Brisbane-based developer <a href="https://www.apartments.com.au/developers/red-co">Red &amp; Co</a> has made a striking debut on the Gold Coast, officially unveiling its $250 million COMO development in Varsity Lakes, a lifestyle-driven residential project anchored by an extensive rooftop wellness and activity precinct.

Having recently launched to market, construction has already been fast-tracked by <a href="https://www.apartments.com.au/builders/5point-projects">5Point Projects</a>, ensuring momentum continues on what is set to become a landmark residential address for the growing Varsity Lakes community.

Located at 22 Lake Street, Varsity Lakes, <a href="https://www.apartments.com.au/new-apartments/como-varsity-lakes-22-lake-street-varsity-lakes-qld-4227">COMO</a> will comprise 156 apartments across 16 levels, comprising one-, two- and three-bedroom residences designed for modern living. However, it is the project’s rooftop amenity offering that sets COMO apart.

[smartcode_project:default project_id=135546 project_image_fid=363510]

Designed as a dedicated wellness and recreation hub, the rooftop will feature a 25-metre lap pool, fully equipped gymnasium, and multiple pickleball and paddleball courts - amenities rarely seen in boutique apartment projects.

Residents will also have access to a sauna and plunge baths, while landscaped gardens and relaxation zones will provide tranquil spaces overlooking sweeping panoramic views across the Gold Coast skyline.

The rooftop precinct has been designed to function as the social and wellness heart of the development, encouraging residents to embrace an active, balanced lifestyle within their own building.

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[smartcode_project:default project_id=135546 project_image_fid=363512]

Red &amp; Co director David Laverty said the amenity offering was central to the project’s design from the outset.

“Amenities were at the forefront of our decisions,” Laverty said.

“Buyers today are looking for more than just an apartment - they want a lifestyle that promotes health, connection and balance.

“The rooftop at COMO has been designed to be the epicentre of that lifestyle, with a suite of wellness and recreation facilities that are quite unique for a boutique development of this scale.”

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[smartcode_project:default project_id=135546 project_image_fid=363514]

Designed by <a href="https://www.apartments.com.au/architects/bda-architecture">BDA Architecture</a>, the residences prioritise liveability, featuring spacious layouts, 2.7-metre ceilings and high-quality finishes throughout.

The development sits beside Bond University, placing residents within walking distance of education, retail and dining options within the vibrant Varsity Lakes precinct, including Robina Town Centre, Varsity Lakes Train Station and a range of leading schools.

[smartcode_project:default project_id=135546 project_image_fid=363511]

Laverty said the location was a key driver behind Red &amp; Co’s decision to bring the project to the Gold Coast.

“<a href="https://www.apartments.com.au/developments/varsity-lakes-qld-4227">Varsity Lakes</a> was a clear choice for us to invest in as it’s a lifestyle hub that seamlessly blends lakeside living with urbanity,” he said.&nbsp;

“Como will capitalize on this great location, delivering a project that not only creates premium homes, but a lifestyle defined by community, wellbeing, and connectivity.”

Red &amp; Co has delivered more than 500 apartments and townhouses across 26 projects in Brisbane in recent years, with COMO marking the company’s first major Gold Coast development.

[smartcode_project_cta:default project_id=135546]

Joel Robinson

Red & Co unveils amenity-rich Como development in Varsity Lakes

Gold Coast developer&nbsp;<a href="https://www.apartments.com.au/developers/big-projects">Big Projects</a> has secured approval for its second Mermaid Beach project.

The developer, currently selling <a href="https://www.apartments.com.au/new-apartments/the-frederick-mermaid-beach-2265-gold-coast-highway-mermaid-beach-qld-4218">The Frederick in Nobby Beach</a>, has secured approval for its next project just 1.5 kilomnetres up the road.

The new development, dubbed&nbsp;<a href="https://www.apartments.com.au/new-apartments/glenelg-residences-2462-2472-gold-coast-highway-mermaid-beach-qld-4218">Glenelg Residences</a>, has been designed by BDA Architecture and&nbsp;will have just under 100 apartments across an 11-storey building&nbsp;at 2462–2472 Gold Coast Highway, on the corner of Glenelg Avenue just under 300m from the future Mermaid Beach Light Rail stop.

The apartments, a mix of two- and three-bedrooms, will sit above a retail-focused ground plane and under extensive rooftop resident amenities.

