Wealth Pi Talks: Non-bank’s Rising Power to Fund Property Development Projects in a Credit Tightened Market

On 27th March 2019, Wealth Pi Talks came to Melbourne again with the theme on non-bank lending and risk management. Sponsored by Wealth Pi Fund and Hall & Wilcox, the talk has attracted more than 50 attendees, most of whom are Melbourne-based developers with a Chinese background.

With the increasing pressure from APRA, the major four banks have been tightening their lending practices and reducing the exposures to commercial property loans since 2016. The non-bank lending sector has been growing rapidly since then, with private capital continuously flowing into the property financing market to fund the gap of bank loans. The market has been witnessing the transaction volume of non-bank loans significantly increasing over the past two years, with no signs of slowing down.

There seems no doubt that in the current market, non-banks are rising power to fund property development projects in a credit tighten market. However, the questions are, which non-bank lender to go to and what risks are involved? What will be the market interest rates from non-bank lenders for a typical construction loan?

Three distinguished experts in the field have been invited to give the presentation and provide answers to these frequently asked questions.

Mr. Eugene Chen, Partner and Head of China Practice of Hall & Wilcox, shared his knowledge and thoughts on the recent development in law relating to property and development. He pointed out the risks in vendor financing and the settlement of pre-sale contracts, while providing case studies on the enforceability of certain sale contracts and agreements. Much positive feedback was received for his insightful sharing.

Mr. Xiaohu (Tiger) Liu, Managing Director of Wealth Pi Fund shared his view on the non-bank lending market regarding cost of capital and requirements.

“With the local and offshore experience in the industry, Wealth Pi team is capable of understanding our clients’ funding needs and tailoring the most suitable funding structures for their projects to maximise the return on equity with moderate leverage.” Tiger said.

Mrs. Christina Jiang, Business Executive of Wealth Pi Fund used three case studies to demonstrate how a development projects could be funded by well-structured funding solutions from land acquisition to completion even with stocks to sell down. She emphasized the importance of reviewing the debt structure from both company level and project level to achieve the optimal financing structure. Wealth Pi Fund, along with its advisory arm Brick Lane, can provide a ‘one-stop’ debt advisory and debt underwriting service.

In March 2019 alone, Wealth Pi Fund had 3 first mortgage loans fully repaid totaling circa $19 million and many more loans expecting exits in late 2019. In 2018, the Group had $263 million transaction in property loans. The property finance loan products include land banking, construction loan, residual stock loans and bridging loans for 1st and 2nd mortgages.

We would like to express our sincere appreciation to our partner Hall & Wilcox, and to all the attendees for their support and trust.

Wealth Pi team has scheduled future talks in Sydney in a couple of months’ time. We are looking forward to seeing you in our next event.

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