The scenario
“A lender funds the exit, not the dream.”
— The Australian Property Development Handbook
A developer is delivering a commercial building with credible pre-commitments and plans to hold the completed investment. Unlike a for-sale project, leverage is set against the completed, leased value implied by the passing rent — so the tenant covenant and pre-lease depth carry the funding.
How we structured it
| Total development cost | $10.5m |
|---|---|
| Pre-committed net rent | $780k p.a. |
| Completed value (6.0% yield) | ~$13.0m |
| Senior debt | $7.35m |
| Mezzanine | $1.0m |
| Developer's equity | ~$2.15m |
| Brokerage — senior facility | From 1.0% + GST (min. $20k) — ≈ $73,500 + GST |
| Brokerage — mezzanine | From 1.0% + GST (min. $10k) — ≈ $10,000 + GST |
| Total brokerage (indicative) | ≈ $83,500 + GST |
| Senior rate | 9.00% |
|---|---|
| Mezzanine rate | 16.00% |
| Blended cost of debt | 9.84% |
| Loan to value (LVR) | 64.2% |
| Loan to cost (LTC) | 79.5% |
| Development margin | $2.5m |
| Margin on cost (RoC) | 23.8% |
| Return on equity (RoE) | 116% |
| Equity multiple | 2.16x |
How our fee works: BluCow charges per facility — from 1.0% + GST on the senior facility (minimum $20k + GST), and from 1.0% + GST on any mezzanine or preferred equity (minimum $10k + GST), tapering to 0.75% above $10m. Where a lender also pays BluCow a commission on a facility, it is credited against the fee shown.
This case study is hypothetical and illustrative — figures depend on the project, security, presales and lender.
The outcome
Funding is assessed against the ~$13.0m completed value rather than construction cost, and a modest mezzanine layer preserves the developer's cash. On completion the facility refinances onto a held-investment loan or the asset is sold; the mezzanine floor of $10k applies because 1% of the $1.0m slice sits at the minimum.