.png)
Insights
Practical observations on property debt, equity and capital markets.
.png)
𝗖𝗿𝗲𝗱𝗶𝘁 𝗽𝗮𝗿𝘁𝗶𝗲𝘀 𝗯𝘂𝘁 𝗲𝗾𝘂𝗶𝘁𝘆 𝗶𝘀 𝘄𝗮𝗶𝘁𝗶𝗻𝗴
"We had a three-hour IC on an equity JV with our strongest sponsor but everything's changed, Flynn. We could be heading into a major downturn," a family office-backed $500m equity JV fund told me recently.
Since the Iran war, caution has spread across many of my equity capital...
.png)
𝗧𝗿𝗶𝗴𝗴𝗲𝗿𝗲𝗱 𝗺𝗲𝘇𝘇 𝗹𝗼𝗮𝗻𝘀: 𝗯𝗮𝗻𝗸 𝗮𝗻𝗱 𝗽𝗿𝗶𝘃𝗮𝘁𝗲 𝗰𝗼𝗹𝗹𝗮𝗯𝗼𝗿𝗮𝘁𝗶𝗼𝗻
"We provide mezz but once presales hit the trigger hurdle, the bank refinances us out. Everyone likes it: our investors, the bank, and the developer," a family office backed credit fund recently told me.
This is a fascinating collaboration between competitors...
.png)
𝗣𝗮𝗿𝗶 𝗽𝗮𝘀𝘀𝘂 𝗰𝗼𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻 𝗹𝗼𝗮𝗻𝘀: 𝟯 𝘄𝗮𝘆𝘀 𝘁𝗼 𝗽𝗮𝘆 𝗹𝗮𝘁𝗲𝗿
A premium of only about 0.20% pa above a traditional cost-to-complete construction loan is enough now, in some cases, for developers to progressively inject equity under pari passu structures.
That is a modest price for a meaningful lift in developer EIRR...
.png)
𝗨𝗻𝗶-𝘁𝗿𝗮𝗻𝗰𝗵𝗲 𝗹𝗼𝗮𝗻𝘀 𝗵𝗮𝘃𝗲 𝗮 𝗻𝗲𝘄 𝗹𝗲𝗮𝗱 𝗮𝗿𝗿𝗮𝗻𝗴𝗲𝗿: 𝘁𝗵𝗲 𝗯𝗮𝗻𝗸𝘀
Recently, the State Head of Corporate Property for a major bank told me they are proactively offering higher-leverage (70–75% LVR) construction funding to select clients.
Traditionally, private lenders have used 'uni-tranche' structures to deliver stretch leverage and terms on...
.png)
𝗧𝗵𝗲 "𝗮𝗹𝗹-𝗶𝗻 𝗿𝗮𝘁𝗲" 𝗳𝗮𝗹𝗹𝗮𝗰𝘆 𝗳𝗼𝗿 𝗰𝗼𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻 𝗹𝗼𝗮𝗻𝘀
Overstating profit by about 2% and equity returns by about 5% is the kind of error I often see when developers rely on an “all-in rate” proxy.
Adding interest rate + line fee + establishment fee to make a single rate is a common shorthand in one-page feasibilities....
.png)
𝗦𝘁𝗮𝗴𝗲 𝟯 𝗼𝗳 𝘁𝗵𝗲 𝗽𝗿𝗶𝘃𝗮𝘁𝗲 𝗰𝗿𝗲𝗱𝗶𝘁 𝗲𝘃𝗼𝗹𝘂𝘁𝗶𝗼𝗻: 𝗘𝗜𝗥𝗥 𝗼𝘃𝗲𝗿 𝗰𝗲𝗿𝘁𝗮𝗶𝗻𝘁𝘆
“We don’t write pari passu construction loans. Yet,” the state head at a $5bn private credit firm told me recently during a frank risk discussion.
That final word matters.
It signals where the market is heading: lenders increasingly accepting less...
.png)
𝗣𝗿𝗶𝘃𝗮𝘁𝗲 𝗰𝗿𝗲𝗱𝗶𝘁 𝗳𝗿𝗲𝗲𝘇𝗲𝘀 𝗰𝗮𝗻 𝗵𝗮𝗽𝗽𝗲𝗻 𝗳𝗮𝘀𝘁
Five basement levels down. $50m of equity spent. 150 apartments pre-sold. Then catastrophic news. Two months before first drawdown, my client was told their superannuation-backed non-bank had 𝘄𝗶𝘁𝗵𝗱𝗿𝗮𝘄𝗻 𝘁𝗵𝗲 $𝟭𝟱𝟬𝗺 𝗰𝗼𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻 𝗳𝗮𝗰𝗶𝗹𝗶𝘁𝘆.
It was April 2020, shortly after early...
.png)
𝗪𝗼𝘂𝗹𝗱 𝘆𝗼𝘂 𝗹𝗶𝗸𝗲 𝗲𝗾𝘂𝗶𝘁𝘆 𝘄𝗶𝘁𝗵 𝘁𝗵𝗮𝘁 𝗿𝗲𝘀𝗶𝗱𝘂𝗮𝗹 𝘀𝘁𝗼𝗰𝗸 (𝗥𝗦) 𝗳𝗮𝗰𝗶𝗹𝗶𝘁𝘆?
Recently, a $40m QLD RS facility redefined nonbank risk appetite, releasing equity both immediately and before construction of the apartment project was completed.
While this is the first equity release RS product I have seen, several of my capital partners have similar products...
.png)
𝗖𝗼𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻 𝗹𝗲𝗻𝗱𝗶𝗻𝗴 𝗿𝗶𝘀𝗸 𝗿𝘂𝗹𝗲𝘀 𝗮𝗿𝗲 𝗯𝗿𝗲𝗮𝗸𝗶𝗻𝗴
Two recent calls, first with a $100bn offshore asset manager and then a $500m domestic lender, confirmed my suspicions. The old order of debt risk management is being replaced at the edges.
New capital is pouring into Australia, and domestic lenders are responding...