Our client is a successful developer who is currently constructing a large residential project in Brisbane. The developer had the opportunity to achieve significant cost savings from local and international suppliers if they could pay for materials well in advance of them being delivered to site. Paying for the materials early would also reduce the possibility of delays in completion of the project. The materials could not be funded from the developer’s senior construction facility, which only released additional funds following the completion of each construction milestone.
Limba Finance quickly analysed the situation and developed a funding structure that worked for our client. Limba could see that the development was progressing well and was on track to be commercially successful based on the level of pre-sales that had taken place, discussions with local agents, our knowledge of the local real estate market and the track record of the builder. Limba provided a 6 month loan, with an option to extend. Fees and interest were capitalised and payable on maturity. The developer planned to repay the loan once the next tranche of senior funding became available, after meeting the necessary construction milestones.
Our client was able to achieve cost savings from suppliers that were greater than the incremental cost of the funding provided by Limba Finance. In addition, there were operational benefits to having the materials available to be delivered to the site earlier than previously planned. Limba has a strong understanding of the needs of developers and were able to provide a loan that would be repaid based on the project achieving construction milestones. Limba was able to perform its analysis and due diligence within a tight timetable. Limba offered funding that worked alongside, and in addition to the existing funding facilities that were in place, in a subordinated position.
