Yep. cmon you lot... fess up. Who was it?
Blackminster JV: 4 apartments in Mindarie WA
- Thread starter westminster
- Start date
Yep. cmon you lot... fess up. Who was it?
The other block sold for more than we paid so they had a touch of Sellers Remorse and a massive bunched up panties wedgy!
Jez - not too bad. We had some good contacts though. Yes commercial lending but no servicing during construction, its all capitalised. Due to the small number of apartments and the strength of the deal we didn't need to sell off the plan.
We probably will try and sell OTP though
As WM said, wasnt too bad - however, that was largely due to the fact that my Brother is a commercial property banker. But he always plays in the big boys school, but still he "knew a guy". He also put in a lot of effort in writing up the proposal into a structure the bank knows and recognises (ie, using their proposal forms). Wouldnt suprise me if the banker just submitted the application my brother wrote.
Our structure is very simple so no issues there. The only thing we didnt win on was the limited liability. Had to provide full guarantees each. my brother thinks that once we have built a bit of a relationship with the bank, we should be able to limit this in the future.
Once the plans are finalised with council approval we will see if we cant slip in a pre-sale or two.
Im pretty excited about the designs. They will be fantastic appartments provided the council plays friendly.
Blacky
How did they calculate the value of the project?
I've got a contact with CBA for commercial lending (i looked into this a while back when i was looking at belmont - thank god i never went ahead with it!) and this is the repsonse i got when i asked questions around the lending options:
1). Capitalising interest is an option; however we will require Net eligible pre-sales to clear proposed debt in full.
2). We base our value on the in-one-line value. To calculate this very roughly, take your expected on completion value, less GST, less 15%. This is the value we would use in our application. Then, if the proposal is non-recourse (no guarantees etc) times this figure by 65%. As an example, if your on-completion value was $2.8m, the in-one-line value would be circa $2.1m, we would then lend up to 65% of this value or, $1.39m. This may of course be a large hurdle. (70% if there is full recourse).
3). If servicing cannot be shown via existing income streams, pre-sales will be required. To able to include existing income, guarantees will be sought from applicants. If servicing can be shown via existing income, we may have the option of avoiding the pre-sale requirement.
4). There is the possibility we can lend up to 70% of the Net Realisable Value. To be able to go down this path, we will need to meet the following criteria - 50% pre-sales held, and/or 100% peak debt clearance from net proceeds.
Was the finance pre-reqs fairly similar to that? I was fairly intimidated by these requirements back then, but i guess after reading both your posts, it is giving me this urge to just go and find a good deal and get my hands dirty.. haha
I've got a contact with CBA for commercial lending (i looked into this a while back when i was looking at belmont - thank god i never went ahead with it!) and this is the repsonse i got when i asked questions around the lending options:
1). Capitalising interest is an option; however we will require Net eligible pre-sales to clear proposed debt in full.
2). We base our value on the in-one-line value. To calculate this very roughly, take your expected on completion value, less GST, less 15%. This is the value we would use in our application. Then, if the proposal is non-recourse (no guarantees etc) times this figure by 65%. As an example, if your on-completion value was $2.8m, the in-one-line value would be circa $2.1m, we would then lend up to 65% of this value or, $1.39m. This may of course be a large hurdle. (70% if there is full recourse).
3). If servicing cannot be shown via existing income streams, pre-sales will be required. To able to include existing income, guarantees will be sought from applicants. If servicing can be shown via existing income, we may have the option of avoiding the pre-sale requirement.
4). There is the possibility we can lend up to 70% of the Net Realisable Value. To be able to go down this path, we will need to meet the following criteria - 50% pre-sales held, and/or 100% peak debt clearance from net proceeds.
Was the finance pre-reqs fairly similar to that? I was fairly intimidated by these requirements back then, but i guess after reading both your posts, it is giving me this urge to just go and find a good deal and get my hands dirty.. haha
Jezza
Im not 100% on the terms, however, it looks kind of similar. Commercial lending is different to resi, the rules arent hard and fast (more used as a guide).
1) Given the small size (4units) pre-sales werent required. If we went bigger, they would most likely require it.
2) Im pretty sure the val was based on land value+total construction cost. Then we can borrow a % of that. No allowance was made for on completion value that I am aware of (it would be hard given designs arent finalised). You can twist and turn the numbers a thousand ways, but really, your looking at 65-70% lend of your total costs.