<img alt="Exclusive: Big Projects plot Mermaid Beach apartment development, Glenelg Residences" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screen%20Shot%202024-06-11%20at%209.55.04%20am.png?VersionId=z6NV4izeuvhBSSVlY6vK6TPO1LxrFeaG" />

BDA said in its planning submission that the project is intended to support the area’s transition toward higher-density, mixed-use living. “This project offers the opportunity to generate appropriate higher-intensity development within the future Light Rail corridor of <a href="https://www.apartments.com.au/developments/mermaid-beach-qld-4218">Mermaid Beach</a>,” the submission noted.

At ground level, Glenelg Residences will include eight retail tenancies designed to activate the street frontage, complemented by a basement bar offering an additional hospitality element. Above, residents will have access to a rooftop amenity deck featuring an infinity pool, hot and cold plunge spas, day beds, and barbecue facilities.

The architectural approach adopts a restrained material palette of brick, textured concrete, and integrated landscaping, with cantilevered concrete frames and cascading planting intended to soften the built form. BDA described the design as aiming to create “a memorable sculptural mid-rise mixed-use building” that responds to both its coastal setting and urban context.

<img alt="Exclusive: Big Projects plot Mermaid Beach apartment development, Glenelg Residences" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screen%20Shot%202024-06-11%20at%209.55.45%20am.png?VersionId=cpjIVBqcT_sujmo2UMWkVyLcQ7WGJHaQ" />

The approval comes as the City of Gold Coast continues to plan for significant population growth, with regional targets requiring more than 100,000 new high-density dwellings by 2046.

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Big Projects, led by Matthew and John Barrett, is part of a growing cohort of developers that deliver construction in-house, providing a high level of confidence to prospective purchasers.
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[smartcode_project_cta:default project_id=150260]

Big Projects secures approval for Glenelg Residences in Mermaid Beach

Sherpa Group is ramping up its investment in the southern Gold Coast by lodging a development application for <a href="https://www.apartments.com.au/new-apartments/flourish-viver-87-griffith-street-coolangatta-qld-4225">Flourish Viveré</a>, a new $350 million project in Coolangatta.

The move comes after the group’s $27 million acquisition of the 2,029 sqm site on the corner of Griffith and Warner Street, last year.

They will develop 194 apartments across a 26-storey tower, which will become Sherpa’s largest project to date.

Viveré will be the next chapter in the Flourish story, following closely behind Amargo, Oasis, and the Avenues in Palm Beach, as well as Symphony in Brisbane, all designed to deliver affordable housing in lifestyle-rich locations, giving locals a real chance to secure a residence close to the beachfront.

The HAL Architect-designed project will offer a diverse range of residences, from one-, two, and three- bedroom apartments to the premium Canopy range to luxury penthouses.

<img alt="Vivere" data-entity-type="file" data-entity-uuid="c85f5a7e-a22f-4745-8def-400adb3c0b35" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-04-15%20at%209.53.43%E2%80%AFAM.png?VersionId=OY.chur3BPExn1exQ2q8clHqWnW_CaBi" />

“The Gold Coast is undergoing a period of immense growth, with more people drawn to the incredible 
lifestyle that’s available, leading to strong growth in property prices,” said Christie Leet, founder of Sherpa 
Group.

“Our goal at Sherpa is to ensure locals are not priced out of the market in prime locations, which is why we 
created the Flourish collection.

“Flourish Vivere will form the next chapter in our portfolio, and we are so excited to be lodging the DA, marking our first project in Coolangatta.”

A signature of the Flourish developments is the communal rooftop. Flourish Vivere will showcase a private resident’s lounge, outdoor dining with barbecues and pizza ovens, heated pool, fully-equipped gym, and a wellness centre with sauna and steam room.

<img alt="Vivere" data-entity-type="file" data-entity-uuid="c09372cc-aae6-4458-af2e-f291bd19a5e5" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-04-15%20at%209.53.49%E2%80%AFAM.png?VersionId=Sc_RLXl5jiff.tnadogXjQJ_WIpDjf3p" />

The project is strategically located to offer a walkable lifestyle, with the Strand shopping centre, cafes, restaurants, shops and the beach, all just a short stroll away.

“We have meticulously planned Vivere to build on the Flourish legacy, creating a truly special project,”&nbsp;Leet added.

