Residual stock loan on unsold apartments

The situation

This is an anonymised composite drawn from a recurring pattern, not a specific settled transaction. A developer completes a small apartment block on schedule, with most units pre-sold, but a handful of units remain unsold as the original construction facility approaches its maturity date. Market conditions have softened slightly since the project began, and buyers for the remaining units are proving slower to secure at the prices originally modelled.

Why it's hard

The construction lender's facility is due to be repaid in full, and the developer does not want to accept a rapid, discounted bulk sale simply to meet that deadline, since doing so would erode a meaningful share of the project's remaining margin. At the same time, the completed stock is a different asset class to the site the original facility was secured against, and not every construction lender is set up to simply extend into a residual stock facility on the same terms.

How it can be structured

A dedicated residual stock facility refinances the construction loan against the individual completed units, secured by first mortgages over the remaining stock, sized against each unit's value rather than the original project feasibility, giving the developer time to sell at closer to full market value; the exit here is the staged sale of each unit as buyers are secured. Where only one or two units remain and the amount involved is modest, a shorter bridging facility against the specific units can achieve a similar outcome with less structuring. In some cases the original construction lender will extend or restructure the facility itself into a residual stock arrangement, avoiding a full refinance, though this depends on that lender's own appetite for holding the position longer.

Lenders assessing residual stock will typically request updated, unit-by-unit valuations rather than relying on the original project feasibility, since individual unit values can move independently of the overall project's headline numbers depending on floor level, aspect, and buyer preferences that only become apparent once a development is complete and on the market. Where some units have received genuine offers below the developer's asking price, presenting this pricing feedback honestly, alongside a realistic revised sales strategy, tends to produce a more workable facility than holding firm to an asking price the market has already signalled it will not support. Some residual stock facilities are structured with a declining facility limit as each unit sells, releasing a portion of the proceeds to the developer while the balance pays down the facility, giving the developer some liquidity through the sell-down period rather than waiting until every unit is sold. Holding costs, including strata levies, council rates, utilities and insurance, on unsold stock can accumulate meaningfully over an extended sell-down period and should be built into the facility's sizing from the outset rather than funded separately.

What it typically costs

Residual stock finance is priced against the risk of the remaining sales taking longer than planned and the individual unit values involved, quoted on enquiry once a lender has reviewed the stock and the sales strategy. Costs typically include an establishment fee and ongoing interest, with pricing reflecting a genuine, but time-limited, extension of risk rather than a fresh construction facility.

Timeline

1. Same day — scoping call to confirm the number and value of remaining units and the original facility's maturity date.
2. 2–5 business days — valuations on remaining stock and lender matching.
3. 5–10 business days — credit approval and offer.
4. 3–5 business days — settlement and discharge of the original construction facility.

Questions we'd ask you

1. How many units remain unsold, and what is their combined estimated value?
2. When does the existing construction facility mature, and has the lender been notified of the position?
3. What is the current sales and marketing strategy for the remaining stock?
4. Are there any existing offers or genuine buyer interest on the remaining units?
5. What holding costs — rates, strata, insurance — need to be funded through the extended period?

Related

Construction finance · Commercial property loans · Property developers