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FIIG JV funding developers as banks avoid sector

A bespoke lender, who has arranged more than $100 million in development finance, sees a huge opportunity to fund borrowers that have been left “high and dry” by the banks.

Gieldan Capital, a joint venture between fixed income dealer FIIG Securities and private equity firm MH Carnegie & Co, has concluded its sixth debt facility after financing deals such as the highly anticipated Cairns Aquarium and Archery Capital.

The most recent facility for $16 million was arranged on behalf of an experienced Sydney-based property developer and will be used to support the client’s existing finance facilities to fund a residential development at Kellyville, in Sydney’s north-west.

Gieldan Capital managing director Neil Sutton said the new facility reinforced the company’s view that the property sector would be an important market over coming years for alternative finance providers.

“The opportunity to provide bespoke debt solutions for borrowers and high yield for investors will continue to grow as the major banks put a freeze on the sector,” Mr Sutton said.

“We think there are plenty of high-quality developers in the market who are being left high and dry by their banks despite the underlying strong property and secure credit fundamentals of their projects.”

Gieldan Capital’s primary goal is to identify these opportunities and de-risk the transaction through due diligence, credit analysis and strong credit and security controls.

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Mr Sutton said the group’s latest deal highlighted the increasing role non-bank lending will play in the property sector in the future.

“We are presented with a range of proposals from right across the economy, but right now the vacuum that has been created by the banks is providing some excellent opportunities,” he said.

“We are not limited by the traditional approach or product-driven financing that banks are constrained by, so Gieldan can develop customised funding solutions that deliver value for all parties.”

FIIG Securities CEO Mark Paton said the transaction marked the growing evolution in private placement debt solutions.

“Quality borrowers and projects which might sometimes struggle to find debt capital are being made available to the growing non-bank debt markets. This is great for industry and innovation,” Mr Paton said.

Major developer sees spike in defaults

The news comes after Mirvac, one of Australia’s largest residential property developers, yesterday flagged an increase in default rates over the first quarter of the 2017 financial year.

In an operational update on Tuesday, ASX-listed Mirvac said it achieved a record number of residential lot settlements in the 2016 financial year, with 15 per cent growth forecast for 2017.

“I am pleased to say we are tracking well, with over 660 residential lot settlements achieved in the first quarter, and we expect the majority of settlements to fall into the second half of the financial year,” Mirvac CEO and managing director Susan Lloyd-Hurwitz said.

“We have seen default rates for the quarter sit slightly above our historic average of one per cent, however, we have resold all defaulted lots marketed for sale and we remain comfortable with the contingency we have in place for our full-year earnings outlook,” she said.

In Sydney and Melbourne, where Mirvac has an overweight exposure, indicators, such as above average levels of auction clearance rates, point to solid demand, supported by a competitive lending environment and increasing urban population growth, the group said.

“While we continue to experience settlement delays from foreign buyers, settlements overall are tracking in line with expectations, and we continue to carefully monitor and manage our settlement risk profile,” Ms Lloyd-Hurwitz said.

“Our medium term outlook remains robust with a current pipeline that supports over 14,000 potential lot settlements over the next four years.”

[Related: Mezzanine funder joins major banks on Southbank deal]

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