“Wellness, lifestyle and community are at the forefront of every decision we make, and that has not 
changed for Vivere.”

With the DA now lodged with the Gold Coast City Council, Sherpa has moved quickly to secure LPS Group as the builder, offering buyers a level of certainty that is rarely seen in today’s market.

Sherpa has delivered 16 residential projects over the past seven years with a pipeline of $1 billion, with more under construction.

Sherpa takes Flourish brand to Coolangatta, lays plans for Flourish Vivere 

S&amp;S Projects is boosting its investment at Rainbow Bay to more than $1 billion after the prolific Gold Coast developer acquired a new site for $20.25 million and immediately laid plans for a new luxury apartment project in the sought-after precinct.

The site, which is the company’s fifth acquisition at Rainbow Bay in the past four years, will be home to the company’s largest project to date after delivering 3 sold-out projects and construction progresses on Radia worth a combined $215m. 
S&amp;S Projects is currently finalising plans for its latest strategic acquisition, a 1,518 sqm site located 209-213 Boundary Street in Coolangatta, with a development application expected to be lodged within weeks.

The luxury residential development will build on the company’s highly successful projects at Rainbow Bay, comprising Flow, Awaken, Esprit and Radia, with Radia currently under construction by Hutchinson Builders.

“We have been unflinching in our commitment to Rainbow Bay and the transformation we have helped drive in this incredible part of the Gold Coast, which is among the city’s most desirable residential locations,” said S&amp;S Projects founder and director Paul Gedoun.

“Our fifth project will reflect the best of what we have done so far to create a lifestyle precinct that is second to none.”

The latest development, which has yet to be named, is proposed to accommodate 88 luxury apartments in a design that will immerse residents in a unique wellness lifestyle that expands on the legacy of S&amp;S Project’s earlier developments at Rainbow Bay.

The development will feature an expansive rooftop garden and wellness centre with a resort- style pool, among a host of lifestyle amenities planned for residents.

“Rainbow Bay, with its beautiful, protected beach and alongside one of the world’s best surf breaks at Snapper Rocks, is the natural wellness heartland of the Gold Coast,” said Gedoun.

“We are taking every advantage to create a truly unique rooftop wellness experience with a natural feel for residents, offering stone features throughout and an underlying theme that emulates a botanical garden.”

The latest acquisition comes as S&amp;S Projects is at the completion of Esprit and construction continues on Radia, which are part of their significant portfolio undertaken by the company at Rainbow Bay since 2022.

The $215 million Radia, which comprises 38 apartments, is currently the flagship development by S&amp;S Projects at Rainbow Bay which is expected to be completed in 2027.

Jayde Pezet, of Pezet Matheson, which has managed sales and marketing for S&amp;S Projects across their Gold Coast portfolio, emphasised the developer’s commitment to continuous improvement and excellence.

“S&amp;S Projects continue to elevate the benchmark of luxury with each development," Pezet said.

“We have worked with S&amp;amp;S on their 4 other projects in Rainbow Bay and their approach reflects a team that is constantly learning, refining, and pushing the standard higher.

“Their hyper-local knowledge and deep expertise within the luxury property sector are what truly set them apart, allowing them to deliver projects that feel both globally sophisticated and authentically connected to their coastal environment”

S&amp;S Projects plans to officially launch its latest project at Rainbow Bay in the second half of this year.

“As we embark on our largest project yet, we have pulled out all stops to create another landmark development that truly reflects the relaxed southern Gold Coast lifestyle,” Gedoun added.

S&S buys $20m Rainbow Bay site for fifth beachside apartment project

Japandi, an emerging design trend that combines Scandinavian functionality with Japanese rustic minimalism, remains relatively untested in Australia’s residential development market.

As developers look to differentiate their projects and offer something distinct to buyers, Brisbane-based developer Lantona has embraced the hybrid style for its recently launched Toowong apartment project, <a href="https://www.apartments.com.au/new-apartments/koya-residences-6-josling-street-toowong-qld-4066">Koya Residences</a>, with early response to the design proving positive.

Lantona entrusted Red Door Architecture and interiors practice Luma Design Co with delivering the Japandi brief. The approach blends Japanese minimalism with Scandinavian functionality, emphasising warm, restrained interiors, natural materials and clean lines. Drawing on the Japanese concept of wabi-sabi (beauty in imperfection) and the Scandinavian principle of hygge (comfort and cosiness), it creates serene, uncluttered and sustainable living environments.

