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%)
Compass Centre, Bankstown (12 Month Bridging Loan LVR 33%)
Wirrabara Village, Dural (12 Month Land Facility LVR 82%)
North Bondi (14 Month Land and Construction Facility LVR 82%)
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.