Oak Laurel – Commercial property development finance

We can arrange commercial property development finance for:

  • Office developments
  • Industrial developments
  • Shopping centre construction projects
  • Hotels and Accommodation projects

We can arrange multi-dwelling property development finance for:

  • Small to large multi-dwelling townhouse developments
  • Apartment construction (multi residential apartment projects)
  • Mixed use retail and residential projects.

Contact us about your development finance needs.

An Oak Laurel mortgage broker will go through your project with you to ascertain the best way forward.

OAK LAUREL

Oak Laurel Mortgage Broker
Benefit from our experience
 
 

Development finance borrowing capacity and maximum loan to value ratio (LVR)

 
Commercial development finance borrowing capacity will depend on your project and the lender’s criteria.
Generally, loan to value ratio for Land Development Cost (LDC) funding will be up to a maximum of 70% – 80%.
Generally, Gross Realisable Value (GVR) financing can be provided up to a 65% – 75% loan to value ratio.

Land Development Cost (LDC)

Land Development Cost finance provides property developers with the funds based on the developer’s costs to acquire and construct the development. It also includes soft costs such as architecture, engineering and interest costs.
This is the most common form of development finance and is generally limited to between 70%-80% of the overall Land Development Costs of the development project. The developer may be required to achieve a specified level of pre-sales before finance will be approved.

Gross Realisable Value (GRV)

Gross Realisable Value finance provides property developers with the funds based on the projected completed value (excluding GST) of the property development. With this type of finance, you may be able to borrow between 65%-75% of the expected end value of the final development. Depending on the project, this types of finance may enable you to fully cover both hard and soft costs without incurring any out-of-pocket expenses.
Often pre-sales are not required when using GRV finance, but it is generally only available for smaller developments only (under $5.0 million).

Mezzanine Finance

Mezzanine finance is typically only available to experienced property developers. Mezzanine finance involves the use of money from external investors rather than deposit capital from the developer or equity partners. This funding supplements senior debt (LDC and GRV funding). Rather than being secured by the actual real estate property, mezzanine loans are secured by the stock that is held by the developers company that owns the real estate. The real estate itself has already been used to secure the first, or primary loan. The interest rate on a mezzanine finance facility is normally higher than other property development finance methods, and is based on a number of factors including project risk.
 

Getting commercial development finance approved

 
When approaching a banks and lenders for commercial development finance (including for multi-dwelling property developments), the developer needs to provide quality information and knowledge about the site and the development you intend to build.
These should include:
  • type of development (residential vs commercial)
  • cost of the land
  • cost of construction
  • cost of marketing and selling agents fees
  • other costs (including the projected development financing costs; stamp duty, professional and legal fees, architect, engineering, quantity surveyor, contingency allowance, etc..)
  • the profit margin on the development (including accounting for GST),
  • the potential gross realisation of the development,
  • the suitability for the location and the saleability of the finished property(s)
  • financial strength of the property developer
  • how much equity you bring to the development project
  • the development experience (track record) of the developer and the developers team (project manager, architect, lawyer, accountant, builder) in relation to the size and complexity of the project.
Preparing and a development project business case or dossier with the merits of the development project including what you intend to build and sell, makes convincing the lender to approve your development finance much easier.
 
 
Oak Laurel Finance Brokers – Development finance made easy!
Oak Laurel Mortgage Broker
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s