Key Summary:
- Refinance and capital provided for debt consolidation and business expansion.
- The loan structure offered flexible cash flow solutions to support ongoing operations.
- Investors offered a monthly targeted income of 10% p.a. secured by a commercial asset.
Loan Overview:
An experienced Australian property developer approached us for first mortgage funding to support the construction of a 132-place childcare centre in Thornton, NSW. Having completed a range of successful commercial and residential projects throughout the NSW Lower Hunter, Newcastle and Central Coast areas, the developer required the funds to refinance existing liabilities and finalise the project’s construction.
The key details of the first mortgage loan were as follows:
- Industry Segment: Property Development - Childcare Centre
- Loan Amount: $3.85M
- Loan Type: Interest-only
- Loan Timeframe: 14 months
- Investor Target Return: 10% p.a.
- LVR: 63% (On Completion)
The Challenges:
The property had obtained Development Approval (DA) for the childcare centre. A long-term lease agreement had already been secured with an experienced childcare operator, ensuring the project's financial viability.
- Immediate refinancing - required to clear the existing debt secured against the property.
- Construction funding - needed to build a 132-place childcare centre
- Fast funding - crucial to ensure project momentum, enabling pre-agreed lease commitments.
- Debt serviceability - project required a strategic loan structure to manage cash flow.
Our Solution:
Credit Connect Group (CCG) provided the Borrower with a first mortgage loan of $3.85M, structured as a 14-month interest-only facility. The loan featured multiple layers of security, ensuring capital preservation for investors and enabling the project to proceed without delay.
The loan was secured by:
- Loan agreement with the borrowing company
- First-ranking registered mortgage over the property
- General security agreement over the assets and undertakings of the borrowing company.
- Personal, unlimited, joint and several guarantees provided by the borrowing company
- Tripartite Deed entered into between the trustee, the borrower and the builder
The project’s valuation supported a conservative Loan-to-Value Ratio (LVR) of 63% "On Completion" and 16% "As Is", providing strong security for investors. The construction was contracted to a local construction company and the projected development cost was independently assessed by an independent quantity surveyor at $2.98M.
The structured loan solution provided by CCG allowed our borrower client to refinance existing debt and proceed with the construction of the childcare centre. The pre-arranged 20-year lease agreement, with options for two further 10-year terms, provided financial security for the project's long-term success.
Investor Benefits:
- Target Income: Our Investors were offered a 10% p.a. income stream throughout the 14-month loan term, providing consistent, high returns.
- Security: The loan was secured by a first mortgage over the property, minimising investment risk.
- Capital Preservation: Investors' capital was safeguarded through a first mortgage and a conservative LVR, with capitalised interest until completion.
- Strong Developer Track Record: The borrower’s extensive experience in similar developments reassured investors of the project’s viability and success.
- Prime Real Estate Location: The project was located in Thornton, NSW, a rapidly growing area with strong demand for childcare services, enhancing the long-term prospects for the development.
This secured lending opportunity offered our valued sophisticated investor network a compelling 10% annual return, backed by prime Australian real estate. Investors benefitted from strong pre-leases, robust securities and consistent income distribution, making it an income-focused, low-risk, high-return investment opportunity.
Get started...
Need fast, flexible financing for your next property development project? Contact CCG today to discover tailored funding solutions to help you meet your project goals. Call us on 1300 795 507 or email us at [email protected].