When Chifley Securities arranged its largest loan to date – a $37m investment for the acquisition of multiple sites in Kensington, NSW – the non-bank finance group didn’t need to access a pool of funds restricted by a defined investment charter or an agreement among multiple trustees.
Instead, it was able to match the deal with a single, high net worth investor, who was able to quickly assess the business opportunity and sign a cheque for the full value of the deal.
“Unlike other private lenders, we don’t pool our investment funds,” Chifley Securites director Joe Morello explains. “Although we have capital worth $1.1bn to invest, we actually match our deals to particular investors, which has been the source of our success.”
Private lenders typically pool funds from multiple investors into a specifically designed investment vehicle. However, this means they need to stick to the agreed rules, which can restrict how they are able to go about investing and what they choose to invest in. Usually the investment falls into the lowest-risk category the pool is willing to accept.
Chifley Securities, on the other hand, connects broker clients directly to sophisticated high net worth investors, who lend funds more directly and strategically than pooled funds.
“We work like a marketplace, where we are able to bring different lenders to the table to meet the unique needs of our brokers’ clients,” Morello says. “We are a lot like a professional matchmaker, and the relationships we build are closer and more powerful as a result.”
The right match
Private lending has been on a sharp growth trajectory ever since the major banks began to slow their investment in some areas of the market. Chifley Securites alone facilitated $638m in lending to property investors, builders and developers last financial year.
“When Chifley launched almost two years ago, it was because there was a substantial growth in deal flow the banks weren’t doing,” Morello says. “Since then, there’s been a drying up of bank lending altogether in many areas of the market, which has seen an unprecedented amount of deal flow directed towards the private sector that just didn’t exist in the past.”
However, Morello says Chifley’s outperformance has been a result of the sophistication it can offer clients over pooled fund options with more limited investment delegations. With its own marketplace of investors, Chifley Securities pairs broker deals with the distinct character, interests and expertise of its high net worth investors, which include niches in development and construction finance, mezzanine finance, commercial finance, private equity and settlement finance.
Morello says brokers see the end results of this model in faster turnarounds, more flexibility on finance commitments, and more personalised involvement that enhances deal success.
“Clients today like a more hands-on approach and more direct access to capital than the pooled funds that are responsible for managing other people’s money,” Morello says. “Just like brokers, clients like dealing with already successful people who have a face and a name.”
Chifley Securities’ marketplace of lenders has been growing this year, as demand for higher rates of return has driven more investor interest in quality property market deals. “We have investors chomping at the bit to get access to quality transactions, and we bring those to the table through our broker network and by allocating them to the right investor,” Morello says.
The lender also has the ability, through its Chifley Partnership arm, to place deals with other ‘partner’ private lenders should a particular deal not meet the criteria of its own panel of investors.
“We sometimes have deals we can’t match with the particular appetites of our investors. But when brokers come to us, we can work with them to find a funding partner that fits that deal and offer them a full service.”
Morello says brokers are now much more aware that they have access to a growing universe of engaged, high net worth investors sitting outside the mainstream banking sector. With Chifley Securities offering 1% broker commission and a track record of turning deals around exceptionally quickly, Morello says it’s a proposition the financial industry can find hard to match.
“The private lending market is proving it has a lot to offer clients in the current market. At Chifley Securities, we are confident our marketplace of lenders will continue to demand good-quality deals through the broking channel, so we’ve got a lot more ‘perfect matches’ to make.”