Refinancing a Woodbridge construction loan into a residual stock loan
How developers with a Woodbridge Capital construction facility can refinance unsold completed stock into a residual stock loan, and what a residual lender needs to see.
Woodbridge Capital is an Australian private credit manager that finances property construction and development. The projects it backs are generally large, which means most Woodbridge construction facilities are well beyond a $1M to $20M lender.
But the point where a construction loan becomes a residual stock loan is different, because by then most of the apartments, townhouses or units have settled, the construction debt has been paid down by the sales, and what's left is a smaller loan over the unsold stock. That's the part this guide is about.
Your first conversation is with your construction lender
If your construction loan is with Woodbridge, the obvious first step is to ask whether it will roll the remaining debt into a residual facility itself. Staying with the same lender usually means less legal work, no new valuation panel to deal with and a lender that already knows the project.
A separate residual lender usually comes into it when:
- You need to release more money from the completed stock than the current facility allows, for example to fund the deposit on the next site
- You want a different term because the sales plan for the remaining stock has changed
- The remaining stock is a small tail and you'd like a facility sized and priced for that rather than for a large project
- You want to split the stock across more than one lender, or separate the residential stock from a commercial lot in the same building
How a residual stock refinance works
The residual lender values the unsold stock, usually on a line-by-line basis, and lends a percentage of that value. The loan is repaid as each unit sells, with an agreed amount released from every sale, until the loan is gone. We set out how lenders size these loans, and the issues we see most often, in residual stock loans: what we've learned from the deals we've looked at.
The main things the new lender will look at are:
- The valuation of each unsold unit and how it compares with the prices achieved on the units that have already settled
- The sales history, including how many contracts fell over and why
- The release price per unit, which needs to repay the loan before the last few units, not after them
- The occupation certificate and strata plan, because a residual loan is over completed, titled stock
- The payout figure on the construction loan, including any fees on discharge
An example
This is an illustrative example. A developer has completed a 60-unit building and settled 46 units, and the construction loan has been paid down to $6,800,000. The 14 remaining units are valued at $13,200,000 in total. A residual loan of $8,500,000 would pay out the construction loan, cover costs and interest, and release about $1,300,000 towards the next project. That's 64.4% of the stock value, inside a 70% residual stock limit, with release prices set so the loan is fully repaid after about 11 of the 14 units sell.
How we do it
Vía Private lends $1M to $20M on residual stock up to 70% of value, for business and investment purposes, secured by completed property on the East Coast, for terms of 6 to 36 months. We set out the total interest, every fee, the release price per unit and the exact payout at the end before you sign.
If you've got completed stock sitting under a construction loan, send us the scenario with the stock list, the valuations or asking prices and the current payout figure. For more on how the product works, see our residual stock loans page.
Hypothetical example only, not a transaction Vía Private has funded. Vía Private is not affiliated with Woodbridge Capital. Woodbridge Capital is named only to describe a refinance scenario, and nothing here sets out its current products, terms or pricing, or compares them with ours. 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.
Frequently asked questions
Why refinance to a different lender for the residual stock?
Usually to release more money from the completed stock than the current facility allows, to get a term that matches the revised sales plan, or because the remaining tail is small enough to be priced as its own facility rather than as part of a large project.
When does a construction loan become a residual stock loan?
Once the building has its occupation certificate, the strata plan is registered and enough units have settled that what's left is a smaller loan over completed, titled stock.
How is a residual stock loan repaid?
As each unit sells. An agreed release price comes out of every settlement, and those releases need to repay the loan before the last few units sell, not after them.
What does the lender look at most closely?
The line-by-line valuation of the unsold units against the prices already achieved, the sales history including fall-overs, and whether the release prices clear the loan with units to spare.