These design principles are expressed throughout the Josling Street development, both in its exterior form and across the 40 one-, two- and three-bedroom residences within.

[smartcode_project:default project_id=150787 project_image_fid=366229]

Koya reflects a deliberately scaled approach, with the five-storey form designed to align with the surrounding residential streetscape rather than dominate it.

“Koya is conceived as a building that sits comfortably within its surroundings. Every decision, from material selection to spatial planning, has been guided by long-term liveability and enduring relevance,” the developer said.

[smartcode_project:default project_id=150787 project_image_fid=366243]

Positioned within an established inner-west neighbourhood, the development sits near riverfront parklands and the Bicentennial Bikeway, while remaining within walking distance of Toowong Village and multiple public transport options connecting to the CBD, St Lucia and West End.

Lantona said the location was central to the project’s conception, pointing to Toowong’s balance of green space, transport access and proximity to major education institutions.

“<a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> combines river access, walkability, immediate CBD connection and a strong educational presence. That balance made it the obvious setting for Koya.”

[smartcode_project:default project_id=150787 project_image_fid=366230]

Communal amenity is concentrated on the rooftop, where a shared retreat will include a pool, dining areas and outdoor spaces oriented towards neighbourhood and city views. The design allows for both private use and small gatherings, extending the living environment beyond individual apartments.

Koya enters the market at a time when smaller-scale developments are becoming less common in established suburbs, with many recent projects in the suburb shooting for the sky.

In a nod of confidence,&nbsp;<a href="https://www.apartments.com.au/builders/brisbane-builders">Brisbane Builders</a>&nbsp;has already commenced construction on the building, which is slated for completion in early 2027. Keenan &amp; Byrne is marketing Koya.

[smartcode_project_cta:default project_id=150787]

