This article is from the Australian Property Journal archive
PROPERTY developer Fortis has managed to secure major bank funding for three projects in Sydney’s exclusive eastern suburbs, worth a combined $284 million despite the conservative lending environment.
The facilities total $142 million in value and support a completed building valued at $42 million and two construction projects with a combined end value of $242 million.
“Although the commercial real estate finance market is more demanding at the moment, these recent facilities from ANZ, St. George and Macquarie Bank demonstrate that the major banks are still looking to lend and to take a commercial approach, displaying a strong preference for premium assets and experienced borrowers,” said Charles Mellick, director, Fortis.
A term debt facility of $25 million from Macquarie Bank supports the completed retail and commercial building at 2 Guilfoyle Avenue in Double Bay, which has long-term tenancies with Baker Bleu on the ground floor and fund manager TDM Growth Partners in three commercial levels above. The assets was last valued at $42 million.
“Macquarie Bank saw significant value in the strength of the lease covenants in this building and were able to lend at an interest rate cover that reflected this,” Mellick said, adding that Fortis was still required to make a substantial equity injection.
Fortis acquired the site for about $14 million at the end of 2020.
The second facility was a $52.4 million construction loan from St. George for the completion of the retail and residential project MONA in Darling Point. This development comprises about 500 sqm of ground floor retail and 24 apartments and has a total projected value of about $103 million on completion. Eight apartments are pre-sold – including the penthouse, which went for $13.75 million – and the new construction loan is 60% covered. MONA is expected to be completed in late 2024.
The third facility was a $64.3 million construction loan from ANZ for the completion of the residential project Piper in Point Piper opposite Cranbrook School. This development comprises 14 apartments, designed by Luigi Roselli, and has a total projected value of about $139 million on completion. Six apartments are pre-sold and the construction loan is about 55% covered. Completion is also expected in late 2024.
The construction loans represented conservative loan-to-value ratios of about 50%. Mellick said the major banks would probably have loaned about 60 to 65% of end net value in early 2022, and each project is more equity intensive than it would have been in that environment.
“On the other hand, in earlier times the major banks would have required that the net value of off-the-plan sales represented 80 to 100% of the construction loan limits, so in this respect they will show commercial flexibility for the right project if the developer has a strong track record.”
Fortis also has a number of projects in Melbourne and has recently expanded into Brisbane. It is the property arm of Pallas Group, which is also the parent company of real estate financier and investment manager, Pallas Capital.
