How a First Mortgage Won a Commercial Purchase on a 21-Day Settlement

For commercial and industrial purchases, timing often decides the deal. Here is a worked example of how a warehouse purchase would be funded quickly enough to hold the contract.

This is a hypothetical worked example, not a transaction Vía Private has funded. Figures are indicative and do not represent an actual client.

The situation

Say a trust is buying an industrial warehouse for $5,000,000 on a 21-day settlement, which is the kind of commercial security we also write against in Double Bay. The banks are interested but can't clear credit inside 21 days, and the buyer can't risk the contract on a six to eight week process.

How the facility would be sized

• Borrower: trust, investment purpose
• Security: industrial warehouse, purchase price and value $5,000,000
• Loan: $3,000,000 first mortgage, at 60% of the property value
• Term: 12 months
• Exit: refinance to a bank term facility once the tenancy and financials are seasoned

How it would work

We'd fund 60% of the $5,000,000 price as a $3,000,000 first mortgage, assessing it on the property and the exit rather than a rigid servicing template, which is what lets us give a firm answer early enough to hold a settlement date. The borrower brings the balance, so on top of the $2,000,000 of equity in the purchase they'd cover $275,000 of stamp duty at 5.5% and $15,000 of legals, which is about $2,290,000 of their own funds going in. A conservative 60% starting position is also what gives everyone comfort on the exit.

What the timeline would look like

On a deal packaged like that, the work that sets the date is the valuation and the legals rather than the credit decision, which is why a private first mortgage can hold a 21-day contract where a six to eight week bank process can't. The same problem turns up on residential purchases, and what a short settlement looks like in North Bondi is the version of this where the income is the part a bank cannot verify in time. The borrower would then have twelve months to stabilise the tenancy before moving to longer-term bank funding.

Broker takeaway

For commercial and industrial purchases where timing is everything, a private first mortgage is often the difference between winning and losing the deal. We are comfortable across larger facilities and multi-security positions, and we give a straight answer either way.

Talk to Vía Private

Vía Private provides commercial and industrial property loans to companies and trusts across NSW, VIC, QLD and the ACT. Brokers welcome.

Hypothetical example only, not a transaction Vía Private has funded. Vía Private is an Australian non-bank private credit lender providing property-secured commercial loans to companies and trusts for business and investment purposes. All lending is subject to credit approval and valuation. General information only, not financial or credit advice.