BRW Advisory launches Newsletter

BRW Advisory

30 June marked the first full year of trading for BRW Advisory. We are pleased to report that we have obtained banking solutions for more than 20 clients, for some we have completed multiple projects. We enter the new financial year with a number of new financings to complete, and feel confident that there is a greater understanding of the benefits our role brings to the client. We work solely for our clients and are paid only by them. In todays tightening banking market, we are pleased to report that we have been able to consistently gain pricing advantages for our clients, or access to new lenders that far exceed any fees that have been paid to us. It is also worth emphasizing that our service is to assist the client from ‘woe to go’ meaning that not only do we obtain the solution, we also ensure that conditions to ensure smooth implementation are met as well.

Current trends

Construction facilities to assist property developers who do not have an existing Bank relationship to work with have been extremely difficult over the last year. For those schemes that passed the credibility test funding sources could be obtained, but often at a price that looked more like equity than debt. However, whilst most of the Big 4 remain off limits to new customers we are seeing some relaxation in their stance as their existing book starts to enter run-off mode as the existing developments conclude. The sweet spot continues to be developments where the debt requirement is in the $15-25m range, and the debt requirement is below 65% of cost and the debt amount is more than fully covered by qualifying pre-sales. Pricing for this funding has increased but overall interest costs of 6-7% are reasonable and acceptable to a well structured proposal. The other key requirements are the experience and track record of the developer and the builder.

Investment Loans for commercial property investment have higher margins. Typical opening request from a Big 4 bank will be for an interest margin of 2.5%/90 day BBSY plus fees of 25-50 bp for a 3 year term. This type of pricing is available on loans in the $10-$50m range. However, there is still appetite for conservatively structured borrowings, and we still see ‘all in’ rates of below 4% after negotiation as achievable. Much of the direction in the property market is governed by the APRA caps that a particular institution has to adhere to. At present there is a strong push to curb interest only loans, and have the book swing to interest and principal repayment, however, interest only is attainable for loans of 50% or less of the valuation or purchase price of a property.

Trading Businesses are hot commodities within the Banks. Any well run and financially secure business will get a good hearing from the Banks at present. Banks still need to deploy their capital, and the property restrictions are putting increasing emphasis on viable trading businesses. If you have such a business and haven’t reviewed your banking services for 2 years or more then it is likely that you are leaving money on the table. We are happy to conduct a ‘no obligations’ review on your total banking services across lending, foreign exchange, trade facilities, transactional banking, corporate credit cards and merchant acquiring. Running a tender process can often unlock substantial value. Remember it is your choice as to whether this actually results in a change of Bank, we will help you to weigh up the advantages and disadvantages. We are sure that in your business you review the pricing of your key suppliers, your Bank should be no different.

Diverse funding sources Over the last year we have seen a rapid increase in the number of funding sources available. Many of these have sprung up to fill the market demand for property lending. The sources include family backed funds, overseas corporations, crowd funding initiatives and private lenders. Whether it is residential loans for overseas apartment buyers, construction facilities or investment loans the number of available sources has multiplied. However, the counter balance is the price that is demanded with first mortgage funding being in the 8-12% range and second charge funding being in the 15/20% range there are only short-term proposals that can really access these sources. Nevertheless if you have such a need let us be your guide to the best match for your requirements.

BRW Advisory representation

Sydney continues to be our main base, however, through both our Directors and Consultants we have a much wider reach. Alistair now has a New Zealand home and can provide coverage across the Tasman, through David McCarthy in Launceston we have representation in Tasmania, Alan Chong also has strong links in Perth to cover Western Australia, and we support the Eastern seaboard from our Sydney Head Office.

BRW Contacts

Angelo Barbati, Director – angelo@brwadvisory.com -

+61 (0) 498 555 005

Alistair Wood, Director – alistair@brwadvisory.com -

+61 (0) 435 442 033

+64 (0) 276 442 033

Alan Chong, Senior Consultant – alan@brwadvisory.com -

+61 (0) 411 262 101

David McCarthy, Senior Consultant – david@brwadvisory.com -

+61 (0) 438 943 213

Website

www.brwadvisory.com