Q&A: Getting to know about Commercial Real Estate Finance Company Salvest

Based in Melbourne, Salvest provides non-bank lending to developers on commercial, industrial and residential real estate, across Australia. 

Read the Q&A below to learn more about Salvest. 

1. What are the core services that Salvest offers?

We provide non-bank lending to the CRED industry from $3.5 million to $200 million, on land and construction loans, for a minimum term of six months.

2. How does your offering differ to those of other non-bank lenders?

Unlike the majority of lenders, our services go beyond finance. Our team has extensive knowledge and experience within real estate, project management and commercial property development. Away from finance, we offer the following services:

• Project advisory
• Due diligence
• Financial modelling 
• Conduct tender process

This allows us to work closely with our development partners in bringing the best version of their project to life.

We understand finance. We understand property. We understand development.

3. What are the fundamentals that Salvest analyses prior to providing funding for a particular project?

There are three key factors we look at when a developer requires funding: If we like the deal, the sponsor and the exit strategy, we will get the deal done.

We do not believe in lengthy finance application checklists. We work efficiently to obtain finance for developers quickly and easily.

4.  How are you finding sentiment amongst developer and investor clients? 

DEVELOPERS

In the non-bank lending space, it is not unusual for developers to switch lenders when seeking funding for each project - they are of course in search for the best deal.

The difference we are seeing is that developers keep coming back to us for finance, as we are committed to obtaining the best possible deal for them at all times. We truly take the legwork out of seeking funding for developers by making the entire process easy. Developers need to keep doing what they do best, DEVELOP. 

Developers have prided us on our ability to seek the best possible deal and have their finance approved in a quick, easy and timely manner.

INVESTORS

As we are experiencing record low interest rates, investors are seeking safe, conservative investments. At Salvest, we only deal with experienced property developers with a strong track record, the skill sets and balance sheet to be able to deliver quality developments nationally. This provides investors with confidence that projects will be successfully completed and returns obtained.

5. What are the prevailing metrics (LVR, pre-sales, types of debt facilities) Salvest is offering clients given current market conditions?

• Up to 75% LVR
• No presales required*

Debt facilities include:

• Preferred equity
• Mezzanine finance
• Stretch Senior Debt
• Senior debt on land and construction

6. What are the major trends you're seeing in the current market?

We are seeing a new wave of property development assets such as :

• Build to rent;
• NDIS;
• Vertically integrated medical centres, with residential independent care above;
• Vertical child care centres

The industrial sector will continue to thrive; especially in the bulky good sectors. This is heavily driven by online sales growing at record rates.

Regional areas will continue to grow. Families seek larger residential footprints to accommodate the family living and working from home.
 

7. Which asset classes are you bullish on?

Given the project is in the right location, we are bullish on all commercial asset classes. We understand that no two projects are the same. If a project is situated in a location where such a development is required, we are bullish and will push to have the project funded.

We do however find mixed-use projects in the right areas highly appealing, as they serve as multi-purpose sites, once completed. 

A list of asset classes we have previously funded:

• Mixed-use projects
• Hotels
• Industrial
• Apartments/Townhouse projects
• Hospitality (pub/bar/restaurants)
• Leasehold assets (including Alpine Lodges)
  
  

8. Which asset classes are you avoiding?

We love property and want to help all developers deliver great projects. We are open to all asset classes within the CRED sector.

9. In terms of development site values, what are you seeing from a ground-level?

Due to record low interest rates, developers have been seeking investment grade assets that can be developed in the future. These assets have been very appealing. There is strong evidence of this in recent sales within the medical, childcare, build to rent and NDIS portfolios, which have attracted larger institutional sources of capital, such as super funds and investment funds. This has been the catalyst behind rising valuations and land prices.

10. How would you assess the current market cycle relative to previous cycles?

This cycle is vastly different. It has not been impacted by a credit crunch, like previous cycles in the past since the early 1900s, due to a global pandemic.

During the COVID-19 pandemic, the housing market reacted in the opposite direction which we all anticipated. We witnessed over 20% capital growth for the established housing market.

Various factors such as government grants, stimulus packages, working from home, desire for larger spaces for residential living and investors seeking yields, continue to drive property prices.

As we are witnessing high volumes of liquidity and low interest rates, the market will continue to grow, particularly in investment grade assets with long whale tenants.

Pandemic proof sectors such as NDIS, Medical, Child Care sectors will continue to grow.

11. Which geographic regions are offering the greatest opportunity for investment currently?

There are a number of growth areas across Australia, however outer West Melbourne is growing rapidly, and the value of this area continues to highly increase. Not only is outer West Melbourne seeing a major rise in residential, it is seeing a major rise in industrial developments. This is great for our economy as it creates a number of long-term job opportunities.

Other areas we are seeing exponential growth is the Greater Geelong region in Victoria, from a residential perspective.

12. What effect do you think forecast lower economic growth and stagnant population growth will have on Australia in future?

Australia will continue to thrive and grow, especially once international borders open. Reopening borders will provide a second stimulus to our economy. Additionally, due to border closure, we have experienced skill shortages for the last two years. 

The way we live will evolve post COVID-19, however the demand for property and investment grade assets will continue to be strong. Interest rates and unemployment rates remain very low. Australia is conserved globally to be safe, secure and regulated, providing global investors comfort to continue to invest into Australia.

13. What do you think the biggest risk to real estate is in the next 12-24 months?

Over the last 20 months, we have seen major inflation within the residential and industrial sector. Due to inflation, it has been and continues to be a seller’s market. Interest rates have remained low, which has spiked residential sales, particularly within the home build space.

A risk we see is that the reserve bank will increase interest rates in the next 12-24 months. If this occurs (which is likely), it will affect home buyers who purchased land/homes, based on the affordability of low interest rates, and being able to service their loans. This will affect the real estate market by then becoming a buyer’s market, with prices either stabilising or slightly dropping. People will be looking to purchase existing builds, rather than complete their own builds. This may slow down building within the residential space.

We do not believe that industrial will be impacted whatsoever. We anticipate that industrial growth will go from strength to strength.

Visit the Salvest website here.