Skip to content
// DRILLS / ISSUE 08 / BASALT RIDGE
IN HIGHBANK ISSUE 08 · SEASON 1 · FILE 8 · 6 MIN READTHE SENIOR READ — MICHAEL

Basalt Ridge Developments

THE COURTSHIP

PROPERTY · NEW-TO-BANK · DIFFICULTY 3/5

// THE ASK
FacilityUS$8.5m senior debt
Project24 townhouses, Christchurch
Loan to cost55% of total cost
Presales40% (policy asks 60%)
Decision by“Two other banks circling”

You have ten minutes. What do you do?

Read the file
// ONE FILE, THREE CHAIRS

// THE SETUP

Basalt Ridge Developments builds mid-scale townhouse projects in Christchurch — six completed projects over eight years, all with a second-tier lender whose pricing the founder-developer now describes as "a tax on not being known." His deck is polished: claimed average ROE of 28% across the six projects, photographs, testimonials from buyers. He wants US$8.5m of senior debt for a 24-townhouse project on land already settled — 55% of total development cost, with presales at 40% against your bank's standing 60% policy line.

The timing has a second layer. Your bank's property team carries a growth target this quarter, and new-to-bank development relationships are on the list. The relationship manager wants this one: "established developer, real track record, we finally get a look." The developer, for his part, mentions twice that two other banks have the deck.

The suburb's median price is down 4% over six months. The build contingency in his feasibility is 3.5%. The settlement statements behind the claimed 28% ROE are not in the deck.

You have the feasibility. You have ten minutes. What do you do?

// PROJECT SNAPSHOT
SOURCE: DEVELOPER FEASIBILITY · UNVERIFIED · 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

Read it against the bank's own development policy, in the file: presales covering at least 60% of peak debt before the first drawdown, and a contingency sized by the bank's surveyor rather than the developer. Loan to cost is senior debt as a share of total development cost; a QS is the independent quantity surveyor who certifies what the build has left to cost.

// THE FILE

THE FEASIBILITY · US$ · 24 UNITS

The developer's feasibility, as submitted, with the bank's arithmetic beside it. A composite project; it belongs to no real site.

DEVELOPMENT BUDGET

The development budget by line, and its total.
Land (settled)US$3.60m
ConstructionUS$9.60m
ContingencyUS$0.34m
Design, consents and feesUS$1.10m
Finance costs and feesUS$0.82m
Total development costUS$15.46m

FUNDING

How the development cost is funded.
Senior debt (requested)US$8.50m
Developer's equity, land includedUS$6.96m
TotalUS$15.46m

SALES

Presales, the unsold units at the assumed price, and the gross development value.
Presold — 4 of 24US$3.40m
Unsold — 20 at US$0.76m assumedUS$15.20m
Gross development valueUS$18.60m

RATIOS FROM THE FEASIBILITY

The ratios a development lender reads, computed from the tables above.
Senior debt ÷ total cost55.0%
Senior debt ÷ gross development value45.7%
Presales ÷ senior debt40.0%
Contingency ÷ build cost3.5%
Margin on cost20.3%

THE TRACK RECORD, AS THE DECK STATES IT

The developer's six completed projects, the claimed return on each, and the evidence provided.
PROJECTDONECLAIMED ROEEVIDENCE
Project 1 — 6 townhouses201824%Deck only
Project 2 — 8 townhouses201931%Deck only
Project 3 — 10 townhouses202135%Deck only
Project 4 — 12 townhouses202229%Deck only
Project 5 — 9 townhouses202422%Deck only
Project 6 — 14 townhouses202527%Deck only

THE FACILITY AND THE MARKET

Senior construction loanNew to the bank. The six earlier projects were funded by a second-tier lender. Two other banks have the deck.
—
US$8.5m
PresalesDeposits paid at signing, the balance at settlement.
4 of 24 townhouses · US$3.4m
Policy line: 60% of the debt
The marketMeasured on the suburb's settled sales.
Suburb median −4% in six months
—
THE REST OF THE FILE · SECURITY · CONDITIONS · BUDGET

As the file stood when the request arrived, in September 2026: the developer's feasibility and deck, four signed presale contracts, the builder's tender, the site's settlement statement and a title search. What a bank has on file beyond the feasibility — enough to write a full credit paper on. A composite borrower: none of it belongs to a real company.

OWNERSHIP, PEOPLE, THE SITE

  • 100% The developer — Formed the company in 2017; its only director
Founder-developer and managing director.
He came to development from residential building and has run all six projects. He handles the sales agent, the builder and the lenders himself.
Project manager.
Employed since 2021; ran the sites of Projects 4 to 6. The company's only other full-time employee.
Sales agent.
A residential agency, paid on commission. It signed the four presales.
External accountant.
A chartered accounting practice prepares the company's annual accounts and tax returns.

