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Non-bank finance group Chifley Securities has announced that it achieved record levels of lending for the 2015-2016 financial year, amounting to $638 million to a range of investors, builders and property developers across Australia.
The newly-formed group currently has $230 million in loans to projects currently in progress, with loans ranging in size from $1 million to $50 million in first mortgages, mezzanine, bridging and construction finance.
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Speaking to The Adviser, Chifley Securities’ head of investments Dominic Lambrinos said that around 90 per cent of the group’s business comes from broker referrals, with approximately $3.8 million generated in broker fees in 2015-16.
He said: “Chifley has a commitment to working with brokers. We will continue to support the broker channel above direct sales, and we also have a broker portal, reward programmes for brokers and educational courses for this channel too. So, brokers are an important channel for us.”
The company reportedly has $1.1 billion worth of loan funding available, which is finding “strong demand” from commercial and residential property developers who do not fulfil the major banks’ new, tighter requirements of pre-sales and added security.
Chifley Securities’ director Joe Morello commented: “We are fulfilling a demand from developers who are not meeting the banks’ latest demands for higher pre-sales, especially where the majority of buyers have been foreign.
“We are providing finance for pre-sales guarantees of 65 per cent of total sales, bridging the gap that has opened up as the major banks have squeezed projects with a strong component of foreign sales.”
Mr Lambrinos added that, unlike the major banks, Chifley doesn’t think “that all foreign buyers are going to be bad”.
“We have a different view to banks. Let’s say you have $20 million worth of pre-sales, with $10 million from local sources and $10 million from foreign. The banks will only recognise the first $10 million. We’ll recognise the first 10 and more than half of the next 10. That way we take more of a positive position.”
Chifley Securities also revealed that the financial year had involved a surge of private equity, hedge and superannuation funds “chasing higher returns of more than 10 per cent from property finance through non-banks”.
Mr Morello said: “Private lending groups, including Chifley Securities, are becoming known as the fifth major bank, with more investment funds entering this sector chasing higher returns, while being secured against property projects being financed.
“We provide security to our lenders by being able to step in, where required, to complete developments with our expert property team.
“Despite the historic low interest rates and demand from buyers, the banks are becoming much more difficult to deal with for developments and we see a strong gap in the market for a more pragmatic finance solution”.
Looking to the future, Mr Lambrinos said that Chifley will be doing “more of the same” but will be “more careful in the markets that [the company] selects”.
He explained: “We'll probably pull back a little bit from Brisbane and Melbourne because we see that slowing down. In Sydney, our view is that the market demand is much higher than supply (for accommodation), and we'll be focusing more in Sydney on industrial and commercial properties, taking some of the emphasis away from residential developments.”
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