With this year framed by a royal commission into banking, house price volatility and constrained credit conditions, it’s reasonable to suggest that 2019 has been a challenging year for property developers.
The availability of construction funding is one of the most important drivers of new activity in development, especially for private developers in the residential sector.
With continued population growth and renewed housing sentiment, the retreat of the major banks has created an opportunity for "non-bank" financiers to fill the void, and in doing so, providing a much-needed injection of liquidity into the sector.
One particular lender Trilogy, has carved out a reputation for providing sensible lending solutions to reputable developers, delivering value for money, speed of delivery and certainty in a challenging market.
Below we explore the Trilogy five-step process and how their approach to lending is built on a model of mutual alignment.
The team at Trilogy work with a national network of experienced brokers to present opportunities that are comprehensive, considered and professional.
“The key is to work with brokers that understand what constitutes a good deal,” Trilogy head of lending and property developments Clinton Arentz said.
“Our brokers bring to us opportunities characterised by an experienced developer with a proven product in a proven location, a sensible and effective marketing strategy and a strong builder with a track record of delivery.”
Through a professional credit proposal, Trilogy’s team can efficiently and diligently assess the opportunity and provide an indicative offer within 24 hours.
With the support of an experienced broker network, with full credit application details provided, Trilogy’s team work toward providing provide brokers and their applicants with an indicative letter of offer within 24 hours of receiving a comprehensive credit proposal.
The non-binding letter of offer outlines the essential commercial terms of the lending solution, including:
Loan to value (LVR) ratio expressed as a percentage of gross realisable value (GRV)
Loan term — expressed in months from commencement
Interest rate — expressed as a percentage on borrowed funds
Fees and charges — such as line, establishment and / or other fees
Securities and guarantees — such as a general security agreement, registered mortgages, personal or corporate guarantees and builder side deeds
Conditions precedent — such as pre-sale requirements, insurances, valuation and quantity surveyors’ reports, consultant reports, among others.
The indicative letter of offer provides the developers with a clear understanding of where the financier’s appetite for lending exists.
Should the terms of the indicative letter of offer be acceptable to both parties, Trilogy then requires that the developer pay a refundable commitment fee that enables the financier to commission an independent valuation report to substantial the project revenues and an independent quantity surveyor’s report to substantiate the construction cost of the project.
Should the financing arrangement not proceed, the commitment fee is refunded to the developer.
Upon receipt of the commitment fee, the registered valuer and the quantity surveyor are commissioned to provide an independent appraisal of the revenue and construction costs, respectively.
“We commission these independent reports from qualified experts to ensure that our lending decisions are sound, but more importantly, to ensure that risk is mitigated for all parties,” Arentz said.
The final step in the process is to present the comprehensive credit proposal, term sheet and independent reports to Trilogy’s lending committee for approval.
Consistent with Trilogy’s agile and efficient model, the lending committee meet weekly to assess opportunities and sign off new loan facilities.
“Ultimately, our client’s success is our success, so we always want to be sure we understand property markets, support quality projects, provide streamlined approvals and then support our clients to the very end,” Arentz said.
Click here to find out more about Trilogy's funding solutions for property developers.
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