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