Brokers wanting to capitalise on the market’s desire for construction and development finance should turn to Trilogy Funds, which has the flexibility, speed and competitive rates that clients seek, says the company’s head of lending and property assets, Clinton Arentz.
The property market continues to soar to ever-greater heights. Owner-occupiers refinancing their homes in an era of incredibly low interest rates, and people selling their homes in the capital cities and moving to the regions are two segments of the market that grab a lot of media attention.
But there’s a lot more going on than that, with a wide array of opportunities available to developers, investors and brokers in residential, commercial and industrial property.
Trilogy Funds is one of Australia’s leading fund managers of property-based investments and non-bank financiers to the property development and construction sector.
Eighty per cent of Trilogy Funds’ lending enquiries originate from brokers.
Australian Broker caught up with Trilogy Funds head of lending and property assets Clinton Arentz and award-winning commercial finance broker George Karam, who runs brokerage BF Money, to talk about Trilogy Funds’ range of loan products and excellent value proposition to brokers.
“For over 20 years Trilogy Funds’ managed funds and private investors have enabled the successful completion of hundreds of projects along the eastern seaboard of Australia, supported by an experienced team and driven by a flexible and tailored lending approach,” says Arentz.
“As the performance of each loan funded through Trilogy Funds underpins the returns provided to investors, broker and developer success is important to us.”
Arentz says loans are predominantly funded by the Trilogy Monthly Income Trust (Trust), provides investors exposure to loans secured by first mortgages over Australian property.
“Investors in the Trust include individuals, self-managed super funds and wholesale investors seeking exposure to the Australian property sector.”
So, how does this benefit brokers and their clients?
Pooled mortgage funds, such as the Trilogy Monthly Income Trust, are open-ended, and investments can be made at any time the Trust is liquid. This means that funds are readily available to support developers.
“Upon receiving a loan application, the Trilogy Funds team will turn around an indication of support and proposed terms typically within 48 hours, subject to the completeness of the loan application,” Arentz says.
“Having availability of funds also ensures each drawdown is met on time throughout the life of a property development or construction process.”
Range of loan products
Trilogy Funds loans cover the residential, industrial and commercial property sectors.
Arentz says for residential loans, the main focus is apartment buildings, townhouses, luxury homes, housing developments and land subdivisions.
“We also fund quality industrial projects, including industrial complexes, industrial subdivisions and industrial parks.”
In terms of commercial projects, Trilogy Funds loans has covered service stations, fast-food outlets, retail, childcare facilities and medical centres.
Target loan criteria include companies with a proven track record of property development and construction experience.
Loan sizes range from $3m to $30m, with a loan-to-value ratio no greater than 65% of the gross realisable value, secured by a registered first mortgage. There also has to be a clear marketing strategy for selldown or refinancing, but not necessarily presales.
“Our tailored pricing model delivers competitive rates based on the quality of the loan assessed against Trilogy Funds’ loan criteria,” Arentz says.
Value proposition to brokers
Arentz says he has seen fewer brokers writing loans with the big four banks. “Eighty per cent of our current loans have been brought to Trilogy Funds by brokers.”
Trilogy Funds values broker relationships, and the team strive to develop quality relationships through three key areas – personalisation, collaboration and communication.
“As specialists in construction and development ﬁnance, we help brokers across Australia to cement their relationships with clients.
“We go beyond traditional lenders by tailoring the developer’s experience, applying our construction and development management expertise to
help ensure that their projects progress smoothly.
“We are also very active in supporting brokers and their clients in the small number of instances where developments do not go to plan.”
When it comes to technology, Trilogy Funds has a speciﬁ c portfolio forecasting platform designed to monitor both individual loans and the loan book as a whole, with the ability to scenario-test a large number of possible outcomes.
“It is interactive, dynamic and multipurpose,” Arentz says.
“The technology platform is used for current and forecast loan assessment, loan progress and monitoring. It enables us to provide quick turnarounds, agile responses and loan updates.”
