• Full doc
• GRV
• Mezzanine
• Joint venture or equity partner

Development finance

Finance Cafe can arrange development finance for residential, commercial, office, industrial, retail and hospitality orientated property throughout Australia and can also obtain funding for land subdivisions.

Development finance can be structured in many ways, tailored to the specific needs of the project. Typical development funding structures fall into two main categories; hard cost based facilities and the GRV based facilities:

Hard Cost Facilities

Hard Cost based facilities are typically offered by Banks and other major institutions. The loan amount is restricted to a maximum percentage of the actual hard costs of the project. Typically the maximum percentage is approximately 70% to 80% of the hard costs of the project.

• Hard Cost Development facilities can fund up to 85% of hard costs
• Loans up to $150M
• Interest Rates start at 7.35% pa

Full Doc options

Full Doc – Typically major lending institutions will accommodate full doc development needs up to 80% LVR with the developer putting in 20% cash or secured equity. As well, the lender may require a minimum requirement of pre-sales before funds can be drawn down.

In this example, a multi-unit site with DA was purchased for $2.6M. Development approval for 37 units with a build cost of approximately $10M.

Gross Realisable Value (GRV) Options

This type of funding is typically sourced via non-bank financiers and private lenders. GRV Development Finance is generally less stringent and also generally requires minimum or no presales. GRV development finance is based on the End Sale value of the project, on a cost to complete basis.  Maximum LVR for this type of facility is 70% of GRV.

At land settlement the loan can not exceed 70% of the value of the land ‘as is’.  Where the property was acquired without the relevant approvals and the property developer put in place the relevant approvals and significantly added value to the land it is possible to borrow 100% of the land and project costs. Where the developer acquired an approved development site it means that they will need to provide 30% of the land purchase price on the assumption that the borrowings do not exceed 70% of GRV the project. The project will be fully funded from there on.

Gross Realisable Value based facilities are based on the sale value of the project, on a cost to complete basis.  The GRV based facility focuses on the profit potential of the project, and are typically sourced through private funding channels.  By utilizing GRV based products means that potentially 100% of project costs can be funded.

• GRV based facilities can fund up to 70% of the end value of the project
• Loans up to $20M 
• Interest Rates start at 8.00% pa

There is obviously a great difference in the mechanics of the two basic funding structures. The funding mechanism utilized will be largely dependant on the requirements of the project, ie to minimize costs of the project, or to maximize the borrowing potential.

GRV Development Finance as it provides the following benefits:

• Less borrower’s equity is required thereby increasing return on investment;
• It allows the developer’s available equity to be used elsewhere and effectively diversifying risk;
• It allows the property developer to continue with the project on a ‘stand alone’ basis;
• It is less stringent and more flexible than traditional development finance; and
• Minimum or no presale requirement could greatly increase the profitability of the project and reduce development time.

Mezzanine finance & joint venture partner (equity finance)

In situations where the developer requires additional funding above those offered in a Hard Cost or GRV based facility Finance Cafe can source additional funding to meet these needs by using either mezzanine finance or joint venture partner (equity finance).

Mezzanine Finance

Finance Cafe can arrange mezzanine funding for both construction and property investment loans tailored to the requirement of the project.  Mezzanine funding is typically sourced from specialist financiers and private investors seeking higher returns than traditional investments.

Mezzanine funding is typically used in situations where the borrower has insufficient equity to fund the project, requires additional funding to complete a project or where quicker more responsive financing can take advantage of market opportunities.

·     Mezzanine finance up to 80% of the end value of the project

·     Loan Amounts up to $15M 

·     Interest Rates start at 15.00% pa

Equity Finance (Joint Venture Finance)

Finance Cafe can arrange equity participation in acceptable projects.  Equity finance is typically a joint venture where up to 100% of project costs are covered for land or site acquisition, land subdivisions and development projects. Equity finance is typically secured by a second mortgage position, or by taking a direct equity position in the project.

Equity participation is particularly useful in situations where the developer requires the additional expertise or balance sheet position of another party to ensure that the project proceeds to a mutually profitable outcome.

·     Joint Venture finance of up to 100% of costs project

·     Amounts up to $20M 

·     Fee based on profit share

Finance Cafe Pty Ltd  ABN: 43 113 855 173

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