Basalt Ridge Developments Ltd, the developer's chair: What do you do with the bank's answer?

// DRILLS / ISSUE 08 / BASALT RIDGE · DEVELOPER

ISSUE 08 · 2026-09-14 · 5 MIN READ

The Other Two Banks

BASALT RIDGE, FROM THE DEVELOPER'S CHAIR

PROPERTY · THE DEVELOPER'S CHAIR · DIFFICULTY 3/5

// YOUR DESK

Your askUS$8.5m, 55% of cost

The bank's answerSmaller first, or less leverage

Presales40% · its line is 60%

Your deck28% ROE, no statements

Two other banksHave the deck, no reply

What do you do with the bank's answer?

Read the file

// ONE FILE, THREE CHAIRS

// THE LENDING CHAIR · ISSUE 08

Basalt Ridge Developments

Read from this chair →

// THE DEVELOPER'S CHAIR

The Other Two Banks

You are here

// A BUYER'S CHAIR

Off the Plan

Read from this chair →

// THE SETUP

You are the developer behind Basalt Ridge. Six projects in eight years, every one of them finished, every one funded by a second-tier lender whose pricing you have taken to calling a tax on not being known. The land for the next one, 24 townhouses in Christchurch, is already settled. Your feasibility asks for US$8.5m of senior debt, 55% of total cost, with presales at 40%, a 3.5% build contingency, and a deck showing an average 28% ROE across the six.

You took that deck to a bank you have never borrowed from, because it was chasing a growth target in property and its relationship manager wanted a look. Two other banks have the same deck. You mentioned that, twice.

The relationship manager rang this morning with the bank's answer, and it was not a decline. The bank wants to be your bank for the next six projects, and it will price the first one so that both sides get there: a smaller project first, or this one at materially lower leverage, with more of your own money in it. The answer also named three things, without comment. The settlement statements behind the 28% were not in the deck. The suburb's median price is down 4% over six months. Presales are at 40% against its 60% line.

The other two banks have not replied. The site is settled, and earning nothing.

One bank that wants your next six projects, and not this one as asked. Two that have not said anything. What do you do with the bank's answer?

// FY25 SNAPSHOT

SOURCE: YOUR FEASIBILITY · THE BANK'S ANSWER · COMPOSITE CASE — FICTIONAL

LOAN TO COST

55%

senior debt / total cost

PRESALES

40%

▼ vs 60% policy

CLAIMED TRACK ROE

28%

▲ in the deck, unverified

SUBURB PRICES

−4%

▼ median, six months

CONTINGENCY

3.5%

▼ of build cost

Lenders to mid-scale residential projects typically look for presales covering 60% or more of the debt, a build contingency of 5–10%, and settlement history they can verify for a developer new to them. Loan to cost is the senior debt as a share of total development cost.

// YOUR JUDGMENT

What do you do with the bank's answer?

[A]Take the full ask to the two banks that already have the deck — six finished projects are a track record, and one of them will say yes[B]Send the settlement statements behind the 28%, put more of your own equity into this project, and let the first deal build the history[C]Counter with structure: offer personal guarantees, a bigger contingency and a presales condition, in exchange for the full US$8.5m at 55% of cost[D]Stay with the lender you know and keep paying the tax on not being known — a bank that wants proof now will want it every time

This drill needs JavaScript: the options above cannot be selected without it, and the senior banker's reading stays hidden. Turn JavaScript on and reload the page to take the drill.

// THE READING

Start with what the answer priced. The bank did not call the project bad, and it did not say no. It said it does not know you yet, and it sized a first deal so that both sides can afford to be wrong about each other. From your chair that reads like a haircut on six projects of work. From the bank's chair it is the only offer a stranger can make that does not depend on believing a deck. Six finished projects prove you can build. They do not prove the 28%, because the statements that would prove it are not in the file, and a lender that funds 55% of cost against a claim it cannot check is lending against the presentation.

Why not A. One of the other banks may well say yes, and a yes that never asked for the settlement statements has not read the file either. It is the same 55% of cost, the same 40% presales and the same 3.5% contingency, in the same suburb, with a lender that has no history with you to draw on the first time the plan and the build disagree. A quicker yes buys you the same project with less understanding behind it.

Why not C or D. C is the answer the bank already weighed and set aside: guarantees, a bigger contingency and a presales condition are promises about behaviour it has never seen. They tighten the paper without adding a fact, and the bank's answer was about the missing fact. Offering more of them shows you heard the words of the answer and missed its point. D keeps paying the tax on not being known in order not to be examined, and that tax does not fall with time. It falls when a new lender has watched you perform.

Which is why the senior banker's advice, in the developer's chair, is B. Send the settlement statements behind the 28% before anyone asks again: if the number is real, it is the cheapest proof you own, and a developer who sends it unasked has already changed the file. Then take the lower-leverage shape on this project, with more of your own money carrying the optimism in the presales and the contingency, and the bank funding what the verified numbers support. Your equity costs you more than the bank's debt, and that is the point: it is the one signal a stranger cannot fake. A first deal is where a lender learns what you do when a plan and a build part company. Make it a deal where that lesson is cheap for both of you.

The bank priced not knowing you. Send the proof, carry the optimism with your own money, and let the history start cheap.

// THE SAME FILE, FROM THE OTHER CHAIRS

Three people read this file in the same week. The lender's reading is the one the other two are reacting to.

// THE LENDING CHAIR · ISSUE 08

Basalt Ridge Developments

A new-to-bank developer, a claimed 28% ROE and two other banks circling. Your bank has a growth target.

Read from this chair →

// A BUYER'S CHAIR

Off the Plan

You signed off the plan and paid the deposit. The build waits for presales, and your contract is one of them.

Read from this chair →

// HOW READERS ANSWER

The senior banker's read is [B].

[A] · 41%

[B] · 24%

[C] · 22%

[D] · 13%

The tempting answer is A. The senior banker chose B. The reading explains what the bank was pricing when it offered a smaller first deal, and why a quicker yes from a lender that asked fewer questions is not the safer one.

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