It is only a matter of time when the property cycle peaks, plateaus and then falls and development site values start to crack.
Larry Schlesinger, Australian Financial Review writes:
“Metropolitan development sites values, which have surged in recent years on a wave of Chinese money, are showing the first signs of correcting after developer Nicholas Smedley secured two sites at discounts of 30 per cent or more after vendors rejected his original off-market offers, thinking they would get more through a public campaign.
Chinese buyers have quit the market in droves, and off-the-plan sales rates have slowed drastically in Sydney and Melbourne meaning the building boom is starting to wane.”
Lately I have heard some very interesting definitions of what “Mezzanine Finance” means.
To clear up the actual meaning; “Mezzanine Finance” is subordinated debt with ranks behind a 1st mortgage/senior debt.
Mezzanine Finance will usually be secured by a 2nd Mortgage.
I have seen other definitions where they say Mezzanine Finance “gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full”. This is incorrect. A mezzanine lender may or may not include rights to takeover the project in the event of default although it is certainly not the definition of “Mezzanine Finance”.
Therefore “Mezzanine Finance” is subordinated debt which ranks behind 1st mortgage/senior debt. The terms can vary from lender to lender.
Our experience in property development and development finance provides you with an edge in the market, by achieving your property development financing objectives fast and efficiently.
Whether you are a long standing property developer seeking low interest rate finance or a highly geared developer seeking mezzanine finance and/or joint venture partners, we can provide a funding solution to cater for your strategic needs.
Prudential Finance specialises in providing property developers with high loan to cost ratio finance facilities. It is possible for select clients to borrow up to 90% of project hard costs.
We have Mortgage Funds and Private Lenders who will lend construction finance without presales.
For property developers seeking low interest rates we are able arrange 1st mortgage funding through the major Banks, Institutions, Building Societies and non-Bank Lenders.
We have very large investors that can provide 1st mortgages and 2nd mortgages up to $50M or more for projects that do not comply with normal Bank criteria or the loan amount is too large for a private lender or mortgage fund to finance.
A property developer’s ability to acquire new projects directly relates to the amount of equity/cash the developer is required to contribute to the project. Through prudent financial structuring Prudential Finance can maximise a developer’s debt gearing to free up capital for the next project.
The company draws upon the extensive property development, real estate and development finance experience of the talented Prudential Finance team, who can relate to the financial needs of property developers.
If you require property development finance in NSW, VIC, QLD, WA or SA call us today to discuss your development finance needs.
Your Development Finance Partner Sydney – Melbourne – Brisbane – Perth