In Developers, Finance, Property Development

Working With Financiers That Can Navigate Difficult Projects – Dorado Directors, Davide Bini and Peter Packer

One of the key advantages for developers of the fundamental shift in the lending market from a dominance by banks to the entry of non-bank competitors is that an increase in choice increases the chance of being able to choose a lender tailored to the specific needs of a project or developer beyond finances alone.

The role of lenders now extends beyond simply providing funds, to using their own experience from the property industry to offer more customised funding that suits the precise needs of a development at the outset, and further applying their own expertise during the project itself to optimise outcomes in an evolving commercial environment.

This becomes particularly important when a project does not go to plan; developers benefit from working with a lender that can navigate the reefs when challenges and setbacks arise.

 

It’s all in how it’s handled

There is nothing like adversity to aid learning in most fields, and property development is well known for its tendency to encounter adversity. Given the complexity of the issues, the number of stakeholders and amount of money at stake in property development a stoic, calm mind is needed when difficulties arise. This is a much easier mindset to adopt when you have faced similar circumstances in the past.

In one case, at a key stage in the project’s development, its builder went into liquidation, causing a funding shortfall and leaving the project likely to grind to a halt. This is an issue that can be hard to anticipate but which requires significant agility to overcome.

 


“The builder going into administration is something that can’t be controlled or prevented at a developer or funder level” Dorado Director Thomas McClung comments, “it’s all in how it’s handled after the fact.”


 

In this case the developer approached the issue with an upfront honest approach from the outset, allowing Dorado to brainstorm with the developer to come up with a strategy extremely quickly, and get the project back up and running for all stakeholders benefit, including the end purchasers. The atmosphere was a rare one of urgency and calm.

 

Unified resources from all sides

When a challenge of this scale hits a project, the best outcome results from having as many experienced minds working together to solve it as possible. For this, having a lender with extensive property industry experience that sees real value in each project’s outcome comes into its own.

Dorado has a lot of skills internally that the developer did not have access to elsewhere, including bank relationships, years of experience in project management evaluating potential outcomes and forecasting capabilities for scenario planning and sensitivity analysis.

In this instance there was a senior lender and combining these skills with the developer’s own resources, and teaming with the senior lender, meant that all parties could put the effort and resources in to address the project’s issues. After several site visits and extensive workshopping, Dorado was able to sort through issues as they arose and facilitate meetings with relevant players to put a funding solution into effect. This allowed the developer to find a replacement construction solution, which Dorado could provide its own insight and advice on as it was put in place.

 

Everyone must be happy for it to work

For circumstances such as these, the outcome could have been very different. A half-finished building presents a real issue for a senior lender that doesn’t believe the developer and funders have the expertise and means to complete it, they will look to appoint a receiver at great cost to the project, until they recover their debt.

This solution worked because Dorado worked with the unique circumstances of the project and its past history with the developer to find a solution, and then considered the effect, impact, and suitability of the solution for multiple stakeholders. As Thomas McClung states, “everyone had to be happy and onboard for it to work.”

Ultimately, to resolve issues such as this, it not only comes down to deploying the experience that has been gained but fundamentally it is down to people, relationships and having a personable long-term approach.

 

www.doradoproperty.com.au

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