08 October 2020
Banks are still competing for good projects: Tim Gurner
Financial Review Rich Lister Tim Gurner will kick off construction of a mixed-use hotel and apartment project in inner Melbourne this month after securing a $55 million loan from ANZ Bank.
While many developers have turned to more expensive non-bank lenders for construction finance amid a withdrawal of bank appetite for residential projects, Mr Gurner said there had been “pretty competitive bidding between the Commonwealth Bank and ANZ” to finance his $120 million Collingwood project called Atelier.
“We are very fortunate to have such a strong relationship with ANZ who continue to support our business and projects along with CBA and NAB.
“Both ANZ and CBA are very active in the market and we believe we will continue to do a lot more with both banks in the future,” Mr Gurner said.
Last year ANZ provided a $150 million loan for Mr Gurner to construct another Collingwood apartment project, Victoria and Vine and a $300 million loan for his St Moritz apartments overlooking St Kilda Beach.
ANZ state director of institutional property John Hudson said the bank had been working with Mr Gurner on the Atelier project before the pandemic.
He noted that the project had achieved a high level of pre-sales during a difficult period and that Mr Gurner had repaid loans this year on two other residential developments that ANZ financed.
“We are pleased to see Atelier proceed now when many other developments have stalled,” he said.
A high level of pre-sales is a prerequisite for most banks to fund residential development projects and a big reason why many developers have turned to non-banks, who have less stringent requirements, albeit at higher interest rates.
A survey of lenders by mortgage originator Stamford Capital found that nine out of 10 banks require developers to have pre-sold 60 per cent to 100 per cent of apartments to be considered for construction funding.
By comparison, 50 per cent of non-bank lenders surveyed said they required no pre-sales.
Of the 53 residences in Atelier, 48 have sold, all to local owner occupiers. They will sit on top of a 96-room serviced apartment-style hotel that will be operated and managed by local player Veriu Group.
Melbourne builder Ironside, led by Luke Skurrie, has been appointed to construct the project at 23-30 Johnston Street, which is due to be completed in mid-2022.
Mr Gurner will retain ownership of the hotel as an investment asset.
“We’re taking a medium to long-term view on the hotel market and firmly believe that the fundamentals, and particular advantages of this particular location, remain strong.
“Due to the post-COVID projections suggesting the number of hotel keys may contract after Melbourne’s unprecedented lockdown, I believe this will only place more upwards pressure on hotel vacancy rates as our city starts to open up again.”
Alongside a hotel and apartments, Atelier will include a restaurant, retail precinct and private club with a rooftop pool, private spas and co-working-style meeting room and business conference facilities.