Nonrecourse Lending?

[HiEquity]

Hi all

One for the brokers perhaps? Just wondering if, in the new financial world we are in today, anyone knows of lenders still considering or doing non-recourse funding for syndicates? Thinking in terms of commercial / industrial property opportunities in particular.

If so, does anyone know what is being achieved on that front in terms of the likely decline in LVRs and increase in IRs compared to recourse lending?

Or are syndicates dead ATM from a lack of non-recourse funding? I know of wind farms still being financed on a non-recourse basis on terms slightly less favourable than before but don't know what has happened in the property market?

Thanks!

 

[Lofty]

Hi Hi Equity

While I don't know of any non recourse lenders for syndicates, one avenue may be buying the properties with vendor finance, using a terms contract. This is a non recourse "terms" purchase agreement.

Cheers, Paul

 

[Shaneelastic]

Hi,

yes there are banks that are doing limited recourse loans to the property themselves.

an example would be 10 people formed a syndicate via a unit trust, the banks will allow that property and loan to be limited recourse to the property asset only so personal assets aret at risk.

must be set up properly.

I know cba and nab have done them recently, lvrs were under 70%, all unit holders had to have credit checks however

 

[Qlds007]

Must admit i have done the off one in the past but wasnt aware of any lender still considering such a proposition.

Always happy to be corrected.

 

[HiEquity]

Hi,

yes there are banks that are doing limited recourse loans to the property themselves.

an example would be 10 people formed a syndicate via a unit trust, the banks will allow that property and loan to be limited recourse to the property asset only so personal assets aret at risk.

must be set up properly.

I know cba and nab have done them recently, lvrs were under 70%, all unit holders had to have credit checks however

Thanks Shane

Looks like there may be some hope on the horizon. As normal recourse lending doesn't seem to be much above 70% in any case there may not be as big a LVR penalty as I had feared. I wouldn't mind slightly (5-10%) less leverage in return for both the lower risk (to the investor - which is pretty valuable IMO) of that type of lending, along with the scale benefits from involvement in a syndicate. But if we were getting down to circa 50% it becomes less attractive. May as well go it alone in that case.

Must admit i have done the off one in the past but wasnt aware of any lender still considering such a proposition.

Always happy to be corrected.

Likewise! I'll see if my broker can come up with anything... I had a chat to a senior lender for one of the majors the other day and he said it was still happening, again if structured correctly. Apparently the structures they like to see now are a bit different to what used to happen in this space. Although we didn't get time to get into the nitty gritty he did say the same result was being achieved...

As I had heard a few syndicates have been active lately I figured they must be doing it somehow?

 

[FinSpec]

SMSF lending has really taken off with many people using the money in their super funds to buy property. Part of the regulations on Super Fund lending is that the loan can not have recourse back to the fund, or the members of that super fund.

As a result, the LVR's are a bit lower, but all the major banks now have limited recource loans available for people wanting to buy property inside superannuation.

To buy a property inside superannuation, the property has to be held by a separate trust to the super fund.

Based on this, if all the banks are going to do that, there is a solid chance that you'll find them doing it for sydicates - just need to find the right people.

 

[APerry]

Non-Recourse lending is certainly still obtainable. The supposed limit remains at 65% LVR, but realistically you won't get more than 60%. For servicing you need Interest coverage 1.3 times at a benchmarked rate of around 10%, you would want the tennant to be pretty strong also, don't expect to get an approval for a milk bar.

Regards
Alistair