Goldman Sachs has agreed to lend $120 million in development finance to Kokoda Propertyfor the 320 apartments it wants to build in Newstead, Brisbane after the developer could not obtain funding from local banks.
The deal, which local financiers say was struck on an all-in lending cost of 9 per cent, is one of the largest non-bank deals secured over the past 12 months in Brisbane in a market, which the Reserve Bank of Australia says faces an oversupply, and where retail lenders have tightened lending requirements considerably.
“We sold the majority of the apartments off the plan 12 months ago but with the funding landscape having changed we had to go abroad to seek finance,” Kokoda Property managing director Mark Stevens said.
“With the greater control APRA has had on banks it has forced the banks not to lend certain quantums for projects like this and those restrictions meant we had to look for other funding sources.”
The Melbourne-based developer saw $95 million worth of sales in the $250 million project known as Chester and Ella sell in four weeks. The two towers of the project include 171 and 149 apartments respectively and are planning to be of higher quality than the average market apartment.
Kokoda Property made a move into the Brisbane market in 2015 snapped up the major development site at Newstead from Urban Construct for about $19 million. It has continued to back itself in the difficult Brisbane apartment market, buying sites including along the Brisbane River in St Lucia where it has plans for a $75 million apartment building.
“We think this is perfect timing,” Mr Stevens said, “When construction of the development is complete in 2019 there won’t be a lot of apartments for sale and the values will be stronger.
“Unfortunately I think Brisbane has had a bit of a bad wrap.”
Goldman Sachs said the deal demonstrated its desire to align itself with well-credentialled developers, with a track record of delivering exceptional projects, as it enters property lending in the Australian landscape.
Other big bracket banks such as Credit Suisse have been lending into Brisbane’s apartment market.
Credit Suisse has used its own balance sheet to strike a $65 million funding deal for former float candidate and major apartment developer, Metro Property Development.