Japandi-inspired Koya Residences launch in Toowong

Financing

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EXPERT OBSERVER
While some have expressed surprise at the recent resilience in the value of the Australian dollar around the $US0.69-0.70 level despite weak Australian growth and Reserve Bank rate cuts, from a big picture sense it has already fallen a long way. It’s down 37% from a multi-decade high of $US1.10 in 2011 and it’s down 15% from a high in January last year of $US0.81. So, having met our long-held expectation for a fall to around or just below $US0.70 and given its recent resilience now is an appropriate time to take a look at its outlook.
The $A is slightly undervalued long term
The first thing to note is that from a very long-term perspective the Australian dollar is around or just below fair value. This contrasts to the situation back in 2011 when it was well above long-term fair value. The best guide to this is what is called purchasing power parity (PPP) according to which exchange rates should equilibrate the price of a basket of goods and services across countries – see the next chart.
If over time Australian inflation and costs rise relative to the US, then the value of the $A should fall to maintain its real purchasing power and competitiveness. And vice versa if Australian inflation falls relative to the US. Consistent with this the Australian dollar tends to move in line with relative price differentials – or its purchasing power parity implied level – over the long term. And right now, it’s around or just below fair value. But as can be seen in the last chart, it rarely spends much time at the purchasing power parity level.
Cyclical swings in the $A are largely driven by swings in the prices of Australia's key commodity exports and relative interest rates, such that a fall in Australian rates relative to US rates makes it more attractive to park money in the US and hence pushes the $A down. “Investor” sentiment and positioning also impacts – such that if the $A is over-loved with a lot of long positions then it becomes vulnerable to a fall and vice versa if it’s under-loved.
The negatives for the $A…
For some time, our view has been that the $A would fall into the high $US0.60s and this has happened. But notwithstanding this and that the $A has already fallen a long way from its 2011 high, it could still face a bit more downside over the next six to 12 months. The main reason is that Australian growth is weaker than US growth and spare capacity is much higher in Australia.
For example, labour market underutilisation is 13.7% in Australia versus just 7.1% in the US, growth in Australia is running at 1.8% year on year compared to 3.2% in the US and the drag on growth from the housing downturn is likely to keep growth relatively weak in Australia for the next year or so. So this all points to more downside for the Australian dollar.
…and the positives
Against this there are a bunch of forces acting to support the $A, and this has been evident in its relative resilience despite bad news in recent weeks. Firstly, global sentiment towards the Australian dollar has been negative for some time and this has been reflected in short or underweight positions in the $A being at extreme levels – see the next chart. In other words, many of those who want to sell the $A have already done so and this leaves it vulnerable to a rally if there is any good news.
Secondly, there has been good news with the iron ore price pushing above $US100 a tonne and this combined with solid growth in export volumes has pushed the trade balance into a record surplus which has shrunk the current account deficit as a share of GDP to its lowest since the 1970s. Of course, the iron ore price will likely fall back somewhat when Vale gets production back to normal after its dam disaster, but Chinese economic stimulus may help keep it and other commodity prices supported. The smaller current account surplus means Australia has become less dependent on foreign capital inflows.
Finally, in response to the threat to growth from President Trump’s trade wars, mixed economic data and weak inflation, investors have moved to price in rate cuts from the Fed over the next year. And this is negative for the $US generally after a multi-year bull market since 2008.
So where to from here?
Overall, we expect that the weaker growth outlook in Australia relative to the US and the likely continuing decline in the interest rate differential versus the US will dominate and push the $A still lower.But with the $A having already had a big fall, short $A positions running high, the current account deficit having shrunk and the US dollar looking toppy we see the $A falling to around $US0.65 on a six to 12 month horizon as opposed to crashing down to say the 2001 low of $US0.48.
Of course, if the global economy falls apart, causing a surge in unemployment in Australia as export demand and confidence collapses and another big leg down in house prices then all bets are off and the Aussie will fall a lot more…but that’s not our base case.
What does it mean for investors?
With the risks skewed towards more downside in the value of the $A, albeit less so than say a year ago, there are several implications for investors. First, there remains a case – albeit not as strong as it was when the Australia dollar was much higher – to maintain a decent exposure to offshore assets that are not hedged back to Australian dollars. A decline in the value of the $A will boost the value of an investment in offshore assets denominated in foreign currency one for one.
Meanwhile, the fall in Australian interest rates relative to global interest rates has reduced the incentive to hedge because when Australian rates are above global rates investors are “paid” to hedge. Second, if the global outlook turns sour due to say Trump’s trade wars, having an exposure to foreign currency provides protection for Australian investors as the $A usually falls in response to threats to global growth. As can be seen in the next chart there is a rough positive correlation between changes in global shares in their local currency terms and the $A.
Major falls in global shares associated with the emerging market/LTCM crisis in 1998, the tech wreck into 2001, the GFC, the Eurozone crises and the 2015-16 global growth scare saw sharp falls in the $A. So being short the $A and long foreign exchange provides good protection against threats to the global outlook.
Finally, continuing softness in the $A will be positive for Australian industry sectors that compete internationally like tourism, higher education, manufacturing, agriculture and mining and this will benefit shares exposed to these areas.
DR SHANE OLIVER is the Head of Investment Strategy and Chief Economist for AMP Capital 
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soliver-smf6LQXgW9

The $A still has more downside but much weakness has passed: Shane Oliver

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GUEST OBSERVATION
The banking industry, along with the Council of the Ageing and National Seniors, are calling on all the nation’s Attorneys General to agree their COAG meeting tomorrow to key changes which will empower bank staff to help detect and prevent elder financial abuse.
At the beginning of this year the banking industry, along with seniors group, called on the Federal Government to take the lead on these important changes to help bank staff tackle elder financial abuse. Key changes are a standardisation of power of attorney orders, a national online register and a designated body to report abuse.
In this year’s federal budget the Government announced funding for a national online register and an intent to seek agreement from states and territories for a standardisation of power of attorney orders.
The Australian Banking Association along as the Council of the Ageing and National Seniors had written to each Attorney General urging them for a decisive outcome in order to empower bank staff to tackle this growing problem.
Every year in Australia older people are the victim of financial crimes, and while we often see terrible stories about elderly people being robbed, we very rarely get any insight into a far more silent and sinister crime being committed against older Australians – financial abuse.
Financial abuse is a serious and far reaching problem that can happen to anyone, but some people, like the elderly, people with a disability or other vulnerable and isolated people are at greater risk. 
Increased house prices and reasonable superannuation balances can mean that some older people are in a good financial position. For some adult children, this leads to what some refer to as inheritance impatience.
Seniors advocacy groups and the banking industry are united in their determination to see action on this problem.
Australia needs a standardisation of power of attorney orders, which are logged onto an online register and a legally protected body were elder financial abuse can be reported.
Elder financial abuse can of course be reported to police directly however it’s often hard as those involved are often close family and friends.
Tomorrow state and territory governments have an opportunity to join with the federal government and agree to tackle these changes.
We can’t keep drawing this out – all governments need to decide and act to ensure that Australia addresses this growing issue.
Anna Bligh is the CEO of the Australian Banking Association and is the former Premier of Queensland. 
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jrobinson-rf4aSBido9

