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Market Insights
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:
• major banks seeking to defend borrower relationships
• private credit funds seeking better-quality sponsors and earlier repayment
The first stage of this collaboration was bank-led uni-tranche loans.
Now, in some cases, it is evolving into what I would call 'triggered mezzanine' loans.
Since 2025, the banks have aggressively re-entered the CRE market, lifting LVRs, lowering presales hurdles, and cutting margins.
In 2026, they are finding ways to selectively share borrowers with approved private lenders.
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𝗧𝗿𝗮𝗱𝗶𝘁𝗶𝗼𝗻𝗮𝗹 𝗺𝗲𝘇𝘇𝗮𝗻𝗶𝗻𝗲 𝗹𝗼𝗮𝗻𝘀
Mezzanine loans are second-ranking loans offered by private lenders to developers:
• at higher interest rates, often 16-20% pa
• that reduces upfront equity
• and improves project EIRR
Under an intercreditor agreement, the mezzanine debt sits behind the first mortgage loan (from a bank or another private lender).
This means the senior loan must be 𝗳𝘂𝗹𝗹𝘆 𝗿𝗲𝗽𝗮𝗶𝗱 before the mezz is repaid.
That can make mezzanine debt expensive, even where the project de-risks materially during construction.
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𝗧𝗿𝗶𝗴𝗴𝗲𝗿𝗲𝗱 𝗺𝗲𝘇𝘇𝗮𝗻𝗶𝗻𝗲 𝗹𝗼𝗮𝗻𝘀
This dynamic changes with a triggered mezzanine loan:
• the senior is provided by the bank
• a bank-approved private lender provides mezz
• the intercreditor terms specify a trigger event, usually linked to presales
• upon the trigger, the bank lifts its LVR
• bank refinances the mezz
This can materially reduce the developer's total mezzanine interest cost, with a similar upfront equity to higher mezz LVR loan (eg, 80%) given there is less capitalised interest.
It works for the bank because it helps retain or win a borrower who may have opted for a private credit stretch-senior facility.
It works for the private lender because it gets a bank-quality sponsor and likely repayment before construction completion.
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𝗞𝗲𝘆 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀
1. Banks are no longer just competing with private lenders. In some cases, they are now collaborating with them
2. Triggered mezzanine loans allow banks to defend borrower relationships while private lenders provide short-duration leverage
3. Developers can reduce upfront equity and mezz interest costs
4. These loans work best where the trigger event is clear and realistic
5. Only carefully vetted private lenders with strong bank relationships can participate
𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿𝘀: are banks now proactively offering these structures?
Developers wanting confidential benchmarking of current terms, or introductions to lenders and equity JV partners, are welcome to reach out.
#mezzanine #privatecredit #constructionloans
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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 partners:
• inflation is rising (again)
• builders are seeking to reopen fixed-price contracts (again)
• commercial borrowers are rolling off low-rate debt into higher rates and softer valuations
• 𝗰𝗼𝗻𝘀𝗲𝗿𝘃𝗶𝗻𝗴 𝗳𝘂𝗻𝗱𝘀 𝗮𝘀 '𝗱𝗿𝘆 𝗽𝗼𝘄𝗱𝗲𝗿'
Meanwhile, the private credit party continues. Pressure to lend remains intense, and lenders are still finding ways to keep money moving, including profit-on-cost hurdles as low as 10% (vs 15–18% pre-COVID) on selective deals.
Equity, however, increasingly believes the best opportunities are not today, but in 6–12 months when distress starts to emerge.
If that view is right, today’s favourable credit terms may not last.
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𝗙𝗶𝗿𝘀𝘁 𝘁𝗵𝗲 𝗺𝗮𝗷𝗼𝗿𝘀, 𝗻𝗼𝘄 𝗳𝗮𝗺𝗶𝗹𝘆 𝗼𝗳𝗳𝗶𝗰𝗲𝘀 𝗮𝗿𝗲 𝘀𝗹𝗼𝘄𝗶𝗻𝗴 𝗲𝗾𝘂𝗶𝘁𝘆
The surge of capital into private credit since COVID, combined with lower margins and higher risk, pushed many major institutions and family offices towards equity JVs in search of better risk-adjusted returns.
That arguably created the best conditions for developers to secure JV equity through 2024 and into 2025.
But high-profile defaults by borrowers during 2025 saw some larger equity houses retreat or pause.
