Non-bank finance group
Chifley Securities has dropped the interest rates on its commercial and construction loans by as much as three percentage points, citing added demand driven by tighter regulations in the banking sector.
The firm is now offering commercial loans at 7.95% p.a. and construction loans at 8.95% p.a. up to $7.5m. This comes down from 10.50% p.a. for commercial and 10.95% p.a. for construction.
Chifley posted a record $1.1bn of loan applications throughout the 2016 calendar year and released its first tranche facility worth $50m to be placed by 30 June.
The firm expects keen interest in these loans as they remain aligned with mainstream lenders, many of which no longer accept applications from developers as a result of tighter lending criteria from the
Australian Prudential Regulation Authority (APRA).
“We have tapped a new source of offshore funding and can supply developers with a low rate alternative to the major lenders, which are pulling the rug from under their property clients,” Chifley Securities’ principal Joe Morello said.
“Many developers we are funding are backed by strong equity and balance sheets, but are still finding trouble with the banks when it comes to construction and other property loans.”
Twelve months ago, there was a clear line in the sand between what banks and non-banks were doing, Chifley Securities co-founder Dominic Lambrinos, told
Australian Broker.
“Banks were doing these loans for about 6% or 7% and the non-banks were doing 10% or 12%. It was clear. Then the banks changed the line and moved it up. They only went for the better clients and there were a whole lot that dropped into our pool.
“These are still good clients but for whatever reason, and there are a few of those, the banks won’t lend to them. They’ve come to us but they’ve been at 6% and they’re not used to 12% or 11%. They’d prefer to go for 8% or 9%.”
In lowering its rates, Chifley was opening up the opportunity for these borrowers in the non-bank market, Lambrinos said.
“We’ve got this facility up to $7.5m. If you want to develop or buy something, it’s there. If you’re a good client and you fit our conditions, you’ll get that lower rate.”
Through these trends, the firm has seen financing for developers – who have to retain their unsold apartments – increase by 25% this year.
“We have financed a range of developers with unsold stock across the Eastern Seaboard over the last four months as they simply have been shut off from the Tier 1 lenders,” Morello said.
“The stock comprises hundreds of apartments, as well as commercial and retail areas of the developments that are often held by the developers and leased.”
Through this growth, Chifley Securities is targeting $1.5bn in lending for commercial and residential property projects across the Eastern Seaboard in the 2017 calendar year.
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