Trilogy Funds continues to see robust growth in its lending pipeline.
“Trilogy Funds has to date provided new construction loans and timely drawdowns all throughout the COVID pandemic and lockdowns,” says Arentz.
“We currently have over 110 active construction loans in our loan book across Queensland, New South Wales, and Victoria.”
Arentz says July 2021 marked two years of Trilogy Funds setting up an office in Melbourne, and there’s been clear growth in its Victorian portfolio.
“We also brought on board three new portfolio managers this year, one each across Queensland, New South Wales and Victoria.
“Trilogy Funds currently provides loans from Cairns all the way down to Mornington Peninsula.”
Property market trends
Arentz says while property prices are appreciating strongly, construction costs are at a historic high, and this presents a new landscape for property developers to navigate.
“Developers should be carefully reviewing their building contingencies as costs continue to increase.
“Valuations for end products are on the move as well, but they’re historically based. So, what I would suggest to all developers is to place more value on the input they get from the expert consultants they work with, in particular, in the areas of valuations, legal and cost-based QS reporting.
“I believe there is an opportunity for us, brokers and borrowers to benefit from the outperforming industrial and residential property sectors.”
Reacting quickly to a dynamic property market is important, Arentz says.
“It’s critical for developers and lenders to be alert to changes in the market and adjust to them swiftly. It’s a very agile industry in that sense, and we believe Trilogy Funds is at the forefront of that with our flexible approach.”
Arentz says developers are likely to continue to take advantage of buyer demand and fast-track new projects wherever they can access land or infill sites at financially viable prices.
“We anticipate the strong sales results in our existing developments will continue in the coming months.
“We welcome all enquiries from brokers for projects, big or small. Our dedicated team are always ready to discuss lending opportunities as we continue to build quality broker relationships.”
George Karam is the founder and managing director of Sydney brokerage BF Money, which won the Australian Mortgage Awards 2020 award for Brokerage of the Year (6–20 Staff ). Karam was also named the national MFAA 2021 Commercial Finance Broker of the Year.
He is based in Parramatta, Sydney, and assists clients needing finance in the Sydney metropolitan area, as well as clients with some interstate projects.
Karam says he has been using Trilogy Funds as a lender for his clients for more than three years.
“My first deal [with Trilogy Funds] was a boarding house transaction on the NSW Central Coast, with a loan amount of around $8m. It was repaid successfully within time and to the terms,” says Karam.
He says the Trilogy Funds team had a high level of involvement in the brokerage’s first-time funding of a project.
“They’re the moments that test the values and work ethic of people and the company they represent – ours and Trilogy Funds’ values aligned.
“The Trilogy Funds team are both commercial and personalised in their approach and flexible with asset classes and loan amounts.”
Karam says an example of this was a beachfront development in Forster, NSW.
“Trilogy Funds wanted to partake in the deal, but at the time the loan amount was too high, so I facilitated a joint loan with another financier.”
Karam provides another example of a successful project Trilogy Funds has funded for one of his clients.
It’s a construction project in Bankstown, Sydney, which is currently reaching completion and has been funded through the lockdown.
“During a difficult time and a challenging environment, the developers had visited a number of brokers/financiers – Trilogy Funds could structure a deal that both parties were comfortable with.”
Karam says Trilogy Funds met every drawdown to date, and the developer achieved a level of presales during the construction phase.
“The financing should be the least dynamic part of a project, the most predictable. Trilogy Funds offered a steady hand and a predictable outcome.”
When it comes to loan turnaround times, Karam says all the lenders he chooses to work with have quality processes.
“A competitive advantage of Trilogy Funds is that very quickly, the team can identify if it’s a loan they are interested in – they’re able to verify the information the broker is needing through both initial conversations and indicative terms. Trilogy Funds can readily identify the most appropriate credit terms for the transaction – the quality of initial conversations is crucial.”