Save Millions with this new Property Development Lending method.
There's no question the Australian economic recovery out of the COVID-19 induced recession is well underway. Rock bottom interest rates, money printing, the government-imposed restrictions, and a vaccine have all played an important part in dragging Australia out of its first recession since 1991.
It goes without saying that Australia's construction industry has an enormous role to play in Australia's economic rebound. The industry has a long history of being one of Australia's largest employers. It has also consistently played an important role in laying the foundations (pun intended) for economic growth and national stability.
This presents an incredibly exciting opportunity for property developers all across Australia to create ground-breaking (no pun intended this time!), profitable projects that can help shape our country’s future.
It's Getting Harder And Harder To Get The Capital You Need From The Big Banks.
While the importance of Australia's construction industry is obvious, traditional bank lenders' interest in funding commercial and residential property developments remains subdued. Their lack of interest comes in response to tougher lending regulations, the banking royal commission, and higher capital holding requirements.
Interestingly, the demand for commercial and residential property development finance has not diminished, and neither has the quality of borrowers, making it even more challenging for developers to convert their projects from render to reality. Data from consulting firm Plan1, shared with the Australia Financial Review identified the four big banks, who once controlled 85 per cent of the Australian commercial real estate debt market, have shrunk their exposure to 71.6 per cent. Their lowest level of exposure since the GFC. Meanwhile, In the residential development market, banks' debt exposure has plummeted 10% in only two years.
Not only is the bank's appetite for property development lending at record lows, but the amount of pre-sales developers are also required to demonstrate is soaring. In October 2020, Stamford Capital released the results from their Real Estate Debt Capital Markets Survey. The survey revealed that a whopping 93% of banks require 60-100% of presales, up 8% since 2019.
So, with traditional financing options becoming increasingly unattainable, it’s clear developers need a different path to source capital for their developments. The questions are where, and how? The good news is, Iridium Private have answers to both.
The Faster, More Cost-Effective And Easier Method To Get The Finance You Need For Your Next Project.
Head of Finance and Wealth at the ABS, Katherine Keenan said "owner-occupier housing loans grew 1.9 percent, which was the strongest growth seen in four years” in the fourth quarter of 2020. So, as a property developer looking to capitalise on the booming owner-occupier market and the rise of e-commerce driving demand for warehouse capacity, how can you ensure your developments are fully funded in a cost-effective and timely manner without having to rely on the stringent lending criteria and extensive assessment periods notorious with the big banks?
This is where access to capital from non-bank lenders can help developers.
Why non-bank financing can potentially save you millions on your next development.
Non-bank lending options are typically sourced from private individuals or private companies. Said individuals/companies provide funds to lend to borrowers under their own financing terms.
Iridium Private has become adept at tapping into their pool of over 50 trusted non-bank lenders to curate specialised property development financing strategies in a timely and cost-effective fashion. They’ve also demonstrated a proven capability to coordinate leading structured finance solutions for the most challenging and intricate transactions. Iridiums expertise is including, but not limited to construction finance, site acquisition, residual stock and land subdivision.
It’s fundamental property developers consider all options during all phases of the project lifecycle. Selecting the most suitable financing partner from the plethora of options available is certainly no exception. To ensure you’re not counting on the banks to satisfy your financing needs, it’s important that you consider accessing capital through non-bank debt, equity, or joint venture funding. Doing so could save you precious time and the associated opportunity cost. Find out how by booking a free growth session with the Iridium Private today.
There's never been more opportunity to secure non-bank lending for your next development.
The Australian market for non-bank finance is largely underdeveloped in comparison to the rest of the world. With that said, there’s no question the industry is set to boom down under.
David O’Connor, Investment Director at MaxCap Group stated at the Property Funds Association's 2019 Conference that “Australia’s alternative lending market is relatively immature. Globally the share among alternative lenders is approximately 37%. In the North American market it is approximately 48%, yet in Australia, alternative lending currently only accounts for approximately 10% of lending.”
At the same conference, Tony Moussa, Director of Corporate Finance at KPMG mentioned that “non-bank lending has evolved in Australia to become increasingly more competitive, and we are seeing many blue-chip deals and lenders emerge”, emphasising the ever-increasing maturity of the non-bank financing space.
Non-Bank Lending Solutions Focus On Your Company’s Needs, Not The Lenders.
Iridium Private are renowned for their client-centric approach and commitment to providing a bespoke service. Why? Because they recognise each client's needs are different, which means the associated service offering must be tailormade.
