Client or Situation Overview
A residential strata scheme in metropolitan Sydney, comprising 99 lots, required funding to undertake extensive balcony defect and remediation works.
The building, completed in 2015, was experiencing water ingress and associated façade deterioration, requiring a coordinated remediation program across multiple elements, including balconies, windows, and external finishes.
Challenge / Problem
The Owners Corporation faced a complex and sensitive funding scenario:
- Widespread balcony and water ingress defects, requiring intrusive investigation and comprehensive remediation
- Multiple work components, including waterproofing, façade repairs, window replacement, and flashing upgrades
- Elevated levies arrears (~10%+ over 90 days), requiring careful assessment
- No existing available funding
- Persistent disagreement amongst the owners about how best to fund the project
Solution / Approach
Firstrata structured a $2.3 million Hybrid Strata Loan that:
- Funded the full scope of balcony and remedial works, including contingency and additional works
- Supported a progressive drawdown structure, aligned to staged construction over ~24 weeks
- Incorporated arrears-adjusted loan repayment serviceability
- Enabled flexibility for individual owners to:
- Pay upfront and avoid strata loan interest, or
- Participate in the loan and repay via ongoing loan levies
This approach ensured the Owners Corporation could proceed with necessary remediation works despite elevated arrears and funding pressures.
Funding Structure
Results / Outcomes
- $2.3M fully funded, enabling balcony and façade remediation works to be undertaken
- Complex defect scope addressed, improving building integrity and compliance.
- Project delivered via structured drawdowns, aligned with contractor progress
- Serviceability maintained despite arrears, through adjusted assessment methodology
- Owners given flexibility, supporting engagement across the scheme, with almost half of the funding provided by self-funding owners and half by Firstrata Finance
Client Testimonial
“Firstrata Finance’s presentation of their Hybrid Loan Facility was excellent, their team attended the owners’ meeting well prepared, confidently addressing all questions and delivering the proposal in a professional and diligent manner. The process ran smoothly, with almost 50% of owners electing to become an SFO, which was a strong outcome for the scheme. It is great to have a professional and diligent team working for the Owners Corporation.”
Key Takeaways / Lessons
- Complex remediation projects can still proceed when there are elevated arrears, with appropriate structuring
- Hybrid loans can break the deadlock amongst owners regarding project funding, even in financially stressed environments
- Flexible funding enables Owners Corporations to address defects early, avoiding further deterioration