Gresham Property launches $500 million developer lending fund to cash in on banks’ reluctance

Non-bank property financiers and advisory group Gresham Property is launching a $500 million fund for developer financing as it seeks to cash in on tightening of lending rules by major banks. 

The new fund has received backing from several institutional investors that believe there are still good development deals available to the banks who have elected not to lend because of their own capital constraints, reported the Australian Financial Review.

Gresham Property's joint managing directors Ami Simon and Mike Burley said the scale of the backing was proof of the shortfall in developer funding. 

"With APRA calling for the banks to tighten their lending standards and the banks significantly limiting the availability of development finance, we believe that having a non-bank lender step in to help fill some of the void will be a very positive change for the development community," Simon was cited as saying by the AFR.

He said the fund and others like it would "assist in addressing housing supply issues in tight east-coast markets".

"With housing affordability becoming a very significant issue, especially in the Sydney and Melbourne markets, having additional funding sources to help developers address the supply side should be a very positive development."

In 2015, Gresham launched a $400 million fund backed by institutional investors to lend to property developers reconsidering borrowing from banks.

“We are providing something which stretches beyond where the banks like to go," Gresham Property's joint managing director Ami Simon had said then.

Repeat warnings have come from the Reserve Bank of Australia and overseas organisations such as the IMF and OECD about Australia's property markets, and financial watchdog Australian Prudential Regulation Authority is pushing banks to adopt strict mechanisms for lending. 

In such a senario, Gresham's new fund could be a reprieve for developers. 

Gresham’s Mike Burley said the fund would be offering "stretched senior" debt and would be focused on property development and value-add opportunities across all property sectors.

"Projects involving residential development in metropolitan locations are expected to be a primary source of opportunity," Burley said.

"GPF6 will be targeting developers with well-located projects, in markets which are under-supplied, with high-quality presales requiring investments in the $25 million-$125 million range."