More recently, over the last eight weeks, multiple 𝗳𝗮𝗺𝗶𝗹𝘆 𝗼𝗳𝗳𝗶𝗰𝗲 𝗯𝗮𝗰𝗸𝗲𝗱 𝗲𝗾𝘂𝗶𝘁𝘆 𝗳𝘂𝗻𝗱𝘀 across Melbourne, Sydney, Brisbane, and Perth have told me they are 𝗮𝗹𝘀𝗼 𝘀𝗹𝗼𝘄𝗶𝗻𝗴 𝗻𝗲𝘄 𝗲𝗾𝘂𝗶𝘁𝘆 𝗱𝗲𝗽𝗹𝗼𝘆𝗺𝗲𝗻𝘁𝘀.
Examples relayed to me include:
• a builder seeking a $20m variation to a project's fixed price contract
• a reversal of a two-year interstate expansion strategy and return to plain, first-mortgage lending.
That is not panic. But it is a clear move toward preserving dry powder and reducing risk.
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𝗞𝗲𝘆 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀
1. A divergence is emerging between ongoing credit deployment and equity caution
2. Large equity funds hit the brakes in 2025, with family offices now following
3. Equity investment committees are taking longer and seeking more downside protection before approving new deals
4. Increasingly, equity capital wants to preserve capacity for future distress and 'White Knight' investing
5. Developers should think about locking in favourable debt and equity terms while they are still available
𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿𝘀: are you seeing more hesitation, slower IC processes, or stronger downside protections from equity partners?
Developers wanting confidential benchmarking of current terms, or introductions to lenders and equity JV partners, are welcome to reach out. No exclusivity required.
#privatecredit #equityjv #propertydevelopment hashtag#developmentfunding
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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.
Five lenders have now detailed to me how they will take the risk a developer will turn up with equity tomorrow, not today.
Reflecting the weight-of-money challenge in Australian CRE, and need to deploy funds, these loans are now being offered by non-banks and a major bank.
That is a meaningful change in underwriting philosophy.
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𝗪𝗵𝗮𝘁 𝗶𝘀 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁
Standard construction loans require the developer to contribute 100% of required equity upfront before debt is drawn.
Pari passu structures change that sequence.
The lender advances debt on the assumption that part of the developer’s equity will be contributed progressively through the life of the project.
This materially improves developer EIRR because equity stays out of the deal for longer.
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𝗧𝗵𝗲 𝘁𝗵𝗿𝗲𝗲 𝗺𝗮𝗶𝗻 𝗳𝗼𝗿𝗺𝘀
1. Fixed sharing of monthly costs
The developer contributes an agreed share of each month’s total project outgoings, for example 40%, with the lender funding the balance.
2. Capitalised costs
The lender funds the actual project costs, while the developer covers the monthly interest and line fee.
3. Equity pays final costs
The developer contributes most of the equity upfront, the lender funds 100% of costs for most of the project, and the final equity contribution, often the last $10m or so, is injected by the developer to complete the build.
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𝗣𝗲𝗮𝗸 𝗱𝗲𝗯𝘁 𝗰𝗮𝗹𝗰𝘂𝗹𝗮𝘁𝗶𝗼𝗻
In all three structures, the peak debt is usually based on the assumption that the developer makes every future equity contribution when due.
That matters because line and establishment fees are typically calculated off that peak debt.
If the sponsor misses one or more equity injections, the leverage profile can change quickly.
That is the real risk transfer.
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𝗞𝗲𝘆 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀
1. After taking more risk then less margin, some lenders are now willing to accept less certainty with pari passu loans
2. The interest rate premium can be surprisingly low, at 0.20% pa in some cases
3. There are three distinct variants, each shifting equity timing in a different way
4. The lender is underwriting future behaviour, not just developer's current equity capacity
5. While developers can improve EIRR materially, there is significant default risk if liquidity tightens and future equity cannot be contributed.
𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿𝘀: are you seeing these pari passu structures, or are lenders still “equity first”?
Developers wanting confidential benchmarking of current terms, or introductions to lenders and equity JV partners, are welcome to reach out. No exclusivity required.
#privatecredit #developmentfunding #constructionfinance
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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 bank-like pricing through major bank collaboration.
Now, in some cases, banks are deciding two can play this game.
Strategically, it allows non-bank participation without letting non-banks control the borrower relationship.
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𝗨𝗻𝗶-𝘁𝗿𝗮𝗻𝗰𝗵𝗲 𝗹𝗼𝗮𝗻𝘀 𝟭𝟬𝟭
Rather than compete deal-by-deal, some banks and private lenders are teaming up to offer a single blended construction facility.
