How Zenith Secured Financing for a Complex Unit Trust Property Purchase

The Client’s Situation

A group of four investors approached Zenith seeking assistance in obtaining financing for a commercial property they planned to purchase through a unit trust structure.

The group consisted of two married couples: Alex and Sarah, both doctors, and Michael and Lisa, who owned a successful retail business. They had formed a unit trust with equal shareholdings to invest in a $2.5 million office building but were struggling to find a lender who would accommodate their complex ownership structure.

The Challenge

The investors faced several hurdles in their quest to secure financing:

• Many lenders are hesitant to provide loans for unit trust structures due to their complexity
• Each unitholder’s financial situation needed to be assessed individually
• The commercial nature of the property further limited the pool of potential lenders
• The investors required a significant loan amount, which added another layer of complexity

Our Approach

At Zenith, we specialise in navigating complex lending scenarios. We began by:

1. Comprehensive Assessment: We conducted a thorough review of the unit trust structure, including:
   • Analysing the trust deed
   • Mapping out all unitholders and their respective shareholdings
   • Reviewing and assessing each unitholder’s financial situation
2. Lender Research: We identified lenders experienced in unit trust lending by:
   • Leveraging our extensive network of lenders
   • Focusing on those with a track record of financing complex trust structures
3. Financial Analysis: We prepared detailed financial assessments for each unitholder, including:
   • Income verification for the self-employed couple
   • Serviceability calculations for all parties

The Process

Our process involved several key steps:

1. Trust Structure Mapping: We created a clear diagram of the unit trust structure, showing all unitholders and their relationships. This visual aid helped lenders quickly understand the ownership arrangement.
2. Individual Assessments: We conducted thorough financial assessments for each unitholder:
   • For Alex and Sarah, we gathered their employment contracts, pay slips, and tax returns
   • For Michael and Lisa, we collected business financial statements, tax returns, and conducted a detailed analysis of their business performance
3. Lender Presentations: We prepared comprehensive loan application packages for each potential lender, including:
   • The unit trust structure diagram
   • Individual financial assessments for all unitholders
   • Detailed information about the commercial property being purchased
4. Negotiation and Clarification: We actively engaged with lenders to:
   • Address any questions or concerns about the unit trust structure
   • Negotiate competitive interest rates and terms
   • Provide additional information or clarification as needed

Overcoming Obstacles

During the process, we encountered and overcame several challenges:

1. Limited Lender Options: Many lenders declined to consider the application due to the unit trust structure. We persevered, leveraging our relationships with specialist lenders who have experience in this area.
2. Complex Serviceability Assessment: The lenders required serviceability to be assessed for each unitholder individually and collectively. We worked closely with our clients to gather all necessary documentation and present it in a clear, understandable format.
3. Higher Interest Rates: Initially, the interest rates offered were higher than standard due to the perceived risk of the unit trust structure. We negotiated with lenders, highlighting the strong financial positions of all unitholders to secure more competitive rates.

The Outcome

After an intensive process, we successfully:

• Secured financing for the $2.5 million commercial property purchase
• Obtained approval from a lender experienced in unit trust structures
• Negotiated an interest rate on par with standard commercial rates, despite the complex structure
• Ensured all unitholders were comfortable with their obligations under the loan

The investors were able to proceed with their commercial property purchase, with each unitholder clear on their responsibilities and the loan structure aligned with their unit trust arrangement.

Conclusion

This case study highlights the importance of working with a broker who understands complex trust structures and has strong relationships with specialist lenders.

At Zenith, we pride ourselves on our ability to navigate challenging financing scenarios and secure favourable outcomes for our clients. If you’re considering a property purchase through a unit trust or other complex structure, contact us to explore your financing options.