Construction finance for student accommodation development

Red & Co Finance was recently involved in sourcing and settling funding for a small Brisbane student accommodation project. The project entailed 5 fully self contained “units” that would be leased individually to students or young professionals. The site is in an inner city suburb of Brisbane close to universities, train and bus nodes and shopping centres.

The client had spent over a month liaising with their existing banking contacts to try and find a funding solution for the project. Needless to say, this was a massive waste of time. Offers were fielded where the LVR was uncommercial (circa 60% LVR) and a rate in the high 5% range. The borrower was seeking maximum leverage to complete the project and hence Red & Co. successfully negotiated the following terms with a reputable mortgage fund:

  • Loan amount <$1million
  • LVR 75% for construction
  • Cashout was available for the borrower from unencumbered land
  • Rate of 7.29% – interest only and no line fee
  • Establishment fee kept under 2%

Red & Co. also assisted in the valuation process by seeking quotes etc.

With the Brisbane rental market tightening over the first half of 2019, a build to rent project like this makes total sense in a slow sales environment. Unfortunately banks still struggle to get their heads around an asset class such as this. If you have a project that you need funded, but are getting nowhere with the banks. Speak to a team that has solutions. Email Max Laverty at [email protected] for more info.

 

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