These structures typically feature:
• one facility agreement
• one mortgage on title
• an A-note held by a major bank (the first 60–65% of LVR)
• a B-note held by a private lender (the last 5–15% LVR), internally subordinated
Because two parties share the stack, documentation, intercreditor terms and trust matter.
In a workout scenario, conflicts are usually the real risk, not the headline rate.
Historically, this has worked best where private-lender executives had strong relationships with bank credit teams.
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𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗰 𝗱𝗲𝗳𝗲𝗻𝗰𝗲 𝗼𝗳 𝗺𝗮𝗿𝗸𝗲𝘁 𝘀𝗵𝗮𝗿𝗲
In 2025, banks began pricing aggressively to defend market share, alongside higher LVRs and lower, sometimes zero, presale requirements.
Taking the lead on uni-tranche origination is the logical and strategic next step.
In some cases, the bank identifies a sponsor needing stretch leverage, leads the process end to end, and then places the B-note with a private lender.
That gives the bank control of the borrower relationship and which private lender participates, while eliminating the borrower’s need to run a separate non-bank process.
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𝗞𝗲𝘆 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀
1. Uni-tranche allows banks and non-banks to collaborate while still pricing different layers of risk.
2. Since 2025, banks have progressively used price, risk, and now structure to defend market share.
3. Uni-tranche loans provide developers with higher LVRs, lower presale hurdles, and blended pricing through one facility.
4. Many developers are unaware these structures exist, or that banks may now lead them.
5. Bank-led uni-tranche shows banks are becoming more strategic and more assertive in defending borrower relationships.
𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿𝘀: have you seen uni-tranche loans offered on your projects, and were they led by a bank or a non-bank?
Developers wanting confidential benchmarking of current terms, or introductions to lenders and equity JV partners, are welcome to reach out. No exclusivity required.
#privatecredit #unitranche #constructionloans
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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.
It is also wrong.
In the example shown, a correctly modelled $21.8m, 70% LVR construction loan produced (vs a 10.0% pa all-in interest rate):
• a $498k drop in profit
• a $470k increase in required equity
• about a 2.1% reduction in profit on cost
• about a 5.4% reduction in EIRR
If you want an accurate loan cost and equity requirement, you need to model monthly cash flows. There is no shortcut.
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𝗧𝗵𝗲 𝗳𝗼𝘂𝗿 𝗰𝗼𝗺𝗽𝗼𝗻𝗲𝗻𝘁𝘀 𝗼𝗳 𝗰𝗼𝗻𝘀𝘁𝗿𝘂������𝘁𝗶𝗼𝗻 𝗹𝗼𝗮𝗻𝘀
These four variables determine both total loan cost and required developer equity.
1. Loan-to-value ratio (LVR)
The LVR sets the maximum loan limit. Example: $40.0m net realisation × 70% LVR = $28.0m loan limit.
2. Interest rate
This is the sum of base rate plus the lender’s margin. Example: 6.5% pa, made up of 4.0% base + 2.5% margin.
Interest is charged on the 𝗼𝘂𝘁𝘀𝘁𝗮𝗻𝗱𝗶𝗻𝗴 𝗹𝗼𝗮𝗻 𝗯𝗮𝗹𝗮𝗻𝗰𝗲, not the loan limit.
3. Line fee
The line fee is nearly always charged 𝗼𝗻 𝘁𝗵𝗲 𝗹𝗼𝗮𝗻 𝗹𝗶𝗺𝗶𝘁, not the outstanding loan balance.
Example: 2.5% pa line fee on a $28.0m limit = $700k pa, or about $58.3k per month, regardless of loan balance.
4. Establishment fee
This is paid once at the start and is also based 𝗼𝗻 𝘁𝗵𝗲 𝗹𝗼𝗮𝗻 𝗹𝗶𝗺𝗶𝘁. Example: 1.0% on $28.0m = $280k.
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𝗞𝗲𝘆 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀
1. Adding the interest rate, line fee, and establishment fee does 𝗻𝗼𝘁 create a reliable proxy for total loan cost.
2. Interest cost varies with the monthly loan balance, not the loan limit.
3. Line fees and establishment fees are calculated off the loan limit, so they are not directly comparable to interest cost.
