Time, money and red tape were the hot topics addressed at our recent Developers Forum networking and education event.
Construction has a lot to contend with right now. Like many other industries, we’re facing more regulation, more barriers to borrowing from banks, and more pressure to deliver quality results in less time.
Our three speakers at the latest Developers Forum event shared expert advice on how to thrive in the face of these challenges. In addition, we were joined by stallholders CBRE, Scottish Pacific, Knauf and Sarraf Strata.
The lowdown on strata legislation – George Zakos
From July 1 st 2017, all developers will pay 2% of the contract sum as a bond on any residential building projects not covered by Home Owners Warranty. The bond is held as security against building defects, and can only be released after a complex inspection process.
As a longstanding member of the MBA Legal & Contracts committee, George is across every detail of this new requirement and how developers can expect it to affect their operations.
Potential perils and pitfalls
- Inspection parameters – with two inspections needed, it’s the first interim report that must capture any and all building defects. Given the standard for inspection of strata buildings is still under discussion, you can expect a lot of confusion around what constitutes a building defect and an exhaustive list of defects included in that first report.
- More paperwork – bond release depends on submission of multiple documents including warranties, compliance certificates, detailed estimates – the list goes on. As well as finding extra funds to cover the bond, be prepared to spend more time getting your documentation in order.
- More exposure to litigation – this process opens a third pathway to litigation, along with the contract and standard warranties. If you were to walk away from the defect rectification process and give up the bond, you’d be fuelling the OC’s fighting fund for any legal challenges they bring against your project and business.
A snapshot of the lending landscape – George Karam
With all the recent restrictions on construction lending, developers are likely to be feeling the pinch on cash flow for future projects. Few are better placed than George Karam of BF Money to discover golden opportunities in the lending community. As principal of Australia’s most awarded commercial broker, George had some essential insights to help developers navigate their way to competitive finance solutions.
Treat new opportunities with caution
We’re seeing new lenders coming to the table in numbers – as many as two each week. Beware of how reliable their funding sources are though – unlike the banks, they’re often giving approval without actually holding the funds, and their investors sometimes let them – and you – down. Make sure you do your research into their liquidity.
With these non-bank lenders, you can go looking for loans of between $5 – $50 million at up to 85% TDC, but the fees and rates are going to be high. Better deals are on the table above the $50 million mark, as these lenders look to the banks to underwrite some of the loan and then pull in extra funds at a higher rate. This means they deliver a blended rate that’s more competitive.
These are just some of the highlights from George’s detailed survey of the current state of construction finance. For more insights, get in touch at george@bfmoney.com.au.
A better, faster finish for facades – Conall Tayler
As a family business with a strong reputation to protect, Emicon were always going to need some convincing to use a new product for a major development. After consultation with the James Hardie team and careful preparation, they were won over by the simple, time-saving benefits of the EasyLap™ solution.
Standing out at street level
As an affordable apartment complex close to a train station, it was a challenge to deliver a building that would stand out from the traditional brick and rendered structures without blowing the budget. Although render is the traditional alternative to bare brick, it can crack when there’s any structural movement. In seeking a practical, affordable finish with an architectural look, Emicon came across Easylap™.
Fewer trades on site saves time and hassle
When trying something new, there are always going to be bumps in the road to get over. Thanks to discussions held between the Emicon and James Hardie teams, starting from 18 months before the project came out of the ground, many issues were planned for such as addressing fire rating requirements, and where the panels would meet different site elements.
In the end, the risks and issues with using a new product were far outweighed by the simpler approach offered by Easylap™. By using the same trades for the lining and external finishes, the build isn’t subject to the risks that come with coordinating a large number of different sub-contractors. The savings in time and labour delivered a very streamlined, successful project, convincing Emicon to move forward with Easylap™ for one of their next 46 unit development projects.
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