Background
An experienced property developer was planning to purchase an 850sqm site in Auckland’s North Shore, which had an existing 1960s three-bedroom home, and redevelop it into four standalone houses.
The developer needed finance to support all stages of the project — from land acquisition, through to construction, and holding the stock as a long-term rental investment
Challenges
The developer faced several challenges:
- They struggled to find lenders who can finance the full development lifecycle, particularly the pre-development and post-development stages, at competitive rates.
- The case was further complicated as the developer had no resource consent. Most of the lenders were unable to support the initial land purchase.
- In addition, the developer required flexibility to capitalise interest and fees during the construction phase to support project cash flow.
Mitigants
Following a thorough assessment of the developer’s credit position and the project feasibility, we were confident that the application is a sound lending opportunity:
- The North Shore location offered promising rental potential
- The developer is reputable with a solid credit history.
- They had a clear development and investment strategy.
- We can provide funding for the land purchase and allow time for the developer to obtain resource consent.
Solution
We provided a staged lending solution to support the full lifecycle of the project. The developer was very pleased with our tailored approach, allowing them to focus on progressing the development with confidence.
Stage 1 – Pre-development
LOAN AMOUNT
$950,000
INTEREST RATE
7.95% p.a.
LOAN TERM
12-month
Stage 2 – Construction
LOAN AMOUNT
$3,200,000
INTEREST RATE
8.95% p.a.
LOAN TERM
12-month capitalised interest and fees
Stage 3 – Investment
LOAN AMOUNT
$3,200,000
INTEREST RATE
7.55% p.a.
LOAN TERM
12-month
LVR
62%
CASE STUDY - PROPERTY LENDING
Property Develop Loan
Our Property Development Loan supports the full development lifecycle, from land acquisition and pre-development funding, through to construction, and post-completion solutions such as residual stock or long-term hold.
What sets us apart is our ability to provide seamless funding across all stages of a development project, often without the need for presales. We can also support developments outside of main centres and offer flexible structures, including higher LVRs than other lenders for well-located projects.
While our primary focus is on residential property development, we’re also open to considering commercial projects that meet our lending criteria.
For further details on fees, repayments, securities and documentation requirements, or if you’d like to workshop a client scenario, get in touch with your Avanti BDM.