4. If you rely on a simplified one-page feasibility, you will often 𝘂𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝘁𝗲 𝗹𝗼𝗮𝗻 𝗰𝗼𝘀𝘁𝘀 𝗮𝗻𝗱 𝗿𝗲𝗾𝘂𝗶𝗿𝗲𝗱 𝗲𝗾𝘂𝗶𝘁𝘆.
5. A weak feasibility model is a major red flag for lenders and equity JV partners.
𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿𝘀: have you used an "all-in rate" shortcut, only to discover later that the equity requirement was materially higher and the profit outcome lower?
Developers wanting confidential benchmarking of current terms, or introductions to lenders and equity JV partners, are welcome to reach out. No exclusivity required.
#constructionloans #developmentfunding #propertydevelopment
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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 completion certainty to maintain margins, while enabling developers to preserve equity and lift EIRR.
In my view, this is stage 3 of Australia’s private-credit evolution.
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𝗧𝗵𝗿𝗲𝗲 𝘀𝘁𝗮𝗴𝗲𝘀 𝗼𝗳 𝗽𝗿𝗶𝘃𝗮𝘁𝗲 𝗰𝗿𝗲𝗱𝗶𝘁
Between 2015 and 2025, Australian CRE private credit increased roughly seven-fold to $92bn, according to Alvarez & Marsal.
That growth was driven by:
• record low interest rates
• capital rotating away from venture capital and private equity
• domestic and offshore superannuation money entering private credit
𝗦𝘁𝗮𝗴𝗲 𝟭: 𝗠𝗼𝗿𝗲 𝗿𝗶𝘀𝗸 (2015-2021)
Non-banks initially competed with banks by offering higher LVRs and lower presale hurdles, taking share as the majors retreated from CRE lending.
Margins and line fees on construction debt were robust at roughly 3.25–3.75% pa, delivering strong risk-adjusted returns.
𝗦𝘁𝗮𝗴𝗲 𝟮: 𝗟𝗲𝘀𝘀 𝗺𝗮𝗿𝗴𝗶𝗻 (2022-2025)
As capital flooded into private credit, non-banks had to compete with each other. Then banks began a sustained push to win market share back.
Non-bank margins fell into the mid-2s, and in some cases for larger, stronger deals to below 2.00% pa.
𝗦𝘁𝗮𝗴𝗲 𝟯: 𝗟𝗲𝘀𝘀 𝗰𝗲𝗿𝘁𝗮𝗶𝗻𝘁𝘆 (2025+)
Lenders are now trying to stabilise margins by giving developers more equity flexibility through pari passu construction loans.
Traditionally, developers contribute 100% of their equity upfront, and debt then funds the project to completion.
Pari passu loans allow developers to contribute only 60–80% of equity upfront, with the balance injected progressively during construction.
That materially improves developer EIRR.
But it also means underwriting is shifting from “has the equity gone in?” to “will the sponsor still have both the capacity and willingness to put it in later?”
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𝗞𝗲𝘆 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀
1. Over the last decade, non-banks first competed by taking more risk, then by accepting less margin.
2. Some lenders are now trying to preserve margin by weakening traditional equity-first protections.
3. Pari passu construction loans can materially improve EIRR for strong sponsors.
4. However, failure to contribute monthly equity calls can be catastrophic for both developer and lender.
5. Developers must be sure of future equity capacity before using these loans.
𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿𝘀: would you accept pari passu funding to lift EIRR, or is equity certainty too important?
Developers wanting confidential benchmarking of current terms, or introductions to lenders and equity JV partners, are welcome to reach out. No exclusivity required.
#privatecredit #developmentfunding #construction
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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 to free 'trapped' developer equity.
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𝗖𝗹𝗮𝘀𝘀𝗶𝗰 𝗿𝗲𝘀𝗶𝗱𝘂𝗮𝗹 𝘀𝘁𝗼𝗰𝗸 (post completion)
Traditionally, RS loans refinance the construction facility a few months after project completion (saving expensive monthly line fees) and the bulk of presales have settled.
The developer then has 6–18 months to sell down stock without being forced into discounting simply to avoid default.
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𝗣𝗿𝗲-𝘁𝗶𝘁𝗹𝗲 𝗿𝗲𝘀𝗶𝗱𝘂𝗮𝗹 𝘀𝘁𝗼𝗰𝗸 ('PTRS')
A new variant is emerging. RS lenders, flush with cash, want to extend the length of their loans. The solution, loan starts 1-5 months before project completion - that is "pre-title" - and only partially repays the construction loan.
