#64 | Constructive Finance with Dan Holden of Holden Capital

In this transcript of episode #64 of the Creating Australia Podcast, Dan Holden of Holden Capital brings us into his world of financing developments throughout Australia.

 

We discuss:

  • How  Holden Capital started and developed into the force it is today.
  • Dan’s industry insights for property developers and the current state of the market.
  • His book, Constructive Finance; and
  • What it is like to be an ‘overnight success’.

 

 

Dan Holden:

Prior to two years ago, everything was get, pre-sales get bank funding. And that was like copy and paste development is you spend lots of money and then eventually one day you get it back and it’s like the, the cash burn and the lag on the money you spend is quite long.

 

Jessica Reynolds:

Hi there. Welcome to the creating Australia podcast. My name is Jessica Reynolds and I’m a private town planner and business owner based in Brisbane, Queensland. I’m passionate about engaging with the amazing people that make the property and development industry, what it is today in creating industry, exploring local stories, projects, businesses, people, ideas, and more

 

Jessica Reynolds:

Welcome to today’s episode of creating Australia. I have with me Dan Holden of Holden capital. Thank you for joining

 

Dan Holden:

Me. Thanks so much,

 

Jessica Reynolds:

Dan, can you please tell us a little bit about what you do day-to-day at Holden capital,

 

Dan Holden:

For sure. So essentially we finance property developers, so we source provide lend and broker construction loans. So that’s all across Australia. We’ve got offices in Brisbane, Sydney and Melbourne on based here in Brisbane. I started the company 10 years ago. So literally December, 2011, started the company on my own in my spare bedroom, working after working in, did a five-year stint for one of the big national firms doing the same kind of thing. So arranging construction lines for property developers, and then five years before that I did develop management. So acquisition fund funding projects and delivering projects. So about 20 years in the industry in total and yeah, still loving it still enjoying it

 

Jessica Reynolds:

20 years is a fair time. So you’re almost getting to that veteran status. How did you fall into that though? Cause you obviously, you know, you’ve gone through this very logical process to get to this point, but you know, did you come out of school going, this is what I’m doing

 

Dan Holden:

From, from doing projects and, and even in the acquisition phase, you were always focused on the finance, how are you going to get it funded? How are you going to make the project, I guess, stack up and be a good return on the equity and how much equity is the right amount of equity and how do we get the projects out of the ground? Not so much that speed is always important, but how do you get it out of the ground quickly so that you’re not turning it to your project nor for your project. And a lot of the projects that I was doing were about probably 40 to 60 apartments per project, we did one large one that was a multi-year project. But what I found was that the, you could very quickly turn a 12 month build into a three year long life commitment, really, I guess.

 

Dan Holden:

So trying to get them out of the ground, you know, probably developers or property traders ultimately. And so, you know, from the time of acquisition through to the time of disposal, if you can expedite that process, that’s, that’s the goal unless you’ve got a long-term whole kind of philosophy on property, you should be turning them over as, as quickly as possible within a, you know, as good a timeframe as you can. And a lot of that comes down to how you fund them. So I just found finance was a major part of every project that I was taking on and acquiring and delivering finance was the critical part. So hence I kind of, I guess, migrated across into finance 15 years ago. And now I see it, you know, every, every day on projects that we’re funding or, or quoting on or trying to help out with is that funding makes, makes or breaks the project.

 

Dan Holden:

So that’s why it’s exciting. I guess also from being a DM and living and breathing a project for three years you know not a simple project, but what is, you know, a fairly simple project, like I said, of 12 months, bill becomes a three-year project from acquisition through to build and disposal and getting all your profit. You are living and breathing those projects for, you know, two or three years, the same three or four projects that I had on my desk and was, was dealing. I was living them every single day for such a long period. And so now, like our, you know, gestation period is now probably I’d say 6, 8, 10 weeks tops. And then it’s onto the next one. So you’re working on so many different projects and helping them get through that, that period that I kind of work on the project for as opposed to living and breathing it from start to finish. So it’s a lot more I guess, you know, vibrant and um you know, you’re seeing a lot more, a lot more different things as opposed to just living and breathing three or four projects constantly. So yeah, it’s a bit more exciting.

 

Jessica Reynolds:

Yeah. I could imagine this very exciting. What I’m hearing is finances, you know, nothing’s happening without the money. We can all have the best ideas in the world. It could be the most, you know, value, valuable project to the community, to, you know, the wallet, but unless somebody’s going to pay for it, I’ll have that money up front, it nothing’s happening. And so you’ve seen that need where it is as you’re saying the most integral component to property development.

 

Dan Holden:

Yeah, I think so. I’ll probably buy us, but if you don’t have the money, so yeah, and I guess another element as well, that I’ve, I guess, learned from dealing with many different developers is development. And this is what I do cover in the book is that development is you spend lots of money and then eventually one day you get it back and it’s like the, the cash burn and the, the lag on the money you spend is quite long. You know, so even at 12 months build, like I said, is, is pretty much a two year project. And so you’ve got to go and spend 12 million bucks to hopefully get 15 back one day and like the, yeah, it just uses so much cash. And w you know, all of that 12 million spent probably two or three what’s your own.

