Commonwealth Bank and Rothschild Launch Higher Gearing 'Single Document' Commercial Property Loans

6 April 2004

The Commonwealth Bank has teamed up with international investment bank Rothschild to launch a new commercial property loan offering higher gearing levels through a single loan structure.

The new product, Real Estate Advantage, is aimed at commercial property investors and consortiums investing for income generation. It offers increased loan to value ratios (LVRs) from 65% traditionally offered to these clients by the Commonwealth Bank to 75%.

"We have been aware for some time that investors are seeking greater leverage to property markets returns through higher gearing. This loan product allows us to deliver a customised loan with higher gearing with the simplicity of one single loan document and financing structure," said Commonwealth Bank’s Executive General Manager, Global Finance Products, George Frazis.

The single loan structure effectively eliminates the need for subordinated and mezzanine debt and reduces the costs of loan establishment and legal fees.

"There is a strong interest in geared property at the moment. This new product fills a market niche for interest only loans over three to five years and is competitively priced," said Mr Frazis.

Rothschild's Head of Property Banking, Mr Stuart Nisbett, said the joint initiative with the Commonwealth Bank extended Rothschild's reach in the local market.

"Rothschild has over the past two years established a strong presence and reputation in the provision of development finance to all sectors of the Australian market. This joint venture gives Rothschild access to the commercial property investment market as well."

He added that Rothschild offered a similar product in the United Kingdom, a market where it has long been a provider of finance to commercial property investors.

"By partnering with a respected and specialist commercial property player like Rothschild we are able to offer our client base significant new advantages for gearing into commercial property without additional risk," said Mr Frazis.

Real Estate Advantage provides interest only loans from $3 million to $15 million for approved commercial office, industrial and retail properties.