AFR Wingate boosts developer lending

Property – Larry Schlesinger

The head of property at Melbourne-based investment house Wingate has played down concerns about a housing crash and says its appetite to lend to private developers remains stronger than ever.

Wingate, which has more than $2 billion of funds under management, has grown its debt partner funds business by $300 million this year, hitting $700 million in November.

It expects to top $1 billion in debt investment next year with around 80 per cent of this being lent to property developers, including for site acquisitions and construction loans.

Despite house prices easing and some developers running into settlement delay issues, Wingate managing director of property Ryan Levin said the off-the-plan contract fall-over rate remained ‘‘small and manageable’’ and that Wingate focused on ‘‘high-quality developers who do better when the market softens’’.

‘‘We don’t anticipate a housing crash, but we see the market coming off and going sideways for sometime,’’ he said.

And the appetite for lending into this market is as strong as ever.

‘‘We’ve had to run a waiting list for our investors who want to get into the debt fund,’’ he said.

‘‘Originally, when we launched the debt fund business in 2012, our co-investors were our Melbourne-based contacts and friends.

‘‘But it’s expanded well beyond that. The majority are now high-net-worth investors and families and we have a small, but growing pool of investors from Hong Kong, Singapore, Britain, America, Israel and South Africa,’’ Mr Levin told The Australian Financial Review.

Mr Levin said the banks coming under pressure from APRA and the banking royal commission had helped expand non-bank lending to the development sector and ‘‘thrown it wide open’’.

‘‘The non-bank lending market in my view is large and growing. It’s very much a permanent space with a lot of scope for growth, which wasn’t my view a year ago when I thought the banks would come back.

‘‘There’s a lot of new players coming into the market, but they can’t compete with our relationship focus. We’re very much long-term relationship focused and the ideal outcome is that everyone does well,’’ he said.

Money raised through its Wingate Investment Partners Trust series of funds has helped fund projects by Canberra-based apartment developer Geocon, Melbourne land developers Intrapac and Resi Ventures, and Brisbane mezzanine financier Anthony Moreton Group and others.

Wingate’s development funding is part of a growing non-bank sector that includes Qualitas, MaxCap, Gersh Finance Fund and the Liberman family backed CVS Lane.

Wingate’s debt investors have been rewarded with annual returns of around 10.5 per cent to 11 per cent. Those who invested in the first Wingate Investment Partners Trust in 2012 and rolled over their investments have doubled their money in six years.

Mr Levin said while its funding was ‘‘materially higher’’ than the major banks it still made sense for developers because the interest payment expense was far from the largest cost in a development and they could still make ‘‘substantial profit’’.

‘‘We lend to the more sophisticated and private end of the developer market. We prefer lending to people than to institutions,’’ he said.

While he said Wingate did not have any ‘‘hard and fast rules’’ when it came to the projects it would lend against, it had stayed away from high-density development in the Melbourne CBD and had concerns about apartment over supply in Brisbane.

Mr Levin said Wingate had not suffered any losses on its debt investments, though a few projects had not gone quite to plan and ‘‘required more intensive management’’.

‘‘We’re a conservative bunch – we’re actuaries and accountants – so the first lens we look at things from is a risk perspective. If we’re not comfortable we won’t do it.

‘‘Counter party risk is paramount – we are very focused on who it is we are partnering with. The property fundamentals have to make sense and we need clarity of exit – we need to know how our money will come back,’’ Mr Levin said.