Time for action on elder financial abuse: ABA's Anna Bligh

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Recent tightening of lending criteria in the banking sector has not only dramatically reduced financing options for companies, but has also created a perfect storm for what could be described as “predatory” lending practices by some second-tier credit providers.
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This year has seen the big four banks impose stricter lending criteria and companies seeking loans on prime secured assets, second mortgages or unsecured cash flow loans have been forced to turn to private equity style second-tier lenders. 
The largely unregulated and agile capital from second tier lenders is attracting borrowers simply as they have no other choice and from the outset borrowers are disadvantaged. 
This is particularly prevalent in commercial property transactions and development funding. Lenders can see in profitable deals there is available uplift and margin, making the value proposition of post transaction litigation a retrospective unappealing action where money has been made by the borrower. 
Second-tier lenders leverage the fact that funds can be advanced quickly with decision-makers assessing deals much more promptly than the big banks can. However, access to funds in the second-tier market can come with significant financial costs. 
Corporate borrowers can often be burdened by unexpected and significant fees when they discharge their obligations. The fine print in loan documentation can stipulate higher interest rates than what has been used in marketing materials. If there is a breach of the terms, the higher rate will apply and the discounted rate evaporates. 
Another “predator” technique is reliance on strict notice provisions to discharge loans. There are cases when notice is provided, but has not taken the form required under the terms, such as an email instead of a fax. Lenders will reject that effective notice has been given and continue the loan for an additional 
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period, or apply default interest based on defective notice if the loan extends beyond the original term. 
The biggest sting comes when borrowers seek to discharge a loan and settle the arrangement, as in the depths of the paperwork there is usually a “term fee” or “capital repayment fee“. On settlement on the loan, lenders claim a percentage of capital and this is typically an unexpected cost and a significant burden for the borrower. 
Lenders cite risk as the reason for these fees, state that the terms and conditions have disclosed all fees and also rely on a Lawyer’s Certificate to confirm that the terms have been explained to the borrower. 
Furthermore, if a lender considers that the borrower is a future litigation risk, they will demand a Deed of Release be signed to absolve the lender from any claims as a condition of settlement. This effectively strips the borrower of future rights and can leave them in a position where loans rack up exorbitant interest at super-charged interest rates in addition to hefty default fees without recourse. 
We desperately need to maintain quality lending practices and it is now up to the big four banks to develop funding solutions for corporate Australia and for regulatory bodies to open their eyes and look at ways to rein in second-tier lenders exploiting the market. 
Francis Farmakidis is a partner, at <a href="http://vobis.com.au/" target="_blank">Vobis Equity Attorneys</a>.
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Warning that predatory second tier lenders are circling property sector

