Michael Veitch is the Head of Property Finance NSW and ACT at Keystone Capital, a funds manager specialising in investment opportunities secured by mortgages over real property assets. Veitch originates and manages lending opportunities for commercial property operators and property developers and works with direct clients, referral partners and mortgage brokers.
Q: After 10 years at Commonwealth Bank, you took a role at a private non-bank lender. What was behind that decision?
A: I know it is a cliché, but part of my decision was about needing a change. The other part was frustration as it seemed like each year property lending at a major bank was becoming harder through a mixture of appetite, process rules and regulatory oversight. Large property developers can still operate in these conditions, but it was getting so difficult to help small and medium-sized property operators. These are the types of clients I enjoy working with the most.
Q:Who is Keystone Capital and why did you join them?
A: Keystone Capital is a funds management business that specialises in the origination and management of property lending opportunities secured by a mortgage. In everyday terms, Keystone is a “private non-bank lender”. I joined Keystone for a couple of reasons. The role allowed me to focus on property lending and working with brokers, two things I really enjoy. The company itself has a good track record, good values and is motivated to grow.
Q: What were the challenges of moving into a private lending role?
A: I have to confess it was a challenge. When I was at CBA I was guilty of thinking that every time the bank declined a deal the client could simply “get a private loan”. Private lending is not bad credit, it’s different credit. All the basics of lending – the client, the security, the loan purpose and how the loan will be repaid – are all part of private lending. Oh, and the COVID pandemic hitting six weeks after I started in the role was also challenging!
Q: How is private lending different from lending at a major bank?
A: Private lending generally is more commercial in its credit appetite, with the trade-o being higher interest rates. For example, Keystone’s appetite is based around the client, the security property and the exit. Private lenders often have loans with capitalised or prepaid interest for the loan term. This means that whilst servicing is considered, it is not a major focus in assessment. Private lending is not a long-term solution – typical loan terms are six months to two years.
Q: Where do you get your business from?
A: Ninety-nine per cent of our business comes from mortgage brokers, and they are very important to our business.We see them as business partners as not only do they help explain where Keystone sits in the market, they match client needs with our appetite. Brokers also help with the management of a client during the loan term, and where applicable also assist with the ‘exit strategy’ of a loan, generally to a better-suited long-term financier.
Q: Where does Keystone sit in the market? What types of deals do you do?
A: Keystone is unique in the private lending space as we lend in all Australian states and territories and do not have postcode restrictions. Our most common type of lending includes:
- helping developers acquire development sites (land banking) and providing time for the client to achieve adevelopment approval or
- start a marketing campaign
- development funding; generally land subdivisions, townhouse and villa developments or boutique apartment buildings with low or no presales
- cash-outs/equity releases for business purposes – this style of lending is where a client has an unencumbered or very lowly geared property and seeks to borrow funds for a commercial purpose (often a property development without the need for quantity surveyors and presales, etc)
Q: What advice do you have for brokers with clients who need private lending?
A: Keystone is a common-sense lender. It is important that when applying for a loan brokers clearly articulate: 1. The funding need; 2. Background on the borrower; 3. Details on the asset/ project; 4. What is the intended loan exit; and 5. Any other useful information. Also, don’t try to hide adverse history – we understand that things don’t always go according to plan and can usually accommodate if reasonable.
Q: What are some of the things brokers need to look out for?
A: If you are dealing with a private lender for the first time, I would recommend making sure that they have an Australian Financial Services Licence, they are able to explain where and how they obtain funding (a link to a product disclosure statement is ideal) and what are their lending guidelines. Talking with your industry colleagues to get a recommendation is also important.
Q: How do brokers find out more about Keystone?
A: Check out our website at www.keystonecapital.com.au or contact me directly on email [email protected]