Industrial Property Development

Property Construction Facility for $90m GRV Project

Commercial Property Construction & Development

Undisclosed

Funding to complete Industrial Development

Property – Industrial Development

The Scope

The client had owned a large parcel of undeveloped land in SE QLD for 20+ years and only recently commenced the construction of 6 of the approved 19 brand-new industrial buildings (Stage 1).
The client cash funded the initial six industrial sheds and wanted to finance the remainder. Each industrial asset on completion was valued in the range of $3M to $6M.
The Gross realization of the entire development is in the range of $90.00M and the client had the desire to hold the entire development for a long-term investment.
The client was unsure of the best way to engage the market and was seeking advice and options to fund the remaining development as the land was also mortgaged to a major bank and tied into other income-producing CRE assets as security.
Before engaging Nexus, the client was happy to engage their existing major bank and fund the remainder over 2/3 stages to suit their hurdles and requirements. This would mean the facility would be a typical construction facility. with QS, bank controls, full builder DD (Painful in the current environment as the builder is not a tier 1-3) interest cover pre-commitment hurdles, and funding over multi stages means further 18 months lead time to completion.
The client wanted to engage someone to run the entire debt exploration process and provide advisory services on multiple funding scenarios.

We were fortunate to have been involved with the site and the borrower group many years ago so we knew the site well and knew the group’s assets and cashflows.
As the client had already effectively injected over $15M of equity as they cash-funded the first stage; we needed to put together a full feasibility and model so we and capital partners can understand the status of all current leases, AFLs, and lease proposals to ascertain the best strategy for finance.
The group is complex with numerous asset classes and cashflows; we wanted to “carve out” this development to be standalone. It was important this was illustrated so our finance and capital partners understood the group and contagion risk was presented as low.
We presented numerous strategies to internal stakeholders with our recommendations and suggested funding solutions with various pros and cons.
We recommended presenting the market with a funding request for a large equity release of +$30M so the client can complete the entire development in “one hit”.
We arranged and instructed the valuations and controlled this whole process; to ensure these were prepared in a format that would be accepted the first time by a lender.
The borrower group had no prior experience or knowledge of the private debt/fund manager space; so we provided a full cost-benefit analysis of going down this path compared to a major bank.

We arranged a new debt facility with +$30M treated as an uncontrolled equity release i.e $30M into the client’s account to complete the development.
The facility was provided by a large fund manager who had a strong appetite for the asset class at time of application.
Negotiated a multi-tranche facility with an LVR of 70% against completed industrial assets and 70% LVR against un-completed stock and balance land.
We negotiated and had approval for no QS involvement, no QS preliminary reports, and no builder DD as the facility was approved as an equity release term loan for 18 months.
We negotiated a contracted commitment that as each industrial asset is completed; additional funding will be advanced against the completed value/uplift i.e equity released uncontrolled into the client’s account.
Interest rate margin of 4.95% above 90-day BBSY on completed stock and 7.25% on balance land. The additional interest cost above a major bank was offset by:
1. 1. Equity release uncontrolled into the client’s account;
  2. Nil controls and minimal conditions;
  3. No interest cover hurdles on pre-commitments so the client can complete the entire development and build spec buildings as required;
  4. Full credit approval within 3 weeks