Borrower demand in these sectors is higher than the availability of conventional finance, and the demand also outweighs the willingness of banks to lend in today’s credit environment.
It’s now common practice to read about how non bank lenders are funding projects in the residential or commercial space. Especially when lenders like White & Partners can offer more lenient and flexible covenants and lend more than a traditional bank.
More recently though White & Partners has been lending to new niches of borrowers including self-storage and pub/hotel projects. This is in addition to the Chinese developers with projects in key growth suburbs. In a number of cases, the banking covenants and/or the lending criteria are simply proving too inflexible for these borrowers.
A recent example of this is a $25 million first mortgage construction loan which has been extended to a pub expansion project in Peakhurst through White & Partners. The Project involves the refurbishment and expansion of the property into a modern hospitality venue comprising food, bar and gaming. The overall LVR was sub 60% with a proven and well established operator.
The banks didn’t like the trade up risk, which given White & Partners experience in the sector, was something we were comfortable with.
While White & Partners (and others) has traditionally focussed on land banks, development and investment loans, these more alternative opportunities through sub-sectors are now becoming more common. Many publicans, in particular, have sought term sheets to refinance away from their mainstream lenders due to restrictive covenants.
Industry intelligence is key in our diversification; investing in understanding the nuances and machinations of sub-industries and businesses in alternative sectors to responsibly lend. Our core business at White & Partners is investing, owning and operating assets across the property spectrum, as a result it’s unlikely that we’ll encounter any first mortgage opportunity in the property space we won’t understand.