This month, we would like to tell you a bit more about our pre-development funding option: who this is for, what we require of our clients in this space, and some recent real-life examples.
On a side but not unrelated note, now is a good time for less experienced developers to talk through their plans with an experienced project funder like us. It can help them firm up their plans and potentially find the right project partners before they’re too far down the track.
If you know of any clients who may be interested in these opportunities, please don’t hesitate to contact us. We’re here to help.
Giving projects a nudge with pre-development funding
Over the past few months, we have been significantly active in the pre-development space, helping professional property investors and developers get the funds they need to get the planning and consenting stages of their projects underway, secured by their existing property portfolio.
It’s an area where often investors and developers find it difficult to get specific funding support. Most providers in the market, including both mainstream lenders and other development finance providers, are reluctant to provide finance if the pre-development work hasn’t been completed ahead of the funding application.
Once again, our approach is different.
We know that property development projects cannot happen until planning and pre-development work has been carried out. But rather than asking clients to fully define their plans, we like them to show us high-level project feasibility.
Key factors we consider
- What the client is trying to achieve and what they think they will be able to achieve on-site;
- How undertaking the planned work will add value;
- How their existing portfolio is performing and whether it’s well-positioned to support these goals;
- The level of outstanding debt they have on their portfolio;
- Their expected timeline in achieving their next development milestone.
Like to learn more? Read on for our latest client scenarios in the pre-development space, or contact our team to discuss this further.
PRE-DEVELOPMENT FUNDING
Client Scenario: This client had bought large sites with the vision of potentially carrying out property development projects in the future. However, they hadn’t purchased land with that specific intent, and while they knew development could happen, they hadn’t scoped down the specifics of those plans. Having decided to move forward with the project, they approached us to secure the required pre-development funding.
Merx Solution: Based on their objectives and their existing portfolio of nine properties, we were able to provide the funds they needed to progress the feasibility study on their project, as well as undertake some planning and design work, and get resource consents for future subdivision and development. Once these stages have been completed, we’ll also be well-placed to help them fund the subsequent development work.
LAND SUBDIVISION – PRE-DEVELOPMENT
Client Scenario: This client, a developer, was looking at getting a subdivision project underway, but hadn’t had completed all the required pre-development work to obtain a full cost-to-complete property development funding structure. Their project needed a little nudge in the right direction.
Merx Solution: Once again, we were able to step in. We determined that they had had sufficient progress on-site for us to fund some of the initial costs, namely $150k secured by a second mortgage. These extra resources will enable our client to unblock the project and proceed with the development stage as planned.