Case Study: Purchase & Fit-Out of Owner-Occupied Commercial Property

A prominent luxury residential developer & builder contracted to purchase a city-fringe light-industrial building, which they were going to fit-out to make their own office.

The Challenge

Banks will often structure this as a standard property loan for the purchase, with a separate Equipment Finance loan on a significantly shorter term of around 5 years for the fit-out – which can mean hefty repayments – e.g. a $500k fit-out would cost about $110k per year in repayments, PLUS the property loan interest/repayments.

The Approach

Our first step was to engage a trusted valuer ourselves (rather than letting the bank order a generic valuation), scoped to complete a valuation on an “as is” basis as well as “as if complete” – similar to a property development.

This allowed STAC to negotiate funding terms with a Bank that were structured under a single property loan, thereby significantly reducing the monthly repayments.

The Outcome

Blending the purchase and fit-out funding into an amortisation period of 15 years with an interest rate of 2.48%, the repayments of the ~$3m loan came to approx. $20,000 per month.

Compared to doing a $2.5m property loan and $500k equipment loan, the repayments were about $70k per annum lower under our negotiated structure.

If you would like to discuss this article or learn more about our funding solutions, please contact us.

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