THE GLOSSARY
Words that move money.
The terms that come up when land, approvals and capital meet, defined plainly and explained in practice.
CAPITAL & STRUCTURING
- Bridging loan Short-term finance that covers a gap, such as buying before selling or settling before longer-term funding is in place. The exit must be clear before the loan is written.
- LTC (loan-to-cost) The loan as a percentage of total project cost, including land, construction, fees and interest. Construction lenders often size facilities on both LTC and LVR and lend the lower of the two.
- LVR (loan-to-value ratio) The loan amount as a percentage of the property's assessed value. Lenders set maximum LVRs by asset type and risk; the lower the LVR, the more equity sits ahead of the lender.
- Mezzanine finance Debt that ranks behind the senior lender and ahead of equity. It costs more than senior debt because it carries more risk, and it is usually governed by an intercreditor deed.
- Preferred equity Capital that ranks ahead of ordinary equity for returns but behind all debt. It can fill a funding gap without adding a second mortgage, at the cost of a priority return.
- Private credit Lending by non-bank sources such as credit funds, family offices and private investors. It is typically faster and more flexible than bank lending and priced higher.
- Residual stock loan A facility secured over completed but unsold lots or apartments, used to repay construction debt or release equity while the remaining stock sells.
DEVELOPMENT
- Development approval (DA) Council or state consent to carry out development on a site, usually subject to conditions that affect cost and timing.
- Material change of use (MCU) A Queensland planning term for starting a new use of premises, or materially changing an existing one, which usually needs a development approval.
- Operational works Queensland approvals for the physical works of a development, such as roads, drainage, earthworks and services, separate from the use approval.
- Plan of subdivision / survey plan The surveyed plan that creates new lots. Once approved and registered with the titles office, the new titles exist and can be sold.
- Presales Contracts signed before construction completes. Construction lenders often require a level of qualifying presales before first drawdown.
THE TUESDAY LETTER One considered note, each week. The week's article and a short market note. Read by developers, lenders and private investors.