Commercial development funding

Hi,

I want to know about funding for commercial property development. If we own the land(60% lvr), plan to do warehouse or storage units type development, pre-sale all units, how much total finance will be available for land plus construnction? Are there any lenders which can fund 100% of the total development cost( site plus construnction) if we pre- sale all units in development(with 25% or so profit on costs)? If so, mainstream lenders or secondary lenders? What are terms? I am told that for commercial development projects, personal serviceability is not considered and also Debt to Service ratio is also not considered.

Rooky

 

60% of end value potentially

 

Thanks Terry.

Mainstream lenders? What are terms i.e interest rate, other fees etc?

 

Not exactly true, really depends on the lender and overall scenario, DSR certainly applies with a bunch of Commercial funders but it's usually more lenient than residential.

What experience do you have doing a similar commercial development project like this?
If it's your first one then it will limit your lender choice, even with pre-sales.

 

Thanks.

If there is sufficient presale to cover loan amount, then i would have thought experience of developer i.e. past projects does not matter.

When you say DSR is applied with some lenders, are they mainstream lenders? Also, what do you mean by lenient? For residential i have heard that recently i.e. in last month or so, there is hard stop at 8.5 DSR for all mainstream lenders as manadated by new policy from regulator. Does same kind of hard limit does exist for commercial funding?

 

Unfortunately not the case, absolutely helps having those pre-sales though don't get me wrong.

The one's I've used that have a DSR are non-mainstream lenders

In my experience, it's not a hard limit and it does depend on the lender.

 

Thanks Lindsay. Looks like commercial finance is more bespoke and there is no set parameters or atleast more complex than residential.

 

Particularly when it's a commercial development project.
They typically follow the 3 C's, Character, Capacity and Collateral - with the 'character' of the applicant more impactful than it is in resi lending.
Lender appetites also change constantly for this type of thing, eg. A lender might like them last year but may not want to take on anymore this year.
Location and type of product also has an impact on lender appetite.

 

yes mainstream one of our brokers is working on 75% lvr with rates in mid 3s

 

Thank Terry and Lindsay.