An experienced owner/builder recently approached FAA as he was frustrated with his long standing bank who wanted to dilute down his borrowing ability because of his owner/builder status. They also decided to increase his pre-sale requirements to over 100% of debt coverage, creating unrealistic engagement terms.
The client had existing plans and permits to build 13 apartments, both 1 and 2 bedrooms, in a well located position in the suburb of Footscray, with an end value of $5.235m.
As the marketing campaign had only recently commenced, he only had two pre-sales to date. His intention was also to hold on to some stock with previous experience dictating better sales results towards the completion end of the project. This enabled prospective purchasers to admire the quality of the finishes compared with other stock in the area.
His bank simply would not entertain this position!
Through one of its GRV lenders FAA was able to arrange a superior borrowing package where the client obtained 65% of the end value of the project net of GST.
Furthermore the lender required only 4 pre-sales to enable construction to commence, and again because of the strong relationships FAA has with its lenders, they allowed one of the sales to be a related party transaction to his own SMSF.
The project is now in commencement stage well ahead of schedule, compared to where the bank’s 100% plus debt coverage position would leave him. Most importantly our valued client requires less of his own cash contribution towards the project, due to the superior borrowing power of the GRV
Facility.
If you’re a developer also experiencing increasing limitations by your bank to obtain development finance for your next project, contact Renato Sturma on 1300 780 196 to discuss a superior borrowing package today or email renato@financeadvocates.com.au
