Estate Living Magazine Retirement Living - Issue 40 April 2019 | Page 48

d e v e l O p m e n t
&
I N V E S T M E N T
LOMBARD’S
PROPERTY
DEVELOPMENT
GUARANTEES
Lombard Insurance has close on 30 years’ experience in delivering guarantees across multiple industries. Our
difference is in understanding the nuances of different markets, the client- and beneficiary-specific requirements,
the related situational risk, and – with this insight – structuring a guarantee to best suit your need.
By looking at where there is a unique need, we’ve identified
where we can make a difference through our product offering
and way of doing business.
One of Lombard’s latest ventures is into the world of property
with our new Property Development Guarantee.
A challenge often faced by residential developers is the inability
to secure the required number of approved sales to release
project financing.
‘In many instances buyers, despite being asset-rich with capital
tied up in long-term investments, are unable to get traditional
bond approval,’ says Alan Beesley of Gap Capital. ‘For financiers,
this often counts as a “no sale”, which reduces the developer’s
chance of receiving the cash required to start building a new
development.’
Lombard’s Property Development Guarantee aims to provide
guarantees to qualifying buyers by assessing their assets rather
than their income, thereby solving the problem of ‘inaccessible’
capital for both buyers and developers.
‘The approval of a traditional bank guarantee (which, in this
instance, would translate into the buyer’s being granted a bond)
relies on the buyer’s income,’ says Lombard’s Sarah Wright. ‘In
many cases, the buyer doesn’t have an income that would qualify
them for a bond for the full purchase price of the property. Rather,
these buyers are relying on the sale of their existing home, or
liquidation of some other asset such as shares, to fund the purchase
of their new home.’
In the case of an off-plan purchase, the time between signing
the purchase agreement and actual transfer can be as long as
two years; but the developer needs the confirmed sales upfront
before building can commence, so the developer is often left in an
untenable situation – plenty of qualifying buyers, but not enough
qualifying sales.
Using our guarantee product to secure the balance of payment after
the required deposit is paid means a buyer doesn’t have to sell off
any assets until the transfer of their new home – and the developer
gets to count the transaction under guarantee as a qualifying sale to
help meet the financier’s quota.
Shoreline Sibaya
Wright says a lot can happen in two years: