Long prior to the GFC the philosophy of having one bank for all our personal, business and property assets was dying and the GFC finally laid that notion to rest. In the post GFC period how often did we hear the phrase “we don’t have an appetite for lending on that type of security “or worse “we will pass on that”.

Even now with the darkest days of the GFC behind us, most sensible bankers will tell their developer / investor clients they need to have a panel of lenders or at least another lender  on tap for your projects or investments.

In our view this always been the case, lenders appetite for property lending has always ebbed and flowed with their desire to increase or decrease their exposure to the market and market segments in particular. Whether caused by changing economic conditions, boom and bust cycles or just knee jerk responses to poor lending practices it matters little.

The outward manifestation of these fluctuating appetites is normally reflected in changing margins and the terms and conditions which inhibit or attract deal flow to them. One of our most important jobs is be aware of these changes and help our clients make the best informed choice of lender for each transaction.

We believe many factors make a good financing deal , margin  certainly , but just as importantly the terms and conditions,  the ability to deliver on time on the terms promised and ongoing service through the loan term.

Margins

It’s really competitive out there at the moment with lenders vigorously competing for the same quality transactions. The result has been a dramatic drop in margin from the post GFC highs of 2.25% to 2.75 % to the now  around 1.20% to 1.75%. This competitive pressure started in late 2013 and intensified throughout 2014 and has continued into this year.

What is interesting, is that as yet this competitiveness has not seen the irrational fall in credit standards which typically accompanies the boom and bust mentality of banks. It has more been a gradual return to more sensible lending criteria. At the moment there is  real competition is for good quality transactions .

Similarly, banks are desperate to maintain their loan books and income streams. This is providing a great opportunity for existing clients to review and improve their margins and conditions. As is the norm , lower margins are being used to attract new business because it’s easier than working really hard to maintain and grow existing business.

Terms and Conditions

As they say the devil is in the detail. A lot has changed post GFC and whilst it’s always been the case not all deals offered are the same. Loan to Value Ratios, Interest Cover Ratios, Loan to Cost Ratios, Revaluation clauses and Default provisions are a moving feast. Never before has it been more important to know and understand the terms and the ramifications of them before you enter into a transaction.

Ability to deliver on time and on the terms promised 

This has become even more important as it has become common practice to now seek indicative terms sheets from a number of lenders, choose a preferred lender and then proceed to formal approval. The key questions remain, can they get approval on the terms offered and within a time frame which won’t jeopordise your proposed deal and or delay settlement.

An indicative terms sheet means nothing if is not based on the correct information about the transaction or is prepared by a banker without the appropriate knowledge of what the real appetite for a transaction is within the bank.

Our philosophy is start negotiations at the approval level first and seek confirmation that the deal will have support when it works its way up for approval. Knowledge of what a particular lender will or won’t do and on what terms is key.

Ongoing service through the loan term.

Not all banks are the same and certainly not all managers are good ones. We pick very carefully where our transactions are funded and managed. Really good managers are rare and they sometimes move position and or banks. Many of our relationships with the people who will be looking after your transactions have been built over many years of cooperation.

This ongoing service is never more relevant than in project lending, late progress claims, arguments re cost to complete and an inability to respond to changes during the development phase can turn a good project into a nightmare.

Whether you are choosing a lender for an investment property or development project the aim is make the journey a successful and a hassle free as possible.

Lending Panel

Structured Property Finance (SPF) works with Australia’s major Banks and Institutional Lenders and has access to the decision makers in the loan approval process. During Mr Clohessy’s Directorship of Security Capital Corporation he was instrumental in setting up a number of the first commercial agency agreements in Australia with a number of lenders including Bankwest, St George Bank and AXA.

SPF deals with a dedicated team of Bank staff within each lending institution and enjoys an excellent working relationship based upon years of successful transactions. In addition SPF has long term contacts within the various legal and valuation firms on the the major lenders legal and valuation panels.