31st January 2018 /
debt management

Debt Markets Continue to Tighten – $80 million of First Mortgage loans settled in December 2017

In December 2017, White & Partners settled over $80 million in first mortgage land and construction loans across four projects in Sydney.

In December 2017, White & Partners settled over $80 million in first mortgage land and construction loans across four projects in Sydney. Whilst the four projects varied in nature, risk profile and delivery status, we believe they shared common fundamentals of being well located properties with significant underlying value being undertaken by experienced sponsors.

Located across Sydney, the projects ranged from a mixed use apartment development in Ashfield, luxury duplex development in North Bondi, shopping centre in Bankstown and a land bank designated for retirement living in Dural. A brief overview of the projects is provided below.

The Place, Ashfield (18 Month Land and Construction Facility, LVR 72%)

  • Funding designated for the development of a 8 storey mixed use project comprising 91 residential dwellings and 7 retail lots, located 300 metres from the railway station
  • Project is largely pre-sold
  • Construction is underway, with in ground works completed at the time of loan origination

Compass Centre, Bankstown (12 Month Bridging Loan LVR 33%)

  • Bridging loan for refinancing of a shopping centre situated on 8,173 sqm adjacent to the Bankstown train station
  • Development Application (DA) has been lodged for 471 apartments, 5,020 sqm of retail, 2,034 sqm of commercial and 794 carparks

Wirrabara Village, Dural (12 Month Land Facility LVR 82%)

  • 15.63 acres of land across three 5 acre titles within close proximity to Dural town centre
  • Developer is pursuing a DA for a retirement living community comprising 37 Villas, 80 Apartments and a 72 bed aged care facility

North Bondi (14 Month Land and Construction Facility LVR 82%)

  • Funding designated for the acquisition of property and development of luxury duplex development in the eastern suburb of North Bondi

With major banks lending more than 80% of all commercial real estate (CRE) debt in Australia (pre GFC, it was ~60%), we are not surprised that banks are tightening CRE lending to reduce concentration levels. Experienced developers with strong balance sheets that would have otherwise received funding a year earlier are increasingly being forced outside the regular banking system. The loans above also indicate that banks are not discriminating between property location, project scale, asset classes and developer profiles.

The current environment has opened up opportunities for private first mortgage lending at rates traditionally associated with the mezzanine space. However, it will be interesting to see how long the current window lasts, especially with the major banks due to receive repayments from the 230,000 apartments penned for completion in 2018. At White and Partners, our focus has always been to lend with a view of building long term relationships with both investors and developers, rather than isolated transactions.