A local Melbourne property development group are the latest to secure substantial offshore loans for grand scale urban development.
Within the space of 12 months, Wolfdene (Melbourne based greenfield developer) have followed up their $190 million Casey Fields development with a $100 million-plus acquisition in nearby locality, Cranbourne South.
Brompton, as it is named, is a 100-hectare project that brings Wolfdene’s portfolio (and rank) up amongst the big players of Melbourne’s major private developers. Finance was secured by a global syndicate, headed up by Japanese bank, Nomura.
While Wolfdene have declined to confirm how much the site was purchased for, or what component was made up by Nomura, industry sources have suggested it was “north of $100 million”. Forecasts for the project look promising, with Brompton holding the capacity for 1,400 homes, and an end value of $610 million.
Normalisation of alternate funding options
This residential property development is the latest in a growing line of projects seeking offshore funding in the face of wary local banks and lenders.
The Welsh Group, led by former Essendon footballer Andrew Welsh, recently secured $70 million from Hong Kong hedge fund, OCP; this is the second project and subsequent loan involving the same parties within the last 12 months.
The 3L Alliance were forced to look offshore when financing their central Melbourne apartment development in March 2017. Despite the first tower of the project all but fully accounted for in pre-sale, local banks remained guarded. Upon recommendation from advisory firm Ernst & Young, 3L Alliance began investigations into offshore and non-bank lenders.
Deloitte Real Estate Transactions partner, Stephen Hynes, helped to facilitate the Brompton project’s finances and says that looking globally to structure finance solutions is becoming more and more common.
Over the past three years, the bank regulator, Australian Prudential Regulation Authority (APRA), has been steadily tightening underwriting standards and issuing warnings against residential development lending. This funding gap has been filled by many non-bank and offshore financers.
APRA have recently acknowledged, however, that their strict limits on lending to investors are “potentially becoming redundant” as the property market cools. That being said, we will continue, in the short term, to see conservative attitudes as “the tougher lending standards which are now in place will be part of the furniture”.
With this, the finance landscape for all sized projects is evolving; offshore and non-bank lending is not only becoming more regular, but often the preferred option too.