This means lender takes on three key risks:
1. 𝗕𝘂𝗶𝗹𝗱 𝗿𝗶𝘀𝗸: project has delays or cost overruns.
2. 𝗣𝗿𝗲-𝘀𝗮𝗹𝗲𝘀 𝗿𝗶𝘀𝗸: settlements fail because valuations do not support contract prices.
3. 𝗦𝘂𝗯𝗼𝗿𝗱𝗶𝗻𝗮𝘁𝗶𝗼𝗻 𝗿𝗶𝘀𝗸: construction lender remain senior and controls project if in default.
For the construction lender, PTRS strengthens the exit. Their exposure reduces earlier, without discounting stock that could depress valuations.
For developers, the construction limit drops and 𝗺𝗼𝗻𝘁𝗵𝗹𝘆 𝗹𝗶𝗻𝗲-𝗳𝗲𝗲 𝘀𝗮𝘃𝗶𝗻𝗴𝘀 𝗰𝗮𝗻 𝗲𝗮𝘀𝗶𝗹𝘆 𝗿𝗲𝗮𝗰𝗵 $𝟭𝟬𝟬𝗸–$𝟯𝟬𝟬𝗸 on larger loans.
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𝗘𝗾𝘂𝗶𝘁𝘆 𝗿𝗲𝗹𝗲𝗮𝘀𝗲 𝗿𝗲𝘀𝗶𝗱𝘂𝗮𝗹 𝘀𝘁𝗼𝗰𝗸 ('ERRS')
Classic RS facilities release equity once LVR drops to 50-55%, with 25–50% of net settlements then flowing to the developer.
An ERRS goes further (either pre or post titles). It swaps part of the construction loan refinance for an 𝘂𝗽𝗳𝗿𝗼𝗻𝘁 𝗲𝗾𝘂𝗶𝘁𝘆 𝗿𝗲𝗹𝗲𝗮𝘀𝗲 to the developer - that can then be used for their next project or other group cash flow needs.
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𝗞𝗲𝘆 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀
1. Weight of money is driving product innovation and higher risk tolerance across private credit.
2. PTRS and equity-release variants are emerging as competitive tools to deploy funds.
3. These facilities are being offered to strong sponsors today but should become mainstream over time.
4. Developers should see a continuation of favourable debt terms in 2026.
5. As risk continues to rise, some family offices are increasingly viewing debt as mispriced and reallocating toward equity JVs.
Developers, would you use a pre-title or equity-release residual-stock facility, and under what conditions?
If you want to benchmark a current debt or equity JV offer, or understand which structure best fits your project and risk profile, feel free to reach out in confidence.
#residualstock #equityrelease #developmentfunding
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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 superannuation withdrawals were allowed. Liquidity mattered more than term sheets. Committed facilities were pulled as funding bases tightened.
The private credit market can look healthiest right before sentiment turns.
A few recent reported “cockroach moments” are refocusing investors on risks that matter just as much to borrowers:
• US: Blue Owl gated redemptions
• US: BlackRock TCP cut a fund's NAV by 19% in 3mths
• UK: Market Financial Solutions placed into administration amid fraud allegations
• AUS: MarketLend / iPartners investors warned of loan book ‘discrepancies’
This isn’t about one manager. It’s about what happens when confidence breaks and investors remember illiquid loans cannot be redeemed like cash.
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𝗪𝗵𝘆 𝘁𝗵𝗶𝘀 𝗺𝗮𝘁𝘁𝗲𝗿𝘀 𝗳𝗼𝗿 𝗱𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿𝘀
When investors lose confidence, the first-order problem is fund liquidity. The second-order problem is borrower liquidity.
If redemptions are gated or liquidity terms change abruptly, the 𝗳𝗹𝗼𝘄-𝘁𝗵𝗿𝗼𝘂𝗴𝗵 𝗰𝗮𝗻 𝗯𝗲 𝗶𝗺𝗺𝗲𝗱𝗶𝗮𝘁𝗲 to borrowers:
• lower LVRs
• more presales
• higher pricing and fees
• slower approvals
• and in the worst cases, delayed or withdrawn funding, including construction drawdowns
Developers should assume the current borrower-friendly window can shut quickly.
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𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿 𝗰𝗼𝗻𝘀𝗶𝗱𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝘀
• Lock terms early while competition remains intense.
• Choose lenders based on funding certainty, not just price. Institutional mandates, strong balance sheets, family office underwritten offers, and demonstrated drawdown capacity matter.
