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MFAA Prosper : Mortgage and Finance Brief 06
indeed in the recovery ward. The Sydney market absorbed a net 110,000 square metres in the three months to 30 September, the highest amount since before Lehmann Brothers collapsed. The office sectors in Sydney, Melbourne and Adelaide are expected to lead the property market recovery. Melbourne’s iconic retail experience is delivering for commercial i nvestors in 2010 and economic consultancy Access Economics expects that to continue, with retail sales in Victoria set to grow faster than the national averages in 2011 and 2012. Vacancies in the important CBD market fell to 2% and to historically low levels of 0.7% in June in Melbourne’s arcades and laneways. A hangover of office space will be the major issue for Brisbane; the current level of construction activity in the CBD and near City Market is the second highest in Australia’s history. Eng ineering and infrastructure development worth more than $60bn was underpinning the Brisbane market, says CBRE. Good opportunities for brokers Seventy per cent of the commercial property market is financed sales, says Macalyk, who is also part of the MFA A’s Equipment and Commercial Finance Committee. That is a huge market for brokers to be missing out on if it is ignored. “People in the industry don’t realise that commercial lenders are back in the market again,” he says. “I am doing deals with second-tier lenders priced at 2.75% over 90-day bills, including a 25 basis point commission for us. At today’s bill rates that works out to 7.75% for the borrower.” And that goodprice is not a one-off. “I have just sent off a holding deposit for a $2.5m deal with a lender that doesn’t pay broker commissions for 2.25% over 30-day bills,” says Macalyk who gets a mandated fee from his happy client. “CBA didn’t want that one, but the smaller lenders are looking at things commercially and the deals can be done.” Bronko Kozel, one of four very experienced partners at Quadrant Financial Solutions in Wollongong, agrees that commercial lending is coming back. “The commercial market is seeing a lot of activity right now from cashed-up buyers looking to take advantage of some good deals, particularly distressed assets,” says Bronko. “Private lenders are taking up some of the slack when the banks say no. Banks and other lenders have always looked at the business that is being bought. Now they want more, and much more up-to-date, information.Before they would settle for last year’s accounts, now they want to see this year’s.” Like Kozel, Greg Parkins, a specialist in commercial and business finance with BCP Group Services in Campbelltown, NSW, is ticking all the boxes for the banks – and then having to go elsewhere for finance. “We can tick all their boxes and the major lenders are still not approving deals,” he says. “They are finding risk in good commercial deals.” Parkins says bank sales departments want to lend, but deals are getting held back by credit departments. “A fter a couple of years when commercial lending sales departments really had no targets and managers just cleaned up their loan books, the sales people are back and looking for good deals. “We are getting things through, but only after a lot of pain and time.” Banks still ticking boxes Westpac led the big banks in contracting business lending overall last financial year. Bank credit departments are clearly being used to ration precious wholesale bank funding for the cherry-picked best business deals and the easy money of the residential mortgage market. Meanwhile, customers don’t feel supported by any of the big banks. Eighty per cent of business bank customers in the mid-sized seg ment told banking research and advising firm East & Partners recently that their bank had shown little or no loyalty to them. But banks are certainly looking like they are making an effort. NAB opened seven new business banking centres during the year and added 293 new business bankers, while Commonwealth, A NZ and Westpac have also invested heavily in promoting and selling their business banks this year. The business banking profits are rolling in again for the big four, on the back of higher margins and lower provisions for bad loans. NA B has increased the profit margin it reaps from commercial lending by 16 basis points in the 12 months to “After a couple of years when commercial lending sales departments really had no targets, the sales people are back and looking for good deals.” Bronko Kozel: ‘The commercial market is seeing a lot of activity’ 36 | Mor tgage & Finance brief Commercial
Mortgage and Finance Brief 05
Mortgage and Finance Brief 07