The banks requiring 100% (or more) debt coverage from presales has seen an influx of traditional bank customers approaching GPS to fund their projects.
I find it quite perplexing that many of these former bank customers are fixated on interest rate, rather than the bottom line.
Borrowing from GPS can take three months off the life of a project. In the current market where presales (if they can be achieved) are costing 8% plus, with half payable upon the contract becoming unconditional, the GPS loan product is very competitive.
4% at the front end of a project in utilising a 60% usage rate equates to a 7% hike in the effective interest rate.
At GPS it is the bottom line figure which is the most important.
GPS continued to lend post GFC. Those projects were some of the most profitable projects for developers that I have seen. They purchased the sites at reduced cost. Good build prices were negotiated as builders were looking for work. When their product was complete the market had turned from oversupply to undersupply, due to the fall in new project starts.
Over the past couple of months, I have spoken with many of these developer/builders. They are back in the market for sites after enjoying a break over the last few years of increased building activity.
GPS does not require pre-construction presales to fund a project. This now represents a considerable saving in the overall project cost.
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