 

Dan Holden:

And the rest comes from someone else, a lender like us, or a bank or whoever. But you’re, you know, you’re spending, spending, spending, spending, and then one day, hopefully you get it back. So it’s just, yeah, it’s a, it’s a big investment. And so having the right capital behind you makes those projects happen hopefully quicker, smoother. And, and particularly like you’re saying at the moment with the construction process, going through a bit of a topsy turvy kind of moment that we’re seeing in the last nine months, and hopefully comes down soon. Again, the capital comes into kind of saves the day and fix things. If you’ve got your capital, right, then you can keep building your project. If you’ve got your capital wrong, it’s a pretty painful time inability, you can’t do this, you can’t finish the project. And then you’ve got 12 million bucks spent, or maybe 10 of the 12 spent. You can’t find the last bit and you kind of get it done. So you don’t get your 15 back. So

 

Jessica Reynolds:

An absolute nightmare if that happens. And that’s some great industry insight. And I think, you know, you’ve mentioned the book, which we’ll get to, but what I really want to know is what makes Holden capital different. You’ve obviously got all this background knowledge experience, passion for what you do. So, and holding capital at 10 years. Now, you have, you come across as an overnight success, but we all know that is not reality. So what is behind this success today?

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Dan Holden:

I’d say it’s from my background as opposed to being a banker, not there’s anything wrong with that, but more from actually being you know, boots on the ground and and doing projects and delivering projects and needing to fund projects that I was doing probably, you know starting the business from a point of that project first kind of approach, as opposed to how much can we sell this money for it’s well, you know, what projects do we want to be involved in and how do we, you know, get a half a dozen or a dozen good clients that we can work with consistently as opposed to having to go and find new, new developers every day to lend money to and so that’s probably been a bit of a key for us in, in, I guess, our success. You know, I’ve got one client that first funded in 2007, and we’re still funding them today.

 

Dan Holden:

So that’s 14 years that we’ve been funding that client. And you know, we work well together because we’ve been working together for so long. And similarly since we’re now a lender in our own, right, we’ve got, yeah, like I say, half a dozen or a dozen clients. So we consistently do all of their project funding and you just get into a good rhythm and you become part of their team. And, and then you can, you know, if an issue comes up, it’s quickly solved because you’re all on the same team heading in the same direction. So yeah, I’d say in answer to the question of what makes us different, I’d say it’s, yeah. Just being able to provide money to developers when they need it. And being able to tackle things together as opposed to be combative.

 

Jessica Reynolds:

Yeah. That’s beautiful. It sounds like you’ve definitely had a lot of strategy and the state of the business around reputation as well. Which is probably why it’s been so long lasting. We all know that a lot of businesses don’t last, there is a lot of boom bust in the industry as well, and you’ve, you’ve made it through. So congratulations on that. So 10 years at the,

 

Dan Holden:

Well, as we know, Brisbane is a small town, and now that we’ve got, I guess, offices in Brisbane, Sydney, and Melbourne, it’s still that same philosophy of you know, it’s a small town and bad news travels quicker than good news. The bad news, I guess.

 

Jessica Reynolds:

Yes, definitely. I don’t know if you’re aware of the house collapsed in new farm. I’m sure everybody knows about it. No, you haven’t seen that one.

 

Dan Holden:

Oh, I saw something on social media yesterday. How’s it tilted to the side like that?

 

Jessica Reynolds:

Yes. Completely collapsed. So well, word travels very quickly. The amount of people that were sending that to me, I was like, oh, I didn’t even know you followed these things.

 

Jessica Reynolds:

But yeah, so it does travel fast, but I want to get into your book. So this is very cool. So you have just, you’re about to release a book as we talk. So that’ll be in early December is my understanding, and it’s all around construction, finance and educating people. Can you please tell us a little bit about the book and that process of writing it?

 

Dan Holden:

Yeah. Yep. So as you say, overnight success, I actually started at November, 2017, so it took me four years, but I probably wrote a big chunk of it back then. And, and then through the process of this year have spent a lot of time getting it, I guess, up to date and covering multiple cycles because as, as we’ve seen, you know, probably cycles go up and down and different factors influence. So, you know, I had to add a section about the construction costs going up and had to add a section about cheap money and you know, the low interest rates that we’re seeing at the moment. And but also, you know, what do we do when interest rates go back up to you know, banks lending at seven, 8% and that kind of stuff. So, yeah, it, it was actually good to let it kind of just stay for a while and see what else we could cover.

 

Dan Holden:

And so this year it went through yeah, two, three different editors and finished up literally yesterday it went to the printer. So the first copy hits my desk today at 10 o’clock, apparently. So I’m excited for that. And I get to hold it in my hands and get it done. But yeah, I guess in, in, in to cover the bulk of what we, what we do cover, it’s very much just sharing the knowledge of what I’ve learnt in the last 15 to 20 years of doing projects and funding projects. And it was probably more so about, you know, having conversations with developers each day, you cover a lot of things over and over again, I guess, and you sound a bit like a broken record sometimes because you’re covering the same things over and over again. So it was probably a way to, instead of talking one-on-one and having those conversations, one-on-one, it was a way to change that and have a conversation from one to many.

