Central Real would also finance “certain non-residential construction projects”.
“We prefer them to residential apartments because they are generally smaller, the asset value is underpinned by a strong pre-lease commitment and we don’t deal in underground construction,” Mr Denny said.
Amid a series of construction company collapses, project cancellations and cost explosions, approvals for private sector housing excluding homes fell 43.5% in July , hitting their lowest level in more than a decade, according to the Australian Bureau of Statistics.
ABS said the sharp drop to 3,439 homes was due to a lack of approvals for large apartment developments.
A decision to avoid financing apartment construction has not hampered the growth ambitions of Central Real Capital, which expects $500 million in total financing capacity to be locked in by July. including an additional $100 million injected from Mr. Denny’s own private sources of wealth.
Balmain’s additional $100 million doubles the warehouse loan facility provided to Central Real Capital by the Sydney-based financial services firm.
Non-bank lending is the third move in Mr Denny’s colorful business career, which began with the founding of a Prague-based car dealership, which he later sold to Polish private equity firm Abris Capital Partners for $320 million in 2014. He returned to the Financial Review Rich List this year with a fortune of $749 million.
One of several private lenders seeking to fill the gaps in the commercial real estate debt market created by the dwindling appetite of the big banks, Central Real has focused on providing loans ranging from $5 million to $20 million for up to 12 months to fund developments in the initial or pre-construction phase.
The short-term bridge loan has allowed developers to take their project to the point where they can refinance with a bank on more conventional financing terms.
“Our sweet spot is to serve borrowers who are preparing for site development or need to secure pre-sales,” said Central Real Capital CEO David Stone.
Central Real-funded projects include fast-food outlets in Queensland and the New South Wales region, the acquisition of a merged site in Newport, and residential development projects in the North West Growth Corridors and South West Sydney.
Targeting a loan portfolio of $1bn – Central Real now has a loan portfolio of $330m – Mr Stone said the non-bank had ambitions to become the “leading private provider of finance development in Australia.
This financing isn’t cheap – the interest rates charged by Central Real are in the high figures – but it offers a solution for developers with good projects that don’t meet the strict criteria of major lenders.
“With $500 million in loans underwritten in two years, our approach is clearly resonating,” Mr. Denny said. “There is room for private lenders who are nimble, who understand and can act quickly to meet developers’ financing needs, and who are reliable.”