STRUCTURE
Development Finance With No Presales: How It Works
A presale requirement is the single biggest reason an otherwise viable Australian development project never gets out of the ground. The bank wants 100% debt cover from off-the-plan contracts before it funds construction; the market won't pay off-the-plan prices until there is something to look at. No-presales development finance breaks that loop. Here is what it actually looks like.
Why banks ask for presales
From a bank's perspective, presales are a credit shock absorber. If qualifying off-the-plan contracts cover the senior debt at completion, the bank's exit is guaranteed regardless of the spot market on completion day.
The problem is that this shifts all of the marketing risk onto the developer at the worst possible moment - before construction has even started, when there is no built form to sell from, and when off-the-plan buyers expect a sharp discount for taking on completion risk.
How a no-presales facility is sized
Non-bank lenders that fund without presales rely on a stricter view of two other numbers: loan to cost and loan to gross realisation. A typical Blackfort no-presales facility sits at up to 80% of total development cost and up to 65% of gross realisation, in line with our development finance product.
Because there are no presale dollars covering the take-out, the lender requires more headroom between the loan balance at completion and a realistic market sales price. That headroom is the credit cushion.
What the lender wants to see instead
Strong site fundamentals (zoning certainty, planning approval in hand, comparable sales that support the realisation), a contracted builder on a fixed-price contract with a credible balance sheet, a current quantity surveyor's report, and a clear sales and marketing plan for the back half of construction.
Equity is also higher than a presold deal. Expect to contribute meaningful cash equity into the project alongside the site, rather than relying on the site as your full equity contribution.
Where the deal can still get away from you
Three things tend to break no-presales deals: a build cost blowout that pushes loan-to-cost above the lender's covenant, a sales market that softens during construction, and slow council approvals that drag the project past its facility maturity. A good lender will model all three before settlement and price the facility accordingly.
Practically, that means a slightly higher coupon than a bank, a longer-than-you'd-like initial term to absorb planning and approval delays, and built-in retest mechanics so a soft market doesn't trigger a default unnecessarily.
When no-presales finance is the right call
Townhouse and medium-density projects under $50m, where presales are commercially difficult or where the developer's marketing strategy is to sell built stock at a premium. Sites where holding for completion meaningfully lifts realisation. And deals where speed-to-construction beats marginal pricing on the senior facility.
If you are sitting on a deal that is being blocked by a presale gate at a bank, the fastest way to test whether a no-presales facility works is to enter the address on the homepage and run indicative terms. You will get a structured answer in minutes.
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