Case Study | Helping to Get Ashgrove Back on Track

Location: Ashgrove, Queensland | Project Type: Construction of 7 residential townhouses

PROJECT OVERVIEW
Stalled construction works at a residential project at Dorset Street, Ashgrove, were able to be recommenced thanks to GPS Development Finance’s service capabilities, including the offering of flexible funding from our in-house experts, and the timely provision of monies from our in-house funding lines.

GPS provided ~$5.4M in construction finance for this development of seven 3-bedroom residential townhouses, with a Loan-to-Value Ratio (LVR) of 68.32%. The loan term has been set for 15 months, with an estimated completion forecast of early 2025.

BACKGROUND
Construction on this project initially commenced in mid-2022, with funding provided by another lender, but faced early delays due to a dispute between the developer and the original builder. Only limited initial works had been undertaken, including the pouring of slabs, before construction works were stalled due to a breakdown of the arrangements between the parties.

As the partially constructed site sat dormant, GPS was approached with the opportunity to provide funding to complete the remaining construction. This included assistance for the challenges associated with recommencement of construction works for a stalled project.

THE CHALLENGE
Considering that limited construction works had already been undertaken, this project presented several key challenges:

Working with the borrower to ensure that the existing works had been properly undertaken and certified. This ensured that the incoming builder could successfully commence and minimise the potential for issues in the future.
Working with the borrower to ensure that the contractual obligations with the original builder had been satisfactorily addressed, and were at an end, to allow the incoming builder to undertake the works to complete.

Working with the borrower to ensure that the funding arrangements provided met the individual circumstances of the project, and were appropriate to achieve completion of the project. This also included the provision of suitable contingencies to provide a buffer for unforeseen project challenges and the prevailing market conditions.
Unique site topography, with a particularly steep gradient present and tight access conditions.

GPS SOLUTIONS OFFERED
Drawing on our extensive experience in construction development lending, GPS worked with the borrower to minimise the risks associated with the partially completed project. We undertook direct discussions with both the borrower and the new builder to gain comfort that the existing works had been satisfactorily completed, minimising concerns that could arise from the initial disruption.

GPS structured a funding package that was appropriate for the individual circumstances of the project. Suitable project contingencies were incorporated into the funding arrangements to provide a buffer to cover potential cost adjustments and unforeseen market conditions.

As GPS’s standard funding model does not require presales, the borrower was able to recommence the construction works at an earlier stage by locking in their builder sooner (price and commencement date). This lending approach ensured that the borrower was not exposed to the potential cost escalation associated with time spent acquiring presales. This also allowed the borrower to retain the flexibility to manage their sales strategy in line with the changing market conditions, and to optimise sales revenue from the project.

OUTCOME
This case demonstrates how GPS’s tailored financing solutions allowed the borrower’s development to overcome past obstacles and successfully move forward, positioning them to take full advantage of Brisbane’s thriving property market upon completion.

GPS’s flexible financing enabled the borrower to recommence construction of the project at an earlier stage, with the final product set to offer in-demand accommodation in a sought after, fringe city location. Our internal funding lines allowed them to access monies immediately after settlement, avoiding further delays and minimising the impact of rising construction costs. GPS’s no-presales offering also enables the borrower to maximise their return on investment, compared to acquiring presales earlier in the construction period.

Construction works are now progressing in line with the builder’s programme, with practical completion expected to be achieved in early 2025.