Now in their seventh year of business, HoldenCAPITAL Partners (HCP) continues to focus on its core target market and the refinement of its platform, market analysis and consistency in applying core lending disciplines to selectively grow its business.
This astute growth has come despite the past 12 months dishing up a challenging environment with inflation and soaring development costs, followed by increasing labour costs, and the resulting fall off of viable project feasibilities.
HCP has maintained an unwavering level of growth in its development finance business, which principal Dan Holden attributed to their consistency of purpose and not being tempted to stray in the hope of greater returns or quick wins.
Understanding that these pressures would slow the availability of opportunities that met the HCP lending hurdles just meant that the team had to work harder to sift through the opportunities available, to either find a better deal or a way to satisfactorily mitigate those risks.
HCP has always been about structuring debt to meet the needs of a specific transaction while ensuring the risk profile was consistent with its investors’ expectations.
This requires a lot of careful analysis, firstly to understand the specific financial needs of the developer and the considerations around the project itself such as:
Availability of presales
Scale and complexity of the construction
Time frames involved
How shifting economic pressures might influence the outcomes at completion, and
The resulting risks to the various stakeholders.
Holden was quick to point out that this requires an experienced team, able to understand the forces at play and craft a deal that will satisfy all involved as far as possible. As with all commercial transactions there are always compromises to be made but Holden said their track record spoke for itself.
The past year challenged their ability to maintain a flow of investment quality opportunities, including pressure to increase returns.
Holden said that HCP’s approach has always been to ensure the risk return to investors was fair while also delivering a competitive product to the developer and their record with a high proportion of repeat-client transactions was testament to them achieving this.
Demand from HCP’s sophisticated investors for quality transactions remained strong and HCP’s head of lending and investments, Gary Connolly, attributed this to the quality of deals offered, but also the consistency and transparency of the offerings themselves.
Where some other lenders deduct a management fee from the interest paid by a developer, HCP passes on 100 per cent of interest paid to its investors, further demonstrating that transparency.
The HCP team is mindful of providing clear and concise information to its investors to ensure they are fully conversant with the risks involved in each project that they offer and this is demonstrated by the fact that offerings are consistently fully subscribed within 48 hours or less of release.
Another point of differentiation is that where other lenders typically operate a pooled fund where investors have limited visibility of where and exactly how their money is actually lent out, HCP investors handpick individual loans that best suit their preferences, including location and product type.
So how do the HCP team see 2024 for developers and the investor base?
Holden expected it to deliver continuing and sound opportunities as the market transitioned from the uncertainties of inflation pressures to one of careful optimism.
It would depend on how quickly some certainty in pricing could be re-established now that development cost had become more manageable and, even though there would be some humps along the way as the RBA attempted to smooth the way forward, Holden said he was confident that 2024 would provide a sound base for an even brighter 2025.
HCP are justifiably proud of achieving their $400 million of loans advanced milestone, and they are more pleased with their record of zero capital losses and negligible default transaction numbers.
This is the standard that they work very hard to maintain.
For borrowers interested in HCP’s lending options, you can find out more here.
For investors interested in joining HCP’s investor group, you can register here.
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