The company works from a leased office and, as the application states, owns no property but the site. The site, in Christchurch, cost US$3.60m and settled in March 2026; it is registered to Basalt Ridge Developments Ltd. Resource consent for 24 townhouses and building consent are both granted. Nothing has been built.

FACILITIES AND PRICING

Senior construction loan — requested
US$8.50m at its peak; 55.0% of total costNot yet offered. The feasibility assumes 9.0% interest, capitalised, and a 1.0% establishment fee20 months: the 16-month build, then titles and settlements. Drawn monthly once the equity is in; repaid from settlements
Lending from this bank
None — new to the bank
Lending elsewhere
None outstanding, as the application statesProject 6's facility with the second-tier lender was repaid from its settlements in 2025. The site was bought without borrowing

SECURITY

First mortgage over the site
Offered in the application. The title search shows the site registered to the company, with no mortgage on it.
General security agreement
Over all present and after-acquired property of Basalt Ridge Developments Ltd; offered in the application. No other security interest is registered against the company.
Guarantees
None offered.

CONDITIONS AND REPORTING

  • No term sheet has been issued. The file is the request as it arrived.
  • The bank's standard development documentation asks, before every drawdown, for the quantity surveyor's progress certificate and cost-to-complete statement, and for a sales schedule: contracts signed and cancelled, and deposits held.
  • Once a year: the borrower's financial statements, within 120 days of its year-end.
  • No record against any of it: the developer has never borrowed from this bank.

THE FOUR PRESALE CONTRACTS

Unit 1 — end, three bedroomsSigned April 2026.
PRICEUS$0.88m
DEPOSITUS$88k · 10%
BUYER'S FINANCENo condition
Unit 6 — end, three bedroomsSigned May 2026; the finance condition was satisfied in June. The buyer's approval letter is not in the file.
PRICEUS$0.86m
DEPOSITUS$86k · 10%
BUYER'S FINANCECondition met
Unit 13 — end, three bedroomsSigned July 2026, with a 5% deposit agreed at signing; the finance condition was satisfied in August. The approval letter is not in the file.
PRICEUS$0.84m
DEPOSITUS$42k · 5%
BUYER'S FINANCECondition met
Unit 24 — end, three bedroomsSigned August 2026.
PRICEUS$0.82m
DEPOSITUS$82k · 10%
BUYER'S FINANCENo condition
Four contracts, all unconditionalPresold value against the debt requested: 40%.
PRICEUS$3.40m
DEPOSITUS$298k
BUYER'S FINANCE—

All four are on the developer's standard contract. Each deposit is held in the developer's solicitor's trust account until settlement. Either party may cancel, with the deposit refunded in full, if title has not issued by 30 September 2028.

VALUE: THE DEVELOPER'S PRICE LIST, AND NO VALUATION

End units, three bedrooms8 in the scheme; the other 4 are presold
UNSOLD4
LIST PRICEUS$0.86m
TOTALUS$3.44m
Three-bedroom units
UNSOLD12
LIST PRICEUS$0.77m
TOTALUS$9.24m
Two-bedroom units
UNSOLD4
LIST PRICEUS$0.63m
TOTALUS$2.52m
Unsold, as the feasibility prices them
UNSOLD20
LIST PRICEUS$0.76m average
TOTALUS$15.20m

The price list is the developer's. The file holds no independent valuation, of the townhouses or of the land, which cost US$3.60m in March 2026; no valuer has been instructed. Its market evidence is the suburb's median, down 4% in six months on settled sales.

THE BUILDING CONTRACT

BuilderA third-party head contractor, not related to the developer. It built Projects 4 to 6, as the deck states.
AS TENDEREDHead contractor
StatusThe developer intends to sign once finance is in place.
AS TENDEREDTendered, not signed
PriceA lump sum for the whole build: the budget's construction line.
AS TENDEREDUS$9.60m
Fixed or notThe tender carries a cost-escalation clause: rises in materials and labour after signing pass to the developer.
AS TENDEREDNot fixed
RetentionsHalf released at practical completion, half at the end of a twelve-month defects period.
AS TENDERED5% of each claim
ProgrammeSite start to practical completion. Titles and settlements follow; the loan term asked for is 20 months.
AS TENDERED16 months