3) They took servicing into consideration, as well as prior development experiance and asset position.
While the preferance is to use other peoples money, you need to show some level of commitment to the debt. It is hard (impossible) to pass 100% of the risk onto the bank. At the end of the day the bank makes sure its your nuts on the line... not theirs. If you are not willing to take on the risk, then why should they?
Im sure we will be posting designs once they are finalised.
Blacky
Im not 100% on the terms, however, it looks kind of similar. Commercial lending is different to resi, the rules arent hard and fast (more used as a guide).
1) Given the small size (4units) pre-sales werent required. If we went bigger, they would most likely require it.
2) Im pretty sure the val was based on land value+total construction cost. Then we can borrow a % of that. No allowance was made for on completion value that I am aware of (it would be hard given designs arent finalised). You can twist and turn the numbers a thousand ways, but really, your looking at 65-70% lend of your total costs.
3) They took servicing into consideration, as well as prior development experiance and asset position.
While the preferance is to use other peoples money, you need to show some level of commitment to the debt. It is hard (impossible) to pass 100% of the risk onto the bank. At the end of the day the bank makes sure its your nuts on the line... not theirs. If you are not willing to take on the risk, then why should they?
Im sure we will be posting designs once they are finalised.
Blacky
westminster / Blacky :
Firstly, congrats on the JV and I look forward to seeing the final result.
Secondly, thinking back to when you first started looking at/doing developments, how did you work out what design would be best for the block? Did you engage a draftsman or someone, to help you work out the best design/layout for your first project?
Really curious to see what your first steps were down this path. Cheers!
Firstly, congrats on the JV and I look forward to seeing the final result.
Secondly, thinking back to when you first started looking at/doing developments, how did you work out what design would be best for the block? Did you engage a draftsman or someone, to help you work out the best design/layout for your first project?
Really curious to see what your first steps were down this path. Cheers!
Cheers Big Ears!
Blackminster just enjoyed a quiet drink to celebrate Settlement today!
Hoorah!!
Blackminster just enjoyed a quiet drink to celebrate Settlement today!
Hoorah!!
onwards and upwards WM & Blacky. looking forward to more updates on this new chapter.
Very interesting. I'd love to know what/how/what they are doing. Has it started construction yet?
Slab poured last week, brickies starting in about 3 or 4 weeks. 2 ground floor, 2 first floor.
'Final' floor plans are finished - just waiting for the elevations which should be ready promptly. Then we are off to council with our fingers crossed.
There will probably be some changes required, as we are pushing the envelope some.
But all in all very happy with the designs and concept. These apartments will be schmiko.
Blacky
There will probably be some changes required, as we are pushing the envelope some.
But all in all very happy with the designs and concept. These apartments will be schmiko.
Blacky
Yup we are very excited. It's nice to see ideas from your head translated into plans. Of course its even more exciting to see that constructed but one step at a time.
In the timeline of things we have managed to get to DA lodging approximately 2mths post settlement.
In the timeline of things we have managed to get to DA lodging approximately 2mths post settlement.
Hello good lookin'
I love our elevations. We are ready to lodge for DA just doing paperwork for it
Front facing Marina
Rear laneway
Side elevation (yup that's some slope!)
I love our elevations. We are ready to lodge for DA just doing paperwork for it
Front facing Marina
Rear laneway
Side elevation (yup that's some slope!)
Hi guys
Nice work on this - thanks for posting the numbers etc.
By the way, this is the issue that put me off development JVs, after having done one. You take on all of the risk ultimately from the banks POV and only get half of the upside. You also have to disclose the full potential liability (not just your 50% share) to any other bank who you may want money from in the future, which limits your future borrowing until this project is sold. So it has to be turned around real fast before it limits other borrowing and ambitions.
I imagine it might be rarified air indeed to get a bank to agree to limit your liability - only when your development entity has sufficient financial resources to stand on its own two feet although some of the Brokers may want to chip in about that.
I also found it a lot of work (even as a relatively silent partner), which in hindsight I would have preferred the full upside as remuneration. But then I don't actually enjoy development that much so the workload would appear bigger to me. One thing that did work though was leaving aspects of the work with the person who was good at it and paying them for the time they spent doing it. Stops doubling up on and arguing about everything and there are no hard feelings if someone ends up doing most of the work.
Anyway, good luck with it all although it doesn't appear you will need it. I would be interested in your all in $/sqm rate on the build if you can give us an idea for that type of product?
