bank can tell you it’s impossible to get anything done in that timeframe.”</p><p>The finance is on terms of 6 per cent pa, with legal fees and the first three months’ interest capitalised. Monthly interest payments thereafter will largely be offset by income from the tenants of an existing seven-unit block until site clearing begins.</p><p>With a DA for eight new dwellings lodged with the council, and sales and marketing well under way, Baker knows DFP will be there to arrange construction finance for him when he needs it.</p><p>“Having people you can rely on really takes the pressure off, which is important because this is a stressful business,’’ he said.</p><p>“I've got a great bunch of consultants around me now, from architects to planners and engineers, and my finance partners DFP are an essential part of the team too. I can pick up the phone to them whenever I need and within 10 minutes, I've got what I need to make a decision.</p><p>“Sometimes you just want a sounding board for your ideas, and I use them for that too, so they add a lot of value for me. I get calls all the time from other financiers inviting me to come in and have a chat, but I don't see any reason to. DFP have always delivered when I needed them—it’s that simple.’’</p><p>DFP director Matt Royal said that trust and goodwill was based on mutual respect.</p><p>“We know Alasdair completes his projects on time and on budget, and repays his lenders as agreed,’’ Royal said. “And he knows we always perform for him and do everything we promise.</p><p>“At DFP we have a strong network of contacts across the industry, so we’re able to negotiate a wide range of funding options for property transactions, from bank and non-bank lending to mezzanine finance, pref equity and joint ventures.</p><p>“We understand the problems developers face raising finance, and we help them find the right solutions.’’</p><p>Development Finance Partners work with property developers looking to finance construction and land-bank projects and can arrange fast and flexible finance approvals to suit any project, from large to boutique.</p><hr><p><strong><em>The Urban Developer</em></strong><strong> is proud to partner with <a href="https://www.dfpartners.com.au/" data-mce-href="https://www.dfpartners.com.au/" target="_blank" rel="noopener">DFP</a> to deliver this article to you. In doing so, we can continue to publish our daily news, information, insights and opinion to you, our valued readers.</strong></p>

Putting an offer in for a site too good to miss, knowing DFP had his back, is part of why Alasdair Baker of Omira Property Group works with them…