In the competitive world of investing in Australian commercial and development property, property investors are constantly considering what can they do to be the preferred party to deal with in relation to a particular project. This is why they need the right property advisers!
How are you getting advice on your next property development? Using the right property advisers can make the difference between winning and losing a transaction
Price is no longer the only factor relevant to winning a transaction.
Additional factors are now becoming increasingly important to the other parties to the transaction in deciding who to deal with.
The increasing importance of Non - price factors
Due to the increasing complexity associated with real estate transactions in Australia, particularly ones involving foreign property investors, and the importance of being able to act quickly to take advantage of opportunities, price of itself will not necessarily be enough to guarantee success.
What are non-price factors? The new problem for property investors/developers
Other factors are becoming equally or more important to the other parties. These include:
- ease of dealing with a party;
- a party's level of familiarity with the type of transaction to be entered into
- availability of funding (including debt finance) for the party; and
- whether FIRB approval is required for the party to complete the transaction.
These factors can each have a major impact on transaction costs and meeting deadlines.
How can they prejudice property investors? Why the right property advisers is critical to success
In the case of foreign investors or developers or local ones involved in more complex transactions than those to which they are used to, the non-price factors are particularly relevant. They can work against the property investor or developer in a tender, expression of interest or private treaty sale.
In relation to ongoing arrangements such as joint venture, co-ownership or development transactions, these factors take on even greater significance. This is due to the extended period of time during which parties need to work together.
Property advisers with the relevant skills and experience can help property investors avoid the negative consequences
To overcome the above disadvantages, property investors and developers should seek advice from the appropriate property adviser(s) as soon as possible to ensure that they understand the main issues relevant to the transaction.
Once the need to have such knowledge is accepted, the question is what do potential investors need to know and when and how should they get that knowledge.
What Makes Us Different?
The main focus of our consulting services is to:
- minimise the cost and time associated with implementing a transaction; and
- maximise the ability of investors to protect their interests when negotiating the initial documentation with the other parties to the transaction.
Real Life Examples
The difference between getting the right advice from an appropriate property adviser as soon as possible and not doing so is demonstrated by the following real-life examples:
- Prior to seeking our advice, a borrower executed a term sheet which contained a prohibition on it acquiring any other property or borrowing further funds without the consent of the lender. Once we highlighted this to the borrower, it advised that it did not wish to proceed without the lender removing this restriction. The lender could not accommodate this request resulting in the loan (approximately $50m) not being provided.
- A developer provided a short form of development management agreement to a foreign property investor which was to fund the development. The agreement did not contain appropriate rights to protect the investor's interests. Upon seeking our advice, we negotiated substantial changes to the document on behalf of the investor. This resulted in a saving of $5m for the investor on completion of the project.
How we help Property Investors and Developers
We leverage off the 30+ years of legal and transactional experience of our Founder, Peter Faludi, which is provided at cost-effective rates. We are property advisers that assist property investors understand legal, documentation and structuring issues associated with property investment, development and finance in Australia.
This type of advice is generally not provided by other property advisers at the very early stages of the transaction.
By addressing these issues at the very beginning of a transaction, the amount of renegotiation required to implement the transaction (due to the investor requesting changes) will be minimised. This results in the saving of costs and time.
We strive to make investment in Australian property simpler. We have been working closely with the Property Council of Australia since early 2016 to further simplify the foreign investment laws applicable to investment in Australian property. Our efforts have already led to results with the removal of the “Land under prescribed airspace” category for sensitive land from 1 July 2017.
What difference does having the right property adviser involved at the right time make to property investors?
By utilising our services, property investors and developers gain control of matters and are better able to protect their interests at the vital early stage of discussions with other parties.
In addition to the cost and time savings mentioned above, by seeking our advice the investor should be seen as a savvy investor by Australian parties. Consequently, the investor will be more likely to be invited to participate in future transactions. This can be of significant value to the investor.
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Peter Faludi Consulting