Fortis, part of Pallas Group, has secured lending facilities for three of its premium projects in Sydney since February in the face of conservative lending conditions.
The three facilities total approximately $142 million in value, supporting a completed building valued at $42 million and two construction projects with a combined end value of $242 million.
Charles Mellick, Director, Fortis, commented that, “Although the commercial real estate finance market is more demanding at the moment, these recent facilities from ANZ, St. George and Macquarie Bank demonstrate that the major banks are still looking to lend and to take a commercial approach, displaying a strong preference for premium assets and experienced borrowers.”
The first of these is a term debt facility of $25 million from Macquarie Bank, supporting the completed retail and commercial building at 2 Guilfoyle Avenue, Double Bay. This building benefits from long-term tenancies with Baker Bleu on the ground floor and fund manager TDM Growth Partners in three commercial levels above. 2 Guilfoyle Avenue was last valued at $42 million.
Mellick adds, “Macquarie Bank saw significant value in the strength of the lease covenants in this building and were able to lend at an Interest Rate Cover that reflected this. Although we were still required to make a substantial equity injection, we appreciated the commercial attitude taken by the bank.”
The second facility was a $52.4 million construction loan from St. George for the completion of the premium retail and residential project MONA in Darling Point. This development comprises about 500 sqm of ground floor retail and 24 apartments and has a total projected value of circa $103 million on completion. With eight apartments pre-sold, including the penthouse sold at a record $13.75 million, the new construction loan is 60% covered. Construction on MONA is expected to be completed in late-2024.
The third facility was a $64.3 million construction loan from ANZ for the completion of the residential project Piper in Point Piper opposite Cranbrook School. This development comprises 14 apartments, designed by Luigi Roselli, and has a total projected value of about $139 million on completion. With six apartments pre-sold this construction loan is about 55% covered. Construction on Piper is expected to be completed by late 2024.
Mellick notes, “These construction loans represented conservative loan to value ratios of about 50%, whereas the major banks would probably have loaned about 60-65% of end net value in early 2022. Accordingly, each project is more equity intensive than it would have been in that environment. On the other hand, in earlier times the major banks would have required that the net value of off-the-plan sales represented 80-100% of the construction loan limits, so in this respect they will show commercial flexibility for the right project if the developer has a strong track record.”
Pallas Group is the parent company of real estate financier and investment manager, Pallas Capital, and property developer, Fortis.