A Big Deal: Scott Roberts

by AB03 Feb 2020

Scott Roberts, chief executive of IBN Direct, discusses how a second opinion and collaboration led to a client’s happy ending

Our client had an existing relationship with their bank and had been verbally advised that the bank would provide the funding required for their new development – a five-stage master-planned community outside Melbourne.

The client was referred to us for a second opinion by a developer we have had a long-term relationship with. The developer was concerned for the applicant, as the bank had casually and informally suggested that new covenants would apply to the new development, but that “everything was good”.

In January 2014, we were asked to quote and provide conditions on a second-opinion basis as a favour to our existing clients.

The applicant was a generational client of their bank and they had a long history of completing successful property developments, all funded by the same institution. The client held large parcels of land – owned outright – with plenty of equity and a small debt to the bank.

In March 2014 we received a frustrated call from the client. The application had been submitted, the deal assessed, and a letter of offer issued, but two days later the client received a call from the bank, which had changed its decision.

The bank said there had been a change in lending policy and it no longer had the appetite for property development in this location. It wanted to see at least 50% worth of presales and had formally placed some excessive and demanding covenants on the amended offer.

The client’s banker said they would be delighted to revisit the project once the presales requirement was met.

The client was stunned, baffled, angry and upset at what he perceived to be the bank reneging on its word. At their request, we revisited the deal with the original private lender to which we had presented the scenario.

This lender took a commercial view of the project and were comfortable with the track record of the developer and the ongoing viability of the deal. It was happy to take on the lending requirements but advised that it could only provide funding for an 18-month period as its funds were earmarked for another larger development in the future.

The client said he was thrilled with this outcome and our ability to turn around what had become a dire situation for his development and ongoing business. 

The loan was settled, construction began, and we undertook to find a new lender to meet the applicant’s needs long term. 

We sourced a new lender with similar parameters to the first. It assessed the deal, again took a commercial approach, and advised that it was interested in a long-term relationship with the applicant and could fund the remainder of the development. However, its funds weren’t available immediately after the expiry of the original loan. This left a three-month funding gap that needed to be filled to ensure no downtime for the project.

Once again, we hit our panel of funders and located a purely short-term funder that specialised in development. While it preferred to lend only in Sydney and surrounding area, it took the time to speak to both the current and future lenders along with the applicant to understand the deal, location, market and requirements. 

Once this new lender had completed its assessment, it advised that it was able to fund the gap.

We contacted the applicant and let them know they were fully funded to completion.

It was one of those goosebump moments as the applicant shared the concerns they had had that we wouldn’t be able to assist, followed by their absolute awe and delight that we had secured funding for their entire project.

As at December 2019, the final stage of the development was completed. The lots have now been registered and settlements are starting to flow through.

The applicant and lender have commenced discussions around the applicant’s next parcel of land to be developed, and they continue to enjoy mutually beneficial commercial arrangements.

Our ability to understand the market, the applicant’s needs and each of the lenders’ requirements and funding parameters made the process relatively quick and easy to get the deal done with minimal running around for the applicant.

Working with specialists in private lending ensures that you are dealing with reputable funders who maintain a commercial attitude towards decision-making. 

Being able to fully fund a project of this nature is exciting, and it is what we strive for. This deal was a true collaboration between all parties, which resulted in a successful outcome for all.