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<img src="/images/2016/03/30/Holdencapital_banner.jpg" alt="" width="646" height="136">
SPONSORED POST
This is a question faced by many developers as they find themselves inevitably stepping up to larger projects and the consequential demand on their equity resources. The answers are complex and can vary depending on many variables but let’s take a look at what each option offers
Firstly, lets be clear on the differences between debt and equity. Debt comes in many forms but essentially, it comprises funds that are lent at a proscribed interest rate which in a project scenario are usually but not always, capitalized as a cost of the project. Debt is typically but again not always, secured by a registered charge over the security property together with sponsor guarantees and in the final wash up, the lender’s repayment of capital, interest and fees take priority over those of the sponsor when apportioning the proceeds of sale. Clearly it is important to negotiate the best possible terms when committing to a debt position but at the end of the day, the golden rule tends to apply, he who has the gold, makes the rules.
Equity on the other hand is usually defined as the capital contribution provided by the sponsor of the project and any related parties. Equity can take the form of cash, services provided and any improvement in value derived from the revaluation of an asset as a consequence of a rezoning or similar.
Sponsor structures can take many different forms but for the purposes of this article we will treat partnerships the same as single traders (as do lenders), while Joint Ventures provide a structured arrangement enabling parties with differing skills and or capabilities to come together to undertake a project and share in the resulting profits. 
The manner in which debt and equity can be sourced and applied is almost limitless but lets take a look at the typical options available to a developer and consider the benefits.
The Debt Options:
Firstly, you need to be aware that the state of the market will often determine what is actually available. Simplistically, in a rising market, access to both debt and equity is typically more readily available and pricing is competitive. Traditional debt providers such as the banks and major funds chasing market share, will consider higher Loan to Cost/Value ratios, more competitive terms such as lower presale requirements and keenly priced interest margins and fees.
Alternatives such as mezzanine funding also become more prevalent in rising markets with participants providing funds to top up the capital stack in a project. Typically filling the gap between senior debt at say 75-80 percent up to 90-95 percent of the total project cost, the cost of Mezzanine can range from 20-25 percent p.a. but as the market gets hotter and depending on the level of risk, pricing can fall to as little as 14 percent.
While these funds may seem attractive, they are often accompanied by very tight and restrictive terms, which can result in the sponsor losing control of the project to the advantage of the mezzanine lender. Sponsors need to be aware that a Mezzanine partner is really just another lender albeit with more to lose that the senior debt provider and when the going gets tough, you potentially have two masters to satisfy rather than just one and neither is likely to have the same agenda as you.
A key point to remember is that in a rising market Mezzanine Lenders are attracted to a share of the upside and negotiate accordingly. In a falling market they will seek to cap their exposure and prioritise their returns at your expense. Conversely, you as the developer are looking to maximise the blue sky in the project or protect your downside as the case maybe.
“Stretch senior” debt is another option that is usually seen in stronger markets with some specialist lenders prepared to exceed the usual Major bank construction loan LCR’s of between 70-80 percent by lending up to 90 percent+ of LCR in return for a margin that reflects the associated risk, which might be some 3-4% above that charged by the banks, depending on their assessment of the project and sponsor risks.
In a falling or credit constrained market as we are currently experiencing, the traditional lenders tighten their terms and we see LCR’s firm to between 65-75% and the application of stricter presale requirements, typically with a minimum of 100% debt cover as a condition precedent. 
Joint Ventures:
The attraction of Joint Ventures is that they provide a multitude of structures that can be tailored to the developers needs and typically provide access to capital and expanded skill sets in return for a share of both the profit and the risk.
Like debt, Joint Venture funds are easier to secure in a rising market but even more importantly than with debt, the secret here is to find the right partner. While negotiating the right terms and a soundly drafted JV Agreement are critical (we will deal with this in a future article), the most important consideration is finding a partner who not only has complementary skills and capabilities to work with their own but also has the same goals and values in terms of their decision-making processes. This is a more challenging exercise that selecting the right debt or mezzanine partner but has the potential to be far more rewarding. 
The classic JV structure where the parties are equal in their contributions and profit entitlements are rare with most comprising of a party with the ideas/opportunities and the other with the capital and resources to make it happen or a similar permutation. As a result, in a rising market Joint Venture partners with capital are attracted by an increased share of the upside and negotiate accordingly, while in a falling market they will seek to cap their exposure and prioritise their returns at the expense of their partner or the lender. Conversely, the initiating developer is also self motivated and looking to give away as little as possible in their project which usually results in an increased downside in the event that they do not perform their obligations and for newcomers this inevitably ends in tears as they over estimate their own capabilities.
So, the question as regards more debt as opposed to equity is not simply one of cost. More importantly it is one of understanding your capabilities to deliver and being able to deal with the consequences if unforeseen forces result in a less than optimum outcome.
In the case of “more debt”, the developer needs to be aware that losing control to the lenders has a proportionally higher risk in terms of the financial consequences both in terms of the project and their personal fortunes. On the other hand the Joint Venture can reduce the downside risks from a capital exposure perspective but comes at the cost of having to give away a substantial portion of the projected profit.
So, there is no right or wrong answer here, the key question an under capitalized developer needs to ask themselves is what option best fits my situation, what is the downside if events outside my control mean that the project fails and can I live with the consequences of my decision?
 
This article was written by Dan Holden of HoldenCAPITAL, who are a bespoke construction finance firm, they arrange construction finance and invest in projects through their equity fund, Queen Street INVEST. To discuss your project finance requirement please call (07) 3171 4200 or visit HoldenCAPITAL <a href="https://www.holdencapital.com.au/" target="_blank">here</a>.
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