Equity at work
The transaction
A well-regarded boutique developer secured the purchase of a large development site in southern Queensland.
The site was regarded as prime residential real estate with direct water frontage on two sides. The development size was $200 million.
Borrower motivation
The purchase and subsequent multi-stage development was too large for the current capital base of the developer, but was an opportunity they were keen to pursue.
The sponsors were highly experienced but lacked a track record of $100m + developments.
Lender requirements
The equity investor was seeking to invest their funds in projects that:
- Required an equity contribution of at least $5million;
- Showed at least 20% return;
- Had sponsors with a proven track record in development.
The Arranger
Balmain's role as the Arranger involved:
- Finding a suitable partner to contribute the significant proportion of the equity required to purchase the land and complete the development;
- Management of the JV documentation process;
- Arranging the debt for all stages of the project;
- Continue to act as the finance consultant and debt arranger for the duration of the project.
The result
The joint venture agreement arranged by Balmain included a cash injection of $20million from the equity investor. These funds were used to reimburse the developer for the DA costs expended to date, project costs between option exchange and land settlement, and equity contribution on land settlement. Most importantly, the client was able develop his prime asset.
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