THE FUNDING, IN THE ORDER IT GOES IN

Land equityThe site, paid for in cash.
AMOUNTUS$3.60m
OF COST23.3%
WHENIn
Cash equityUS$0.64m already spent on design, engineering and the two consents; US$2.72m still to go in. Its source, as the application states it: the company's retained proceeds from Project 6. No bank statement is in the file.
AMOUNTUS$3.36m
OF COST21.7%
WHENBefore any debt
Senior debtDrawn monthly after the equity, with interest capitalised.
AMOUNTUS$8.50m
OF COST55.0%
WHENRequested
Total development cost
AMOUNTUS$15.46m
OF COST100.0%
WHEN—

THE TRACK RECORD: WHAT THE DECK SUPPLIES

Project 1 — 6 townhouses
DONE2018
CLAIMED ROE24%
IN THE DECKPhotographs
Project 2 — 8 townhouses
DONE2019
CLAIMED ROE31%
IN THE DECKPhotographs
Project 3 — 10 townhouses
DONE2021
CLAIMED ROE35%
IN THE DECKPhotographs · buyer testimonials
Project 4 — 12 townhouses
DONE2022
CLAIMED ROE29%
IN THE DECKPhotographs · buyer testimonials
Project 5 — 9 townhouses
DONE2024
CLAIMED ROE22%
IN THE DECKPhotographs · buyer testimonials
Project 6 — 14 townhouses
DONE2025
CLAIMED ROE27%
IN THE DECKPhotographs · buyer testimonials
6 projects · 59 townhouses
DONE2018–2025
CLAIMED ROE28% average
IN THE DECKDeck only

All six were funded by the second-tier lender. For none of them does the file hold a settlement statement, a final cost report, accounts covering the project, or the lender's facility letter.

THE BANK'S STANDING TERMS FOR DEVELOPMENT LENDING

PresalesPresold value — signed contracts, deposits paid — measured against the facility's peak debt, and met before the first drawdown.
STANDING TERMAt least 60% of peak debt
EquityThe developer's whole contribution is spent on the project before the bank lends.
STANDING TERMIn first
Quantity surveyorReviews the budget and the building contract before approval, then inspects the site and certifies each progress claim before it is paid. The developer bears its fees.
STANDING TERMAppointed by the bank
Cost to completeThe undrawn loan plus any unspent equity must cover the surveyor's cost to complete. A shortfall is paid in by the developer before the drawdown.
STANDING TERMTested at every drawdown
ContingencySized for the build by the surveyor, and released only against certified claims.
STANDING TERMAs the surveyor assesses
ValuationAddressed to the bank: the land as it is, and the project as if complete.
STANDING TERMIndependent, before approval
Building contractWith a builder the surveyor accepts, and a side deed that lets the bank step in if the developer defaults.
STANDING TERMSigned before the first drawdown
Deposits and settlementsDeposits stay in a solicitor's trust account until settlement; the net proceeds of every settlement go to the loan until it is repaid.
STANDING TERMHeld, then applied
GuaranteesFrom the shareholders of the borrowing company, with a statement of their assets and liabilities.
STANDING TERMOrdinarily taken

The development section of the bank's credit policy, as it stood in September 2026. Every development facility starts from these terms; none has yet been put to this developer, because no term sheet has been issued.

THE COST PLAN: SPENT, AND STILL TO SPEND

Land (settled)
SPENTUS$3.60m
STILL TO SPENDNil — settled in March 2026
Construction
SPENTNil
STILL TO SPENDUS$9.60m — the builder's tender, not signed
Contingency
SPENTNil
STILL TO SPENDUS$0.34m — 3.5% of construction
Design, consents and fees
SPENTUS$0.64m
STILL TO SPENDUS$0.46m — legal, project management, the surveyor's and valuer's fees, and sales commissions at settlement
Finance costs and fees
SPENTNil
STILL TO SPENDUS$0.82m — interest at an assumed 9.0% on an average US$4.9m drawn across 20 months, and a US$85k establishment fee
Total development cost
SPENTUS$4.24m
STILL TO SPENDUS$11.22m — the developer's US$2.72m first, then the US$8.50m of senior debt

WHAT IS STILL NOT IN THE FILE

A real file would also hold these. A paper that says which of them it needs before approving, and why, is reading the file properly.

  • The settlement statements and final cost reports for the six earlier projects, and the company's financial statements for the years they cover.
  • An independent valuation addressed to the bank: the land as it is, and the townhouses as if complete.
  • A quantity surveyor's review of the budget and the builder's tender.
  • The developer's own statement of assets and liabilities: where the rest of the cash equity comes from, and what else he has guaranteed.
  • The builder's accounts and current workload.
  • The second-tier lender's facility letters for the six projects, and a reference on how they ran.

DOWNLOAD THE FILE · XLSX

With the rest of the file above, this one is complete enough for a full credit paper. Write one, and the first three sent in are read free, the way the senior reads here are written — how the pilot works.

// YOUR JUDGMENT

What do you do with this opportunity?