Iridium are acclaimed for their flexibility towards a borrower's specific needs and requirements to ensure they’re provided with the most suitable lending solution to meet their project objectives. And because non-bank lenders aren’t regulated as highly as the banks, this is entirely possible.
For instance, non-bank lenders can often provide options for borrowers who don't meet the banks ever-increasing LVR and pre-sales requirements.
Iridium and their network of lending partners tend to assess the feasibility of the property development itself. Not necessarily your experience as a developer, equity contribution or pre-sales. Just look at Stamford Capitals Real Estate Debt Capital Markets Survey, which revealed that 50% of non-banks require no presales, up from 34% in 2019.
Here's How Iridium Private Helped Peak Property Achieve Their Goals.
“From the Team at Peak Property Group, we thank the guys at Iridium Private as it has been a pleasure to deal with them so far. They are a group that are solution focussed and they understand the true meaning of building relationships that last. That is the reason why we continue to return” - Michael Tiemen, Peak Property.
In today's market, it's more important than ever to secure rapid finance.
Things move very quickly in the ever-evolving world of property development. And that means changes in market conditions can have an enormous impact on your project's bottom line.
As an experienced developer would say, “cash flow is king in property development”. That's why you need rapid financing options, and Iridium Private has developed a reputation for providing just that.
If you value fast access to capital, get in touch with the team at Iridium Private today and learn how they can help fast track your development.
Developers are utilising their capital more effectively by employing smart non-bank financing strategies.
The uptake in popularity for non-bank financing for property development purposes globally has been astounding. What’s equally impressive is the way that capital is being delivered.
Mezzanine Lending
Smart capital utilisation strategies like mezzanine lending provide developers with the flexibility to stretch their lending capacity beyond the limits of customary construction financing facilities. In other words, it bridges the gap between senior debt and equity contributions.
The appeal of mezzanine debt for developers arises from the opportunity it provides to leverage their capital and employ funds that they would otherwise have committed to the project to better use. Like possibly locking down another development site and spreading their risk.
Mezzanine financing is also typically passive by nature. As a result, it grants developers more control to manage the project to their liking (assuming it's progressing as planned).
Preferred Equity Solutions.
Preferred equity performs a similar function to mezzanine finance by allowing developers to maximise their profits as a percentage of their equity contribution.
The chief distinction between the two is that no second mortgage or junior debt secured by a lien is placed on the proposed development site when adopting a preferred equity strategy.
Instead, preferred equity involves a direct equity investment in the property-owning entity with a fixed and agreed preferential return on the development. Preferred equity holders are rewarded by being paid their distributions prior to the “common” equity interests (usually the property owner).
The appeal towards preferred equity financing exists because there is no obligation for a registered second mortgage or a subordination of debt deed to be arranged by senior debt lenders. All of that translates to potentially significant time savings.
How Iridium Private can work with you to allocate capital more effectively.
Iridium can source funding for your development across the full capital stack from their trusted network of non-bank lenders. Starting from senior debt solutions, all the way to structured finance including mezzanine debt, equity investments and JV solutions for developments from $5m, all the way to $100m dollars.
You can rest easy knowing Iridium will be working around the clock to provide you with a bespoke financing solution. Just listen to what Neil Saligrama, CEO at Compare and Connect AFR Fast Starters had to say about Iridium Private:
“You need a finance partner who can manage an idea through to execution. End to end. The trusted advisor you can rely on. They can walk the talk. I found that with Iridium Private.”
If there’s one thing you take from this whole article, let it be this.
Not only are developers turning to non-bank lending strategies to finance their developments as a result of the banks becoming more deeply regulated and constrained, but they’re also becoming smarter with their capital allocation strategies.
As our economy looks to move past the COVID-19 crisis and into greener pastures, it’s fundamental for developers to understand how non-bank lending and efficient capital allocation strategies can set their projects up for overall success.
That's why it's logical to collaborate with an experienced financing partner like Iridium Private. It makes smart business sense to take advantage of their wealth of knowledge and extensive network to put you in touch with the most suitable and accredited non-bank lenders.
To learn more, about what Iridium Private can offer your business, book your growth session today. In this session, we’ll talk about your specific financing needs and objectives, and the best way for you to meet them. Remember, this free session is about helping you, not helping us. So if you don’t feel like we’re a good fit after this session, there is absolutely no obligation to use our services.