Melbourne developer Len Warson's Glenvill Group has inked one of the biggest non-bank lending deals of the year after securing a $300 million funding package from a leading Asian-based private equity firm.
The senior debt deal, understood to involve Hong Kong-based investment giant PAG, will fund the development of multiple stages of Glenvill's YarraBend development on the former Amcor paper mill site in Alphington in Melbourne's inner north-eastern suburbs.
The mammoth loan follows Trenerry Property Group securing a $250 million senior debt facility from local real estate financier Qualitas earlier this year for its West Melbourne project, amid a wave of deals being struck between developers and non-bank funders.
Mr Warson told The Australian Financial Review local banks were only willing to provide standalone funding of between $75 million-$100 million and required "checklists that needed ticking off".
"We paid more than if we had gone with a local bank, but less than what a local syndicate would have charged.
"It's not all about being cheaper, but about the relationships with people [you deal with] in deciding who you choose to do business with.
'Three offers stood out [following the tender] and we really liked the head guy [from the winning bid]. We found them very reasonable and practical."
The non-bank funding deal was sourced by Stephen Hynes and John Robson from Deloitte’s Real Estate Transactions team who ran a competitive tender process.
Mr Hynes said it provided Glenvill with a "fully funded finance facility to maintain the momentum of the project, as well as the flexibility to increase the facility, in accordance with market conditions".
Glenvill controls about 70 per cent of the former paper mill site in Melbourne's inner north, with Joe Russo's Caydon undertaking a $300 million apartment development on a 7471-square-metre parcel and Guy Nelson's Alpha Partners developing a mixed-use village on a 2.1 hectare portion that is now being sold with an asking price of more than $170 million.
Construction of the first apartment building and the first two stages of The Mills precinct (featuring townhouses and lofts) with a combined end value of $180 million within YarraBend recently began.
Local builder Crema Constructions has been awarded the contract to build the Parkview apartment building.
Glenvill has sold about $470 million of residential stock to mostly owner-occupiers since YarraBend was launched in 2016 and delivered over $100 million of townhouses and houses on site this year.
Mr Warson said there was still plenty of funding for quality projects and professional developers such as Glenvill.
"For others though – like the rag traders that have gone into property development – it's very difficult to get funding. You need the presales."
He said there was current a "clean up" in the market of lesser quality developers following the recent market slump.
"We are still making sales at a higher rate – that's hardly changed – but it's because we are good at what we do."
Once complete, the YarraBend project will feature between 1000 and 1500 homes.