Case Study # 1
Large Developer Lender Diversification
Sparrow Loans was able to help a sizeable Australian developer with over $300M in assets diversify its debt portfolio. The developer had grown their portfolio by cross-securitising multiple properties with a larger private lender that did not want to advance any further cash out against property securitised by their existing loan portfolio due to their contracting LVRs. In addition, the lender did not have much incentive to cater to their client’s immediate cash flow needs as they were in a comfortable position with recourse to the entire property portfolio.
Sensing that this lender had the negotiation advantage through the sheer size of the overall loan book, the developer wanted to manage their exposure to this lender by separating a few properties from the portfolio of cross-securitised properties. In addition, the developer wanted more flexibility and felt the quality of some of their smaller properties should have afforded them the cash out they needed to progress with their projects.
The developer approached Sparrow Loans to diversify their lender base, requested a commercial property loan to pay out the other lender, and requested further cash out against one of their sites in QLD. Sparrow Loans understood the development strategy and advanced $2.5M for a landbank facility to the developer, allowing them to separate this property asset from their portfolio and leverage it for the developer’s current strategic requirements.
Sparrow Loans provided a loan facility within two weeks and assisted the developer in undertaking their strategic initiatives when another lender could not support them. Sparrow Loans successfully helped the developer manage their projects, effect a profit and exit the loan within 12 months by understanding the business strategy and acting promptly.
Case Study # 2
Cashout for an Accounting Firm
A reputable Sydney-based accounting firm faced litigation issues involving fraud against them which compromised their relationship with their existing lender and incurred a loss that would affect them in the short term. They needed a working capital business loan quickly to push forward with a legal defence and have the cash flow to continue business operations without disruptions.
The borrower approached Sparrow Loans for a solution as they owned the premises where the business was based and asked to use this commercial office space as security. The exit strategy for the loan would be to refinance the outstanding amount with a bank once the business assets were safe and the business could return to normal operations.
After reviewing the strong trading history and understanding the time-sensitivity of the transaction, Sparrow Loans was able to provide a $2.35M facility to support the business owner in transitioning and securing the business. With support from Sparrow Loans, they could better manage the disruption to their business, stabilise themselves again and, as a result, exited the loan within six months.
Case Study # 3
Bridging Loan for Property Investor Trio
A group of three investors decided to come together and enter into an investment opportunity together. They signed a Contract for Sale in 2017 to purchase land in VIC, which needed them to put in a 10% deposit. At the time, they were buying land from a developer who planned to subdivide the property into nine separate titles in three years. They planned to settle on the sale using a loan based on the future value of the nine lots and immediately onsell the lots with hopes of making a tidy profit.
As fate would have it, their settlement date was in March 2020, and most private lenders could not offer them a loan facility as they were withholding from land banking transactions. Furthermore, the borrowers wanted a lender willing to lend against the current valuation of the site rather than the pre-subdivided value on the Contract for Sale three years ago.
Sparrow Loans was able to see the current potential of the site and agreed to lend against the current valuation of the site. As a result, the trio of investors could now settle the property with our bridging loan without losing their deposit. In addition, they found buyers for the lots, exited the loan within eight months and made a significant gain on the investment, which would not have been possible without the funding support from Sparrow Loans at such a critical time.
