Finding money – Where there’s a will, there’s a way

28 July, 2010

The temperamental nature of this country’s and the world’s recovery from the recession has been graphically illustrated over the past weeks as reports, on numerous fronts, in both the U.S and Europe have seen an almost daily bout of both positive and negative vibes effecting financial markets worldwide.

We all welcomed in 2010 with a sigh of relief that 2009 was finally behind us and things would steadily improve throughout 2010.  We are now more than half way through the calendar year and recent confidence surveys and property transaction figures show little signs of any rapid recovery, rather a slower patchier situation slowly evolving.  The talk of a double dip recession in the U.S is of real concern, especially as every financial report from around the world seems to be paraded across our morning business reports creating more conjecture and uncertainty.  To read the latest article on this issue, from The Observer  Click here.

This negative bias was offset this week by some positive news on American new home sales with the NZ dollar climbing to a six- month high. However, given the current global environment, what will emerge next week, for better or worse , is anyone’s guess. To read this article click here.

As expected The Reserve Bank lifted the OCR from 2.75 to 3.0 per cent this morning with the key passage in this mornings decision being “The pace and extent of further OCR increases is likely to be more moderate than was projected in the June statement “.To read Brian Fallow’s article on the announcement click here.

All in all , despite the current fickle sentiment of global markets ,the best guess is that in time investors will become more comfortable with Europe’s debt situation and the hysteria about a possible US double-dip recession will die down, both of which favour a stronger NZD.

New Zealand and Australia however, are good places to be.  We are emerging from the financial mire through the demand, particularly from Asia, for our commodity products.  This has not as yet flowed through into increased consumer confidence and demand, which is why the bulk of the local small to medium sized businesses are not as yet experiencing a more positive year.  The latest Westpac Economic Overview 2010 refers to our recovery as a “traditional one” to read this report click here.

Here at Global we have experienced a marked increase in demand for funding, of all descriptions, over the past months, being a mix of refinancing and new projects.  We have also been approached by a number of new lenders, interested in looking at security financing propositions, or even joint venture opportunities.  We see these parties helping fill the gap that our larger finance companies previously occupied.

A recent article in the Sunday Star reaffirmed the sad state of the finance industry in New Zealand over the last 18 months, one that those still in the industry have had to adapt too and continue to work through, with their clients as best they can. The article estimated that 40% of mortgage lenders, including the entire non-standard mortgage market, have disappeared, with the self- employed amongst the worst effected , with all Banks demanding to see two years of financial earnings statements when considering any increased or new lending. To read click here.

Apart from the small number of nominee and small to medium sized finance companies that are left in the market, all of whom are currently looking for opportunities , particularly with the self- employed , who find themselves in no man’s land, we also have high net worth individuals interested in the following types of transactions:

An investor based offshore looking to fund commercial/industrial property investment transactions  He is interested in proposals of $2m plus, geared up to 65%, dependent on location and tenant profile, and will fund interest only at 8.0% – 10.0%.

  • A group of high net worth individuals looking to finance development type deals, either on a 1st and or 2nd mortgage position.  This group is looking for returns of 15% plus, but do not require a complete takeout from pre-sales and will also entertain a J.V position.
  • A group of investors prepared to finance 1st and 2nd mortgages, be they bridging or development propositions.
  • A high net worth individual, financing through a finance company, bridging and development loans of $2m plus.  This party is seeking returns of 16.0% plus.
  • We also have a couple of substantial parties, who are involved in large construction businesses who will look at J.V’s or help with a mezzanine facility, provided their company gets the build tender.

The disappearance of the large debenture funded finance companies and the hesitant attitude of the banks has meant commercial brokers, such as Global Pacific, have to become a lot more creative in getting a deal across the line from that which the client envisaged at the start.

 

An example of this is a transaction just completed on behalf of a client who came to Global for funding or an equity partnership for a large new business project in the South Island.  What we were able to achieve for him was finding an investor prepared to put in sufficient capital to fund the property portion of the project leaving the client with the capital needed for the business start up without raising debt.  A win/ win for the investor and the client.

 

Traditional residential, commercial, industrial or rural based lending.

 

In our recent Global Update Newsletters “Do you need finance”, and “Don’t let your bank suffocate your business in today’s environment”.  Click here and here to view,  we talked of the difficulty of getting access to traditional bank funding, whether a new or existing client, and the availability of new competitive non-bank, first tier funding packages.

 

Whilst these new non-bank lenders are still active in the market, we are seeing a fascinating trend emerging amongst the big four Australian Banks that dominate business here in New Zealand.

 

Historically their lending criteria and appetite, or lack of it, for new business has been similar, albeit residential or non-residential lending, none more so than in the last eighteen months.

 

However,  recently we have experienced very diverse attitudes amongst the Bank’s as regards commercial, industrial and rural lending, with some very keen to look at sound new business opportunities and others retrenching even further.

 

The approval processes, internal management, authority levels and geographic structures of the banks now differ considerably from one to another, with the key to recent successes we have had at Global with approved bank funding being not only knowing which bank to deal with but also within the bank, which division and specific senior bank management to work with.

 

Two recent examples are as follows.

  • Refinanced and raised additional funding for further development of a large multi million dollar special use rural/commercial property with significant intrinsic “collaborative capital” value with strong cash flows and growth potential.
  •  Financed the purchase of a large bare land residential/ rural lifestyle vineyard property, including Plants and Trellis improvements.

As always to obtain funding it’s a case of knowing where to go , the criteria each funder is looking for , and a proper presentation being the key essentials to success.

 

In today’s market if we at Global cannot source funding for a particular deal, whatever the type or risk profile, then nobody can.

 

Should you or any of your clients or colleagues require finance of any description, please call me anytime on 021 333011, or contact me via email.

 

Cheers

 

Ross Hyde
Global Pacific Corporation Limited
112 Gladstone Road, Parnell,
P O Box 3229, Auckland, New Zealand
Phone +64 9 303 3700, Fax +64 9 303 3031
Mobile +64 21 333 011
Email ross.hyde@globalpacific.co.nz
Web site www.globalpacific.co.nz

Global View Archives

September 2013 - Aotearoa- First to get the sun, an OCR increase and possibly an “artificial bubble” ! Read more...

February 2012 - Optimism or Pessimism – Is it time to move forward and “make things happen”? Read more...

February 2011 - “It is important to learn from history – not dwell on it” – JK Read more...

January 2011 - Inflation, interest rates and opportunities Read more...

September 2010 - Looking back – and forward Read more...


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Lack of Debt and Equity brings Opportunities.

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What we do – and what we’re doing now

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Finance becoming more available?

Don’t let the banks suffocate your business in todays environment!


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