Committing to an unconditional $5-million offer is a big gamble for a small property developer with no finance in place, but Alasdair Baker was banking on his trusted professional partners.
The small town of Pottsville on the northern NSW coast is a hidden gem loved by locals for its pristine beaches, and great surfing and fishing, so Alasdair Baker of Omira Property Group was delighted to find a 2000 sq m site for sale.
“I had just finished a major rebranding and website redesign to position my company as a developer of quality lifestyle homes in beautiful locations, based on the philosophy ‘we believe where you live, should inspire you every day’,’’ Baker said.
“So, when I first saw this site on the market, I remember leaping around the living room yelling ‘Yes! This is exactly the kind of project I’ve been looking for, this is what it's all about’.
“It’s in such a great position, with direct access to the beach and a crystal-clear creek, and anybody who’s been to Pottsville knows what a special part of the world it is, with an unspoiled ‘villagey’ feel.’’
The property had only come on the market that day, but when Baker contacted the agent, he discovered it was already hotly contested.
“The agent told me I was about the hundredth caller,’’ Baker said.
“Eventually it came down to a battle between me and three or four other people. My offer was close to the mark, but in the end, I didn't get it. It sold to another developer.’’
A few weeks later, on an off-chance, Alasdair decided to call the agent for an update and was stunned to learn the winning bid had fallen through and the property was back on the market.
Without hesitation, he pitched an unconditional offer for the original $5 million sale price plus $5000, which the seller promptly agreed to.
“So, it went from me not having the site to suddenly my offer being accepted, and I had also committed to a short settlement period to get it over the line,’’ Baker said.
“That left me very little time to line up investors, draw up agreements, create a special-purpose vehicle, work out how to fit this all into our existing schedule and, of course, arrange finance.’’
But having worked on several projects with finance experts Development Finance Partners (DFP) in the past, Baker was confident they would also back this one.
After raising 30 per cent equity, he approached them for assistance to arrange a land bank loan for the balance as quickly as possible.
“I needed a fast, innovative solution, so I went to DFP because I know what they’re capable of,’’ he said. “They’ve worked with me for years now, and they always deliver.
“Within three weeks their valuers had been out to the site, their credit department had cleared my application, the documents had been through the solicitors and signed, and the loan was ready for drawdown.
“That’s an impressive turnaround—any developer who’s ever dealt with a bank can tell you it’s impossible to get anything done in that timeframe.”
The finance is on terms of 6 per cent pa, with legal fees and the first three months’ interest capitalised. Monthly interest payments thereafter will largely be offset by income from the tenants of an existing seven-unit block until site clearing begins.
With a DA for eight new dwellings lodged with the council, and sales and marketing well under way, Baker knows DFP will be there to arrange construction finance for him when he needs it.
“Having people you can rely on really takes the pressure off, which is important because this is a stressful business,’’ he said.
“I've got a great bunch of consultants around me now, from architects to planners and engineers, and my finance partners DFP are an essential part of the team too. I can pick up the phone to them whenever I need and within 10 minutes, I've got what I need to make a decision.
“Sometimes you just want a sounding board for your ideas, and I use them for that too, so they add a lot of value for me. I get calls all the time from other financiers inviting me to come in and have a chat, but I don't see any reason to. DFP have always delivered when I needed them—it’s that simple.’’
DFP director Matt Royal said that trust and goodwill was based on mutual respect.
“We know Alasdair completes his projects on time and on budget, and repays his lenders as agreed,’’ Royal said. “And he knows we always perform for him and do everything we promise.
“At DFP we have a strong network of contacts across the industry, so we’re able to negotiate a wide range of funding options for property transactions, from bank and non-bank lending to mezzanine finance, pref equity and joint ventures.
“We understand the problems developers face raising finance, and we help them find the right solutions.’’
Development Finance Partners work with property developers looking to finance construction and land-bank projects and can arrange fast and flexible finance approvals to suit any project, from large to boutique.
The Urban Developer is proud to partner with DFP to deliver this article to you. In doing so, we can continue to publish our daily news, information, insights and opinion to you, our valued readers.
