27 Sep BANKING ON THE NEXT PROPERTY UPSWING
Developers with a penchant for counter cyclical acquisitions are eyeing the market carefully as an increasing number of projects ‘pause’ and quality sites quietly return to the market – hamstrung by a construction sector bearing the brunt of cost increases, labor shortages and supply delays.
“More millionaires are made in downturns, than in boom markets,” says Scott Roberts, Managing Director of IBN Private.
And history agrees. So what is to be made of the “profitless property boom” of 2022, which has seen a frenzied flight of capital to bricks and mortar and a flurry of new project launches, only to be thwarted by a construction sector under pressure and the cooling effect of rising interest rates?
For counter cyclical players, there are profits to be made in strategic land banking. Often, it’s a long-term commitment that takes into account the cyclical nature of the property market and the time required to advance planning approvals.
“Counter cyclical operators act swiftly to take a site with high appreciation potential off the market, and those who can afford to wait for the construction sector to stabilise will be well positioned,” says Scott.
“At this stage, we don’t anticipate any stabilising in the sector until mid-next year.”
And this, says Scott, is where private lending provides developers with a significant advantage.
“Private funding is particularly advantageous for meeting time-sensitive settlements, land banking, bridging finance and purchasing business assets,” says Scott.
“For site acquisitions, we can often arrange same-day, asset-backed finance approval.
“This is a huge advantage in a competitive market and enables developers to use our services to secure swift finance approval, generally on a short-term basis anywhere between six months and two years, and then transition to traditional banking.
“Before they transition, they are typically adding value to the site by advancing planning approvals for future divestment, or development, when the market improves.
“The developers who come to us for finance are actively land banking in prime lifestyle locations from the west coast to the east coast, with values ranging between $1 million and $8 million.”
Established in 2004, IBN Private is Australia’s leading private funding specialist, providing commercial funding solutions for property developers and business owners Australia-wide, specialising in projects valued between $2 million and $200 million.
The group draws on its own funding, together with more than 250 private funders and investors, ranging from large superannuation funds to Managed Investment Schemes.
“We shine when it comes to complex funding solutions that traditional lenders generally shy away from, such as development finance, non-conforming loans, succession planning and commercial tax debts.
“Our overarching objective is to help businesses achieve their goals, and our reputation, 18-year history and deep industry relationships is testament to how we work.”