• Consider an equity JV partnership. Deep-pocketed equity can be the difference between completing and collapsing if credit tightens mid-project.
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𝗞𝗲𝘆 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀
1. “Cockroach moments” are often operational or valuation issues that hit redemptions and then fund liquidity.
2. If investor sentiment turns, borrower terms can reprice quickly, particularly for construction lending.
3. A loan offer is only as good as the lender’s ability to fund drawdowns under stress.
4. Developers should lock terms earlier and prioritise lenders with robust funding capacity.
5. A well-capitalised equity JV partnership is an insurance policy against a sudden credit freeze.
𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗲𝗿𝘀: are you seeing terms tighten this year, or is it still business as usual?
Developers wanting confidential benchmarking of current terms, or introductions to lenders and equity JV partners with reliable drawdown capacity, are welcome to reach out. No exclusivity required.
#privatecredit #developmentfunding #constructionfinance
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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 to defend market share. This is symptomatic of the 𝘄𝗲𝗶𝗴𝗵𝘁 𝗼𝗳 𝗺𝗼𝗻𝗲𝘆 challenge in Australian private credit, particularly construction loans.
𝗔𝗴𝗴𝗿𝗲𝘀𝘀𝗶𝘃𝗲 𝗽𝗿𝗼𝗱𝘂𝗰𝘁𝘀 𝘃𝗶𝗿𝘁𝘂𝗮𝗹𝗹𝘆 𝘂𝗻𝗸𝗻𝗼𝘄𝗻 𝗶𝗻 𝗔𝘂𝘀𝘁𝗿𝗮𝗹𝗶𝗮 are appearing, that I have triangulated with multiple lenders and developer clients.
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𝗢𝗹𝗱 𝘄𝗼𝗿𝗹𝗱 𝗿𝘂𝗹𝗲𝘀 𝗼𝗳 𝗰𝗼𝗻𝘀𝘁𝗿𝘂𝗰𝘁𝗶𝗼𝗻 𝗿𝗶𝘀𝗸
Since the 2008 GFC, three fundamentals have anchored construction risk:
1. Cost to complete
Developer contributes enough equity upfront so debt can fully complete the project without further equity.
2. Fixed-price build contract
Developer locks in construction cost with a fixed-price contract, so equity + debt fully funds the project.
3. No equity released until debt repaid
Developer stays fully aligned until completion. Equity only comes 'off the table' once construction debt is repaid.
These rules minimise risk not only for lenders but also developers.
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𝗥𝘂𝗹𝗲𝘀 𝗮𝗿𝗲 𝗯𝗲𝗴𝗶𝗻𝗻𝗶𝗻𝗴 𝘁𝗼 𝗯𝗲 𝗯𝗿𝗼𝗸𝗲𝗻
At least seven lenders, including domestic groups, are now breaking these fundamentals for their highest quality sponsors (typically $100m+ loans) through the following:
1. 'Pari passu' construction loans
Each month, debt funds the majority of progress claims and the developer contributes a variable equity contribution. Equity is progressively injected into the project, not fully upfront, lifting developer EIRR.
2. Cost plus build contracts
For long, large projects, build risk is shared. QS-backed budgets are agreed and a fixed builder margin applied on a cost-plus basis. Any later escalation is met with developer equity.
3. Pre-title residual stock loans with equity release
Prior to completion and titles, a residual stock lender partly pays down construction peak debt while also providing an equity release to the developer.
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𝗞𝗲𝘆 𝗶𝗻𝘀𝗶𝗴𝗵𝘁𝘀
1. Private credit availability for construction is at unprecedented levels.
2. New entrants are introducing structures that weaken traditional risk protections.
3. Many lenders (and developers) are unaware these products are now selectively available.
4. 𝗦𝗼𝗺𝗲 𝗹𝗲𝗻𝗱𝗲𝗿𝘀 𝗲𝘅𝗽𝗹𝗶𝗰𝗶𝘁𝗹𝘆 𝗿𝗲𝗷𝗲𝗰𝘁 𝘁𝗵𝗲𝘀𝗲 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲𝘀 but others are following suit.
5. Eligibility could well expand beyond 'top tier'.
Developers and funders, have you seen these new lending structures?
Developers wanting confidential benchmarking of current terms, or introductions to lenders at the sharper end of the risk curve, are welcome to reach out. No exclusivity required.
#developmentfunding #privatecredit #constructiondebt
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