Opportunities opening up for well-funded apartment developers and financiers Media Detail
Opportunities opening up for well-funded apartment developers and financiers
| 13 October 2016
The changing funding landscape for apartment development is opening up opportunities for large, international, well-funded developers and funding organisations to step into the market, according to Gavin Lloyd, CBRE’s National Director of Residential Projects in New Zealand.
Lloyd says that while there are many developers of this nature already working in New Zealand, including Willis Bond, Southpark and Mansons TCLM, he is also seeing substantial international organisations coming into the New Zealand market with sufficient equity to ensure that the projects they start get completed.
He says: “For instance, Belgian developer Eaglestone is creating 49 high quality apartments at Library 27 in Auckland’s CBD, which CBRE is marketing. Eaglestone is a well-funded global developer that is building hundreds of apartments in Europe. Because Eaglestone is not reliant on local bank funding, they can press on with creating Library 27.
“We can expect to see more overseas developers with strong balance sheets and low borrowing requirements filling any void left by local developers. We have seen the entry of international developer Hengyi, which is planning a 300-apartment project in Commerce Street, adjacent to Britomart. Based in Melbourne, Hengyi is a developer with the equity and resources to complete the project. The group have completed over 3000 apartments in Australia and a number of huge developments in the Asian region.”
Diggory Brooke, Director of Capital Advisory at CBRE, says: “Another trend we may see is the entry of the institutional grade developers from Australia, such as Lend Lease, Mirvac and Stocklands. These groups are publically listed giants with strong balance sheets, capable of overcoming some of the funding issues facing the market.”
Brooke also says that another dimension that is currently being missed in the debate is that international lenders are active in the New Zealand market, offering funds across a range of risk parameters.
“There are international banks here in New Zealand who have not pulled up the drawbridge on development funding, such as The Bank of China and China Construction Bank. There are also a range of private equity and other non-bank lenders circling the apartment development market.
“Strong New Zealand-based developers will continue to be supported by their prime Bank lenders but increased amounts of equity and cash input requirements will mean that only the strong will survive.
“Equally, we are aware that there are two international funds - one Australian and one Asian - looking to inject $300 million into New Zealand property development, and they are looking to do deals.”
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