 

Dan Holden:

So to be able to get it out there and, and share it with people yeah, I’m excited by it. I took the weekend and read, literally cover to cover and yeah, got pretty excited. Cause it’s like, CRA, this is a, this is actually here and happening and yeah, I’m pretty sure, you know, I’d like to say, I hope people get something out of it, but I’m pretty sure they will. If you’re in the property industry, you’ll, you’ll learn something or you’ll remember something that you forgot. So, oh yeah. It’s, it’s pretty cool.

 

Jessica Reynolds:

Oh, like, again, congratulations. That is a huge achievement I’m really interested to know as well. How you even found time to finish this book off. You’ve got this big growing company and you finish a book.

 

Dan Holden:

Yeah, well, thankfully I was kind of just doing half an hour a day when I wrote it and it probably, you know, knocked the boat. I think it’s 60,000 words. I probably got to 50,000 words in the first three months. And then the hard part started, which is actually editing it and trying to say that what you’re saying with less words, and that was really tough. So I think it actually blew out to like 80,000 words at one point. And we had to just call her back. And also, I guess, you know, choose some bits that were probably a little bit, I’d say verbose or kind of that we’re going too deep. You know, it’s meant to be a bit of a conversation with people. Like I say, I was saying, having similar conversations with people one-on-one for the last 15 years that I’ve been doing this.

 

Dan Holden:

And so to try and do that and have that conversation from one-to-one to one-to-many, that was more the purpose of it. And so to some parts hop is going a little bit deep on, particularly around business models and strategies and you know, we’re Petra and capital and project pipelines and all this kind of stuff. Like I just, yeah, I went off on a bit of a tangent, so we had to kind of cut it short. So yeah, we will be doing a revision of the book Miami for March next year. And that will be a little bit more I guess, intense. We’ve also got some tools and checklists and stuff which are available online so that we can get an updated. So like due diligence, checklists you know, simple funding models, all that kind of stuff. And so that’s in the book, there’s a link to find them online so that people can still use that.

 

Dan Holden:

And even there, I want to add more things to go, okay, well, let’s have more of a discussion if you’ve read the book and your going online to get these tools that we’ve made available and resources, you probably are interested in more discussion. So we’re making some more content available online as well. So yeah, it’s, it’s, it’s interesting how much you can cover from such a simple topic. You just expand even a, like, you know, we cover sales and marketing and marketing strategies, and a lot of it is around development strategies. It’s, you know, and we’re seeing a big shift even in the last two years where people are doing a lot more luxury, luxury product previously. And, you know, I guess prior to that, two years ago, everything was get, pre-sales get bank funding. And that was like copy and paste. And I’d say five years ago, over 75% of our business were brokering all of the lines to the major bank.

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Dan Holden:

And now we’re doing less than 20% and that’s a big shift around, like I said, last two years, it’s been around luxury product. Now you’ve got to build it and then sell it. And people can, you know, I guess the gold coast is one example or some suburbs of Brisbane. There’s five projects going up and you’ve got to differentiate yourself to get the buyer excited and to get them paid top dollar. And so a lot of people, a lot of developers are taking the building so approach and getting them excited. And so even down to where funding, as small as two houses, side by side, as the lower end of the projects that we fund and we’re seeing developers get amazing process because I don’t sell until they’ve built the product, furnished, it, all the staging made it pretty. And then they have an open home and have 80 people through and then they get multiple offers and they get top dollar.

 

Dan Holden:

And you compare that to, you know, a pre project valuation. That might be an, an example, one we did in Solutia. I think the pre-project Val was one point nano and I sold it for 2.2, five that’s over a 10 cent increase. So if they had a pretty solid, I already got 1.9 mill that would have been happy, right. That would have made money. They would’ve delivered the project. Fantastic. No problems, but they built it with no pre-sales we funded it and then they ended up getting 2.25, and I think 2.3, two for the one next door. So they ended up getting 300 grand more per house. That’s like, they’ve doubled their profits. So you see people doing that. And we’re doing that also on larger projects. So we’re doing we did 10 houses recently like 10 in an estate data to state that like houses they’re like townhouses, but they’re luxury.

 

Dan Holden:

And so they’re now selling for about eight to 10% higher than the pre-project Val. So if they went and pre sold them, they would have got, as I said, due to my money, that would have been happy, but now they’re selling them when the trusses are up in the finishes board and a little sales office, they’re getting top dollar. And so you’re seeing that in the current market where the luxury product is, the focus is you’ve got to get people through it, get them excited, get them emotional, and that’s when they pay top dollar. And that’s how you maximize your profits. So we’re seeing a big shift in that project delivery and project funding approach from a number of developers. And that’s even in luxury apartments, locked down. The Southern gold coast was saying stuff, sofa four, 5 million apartment. Some of that selling off the plan because people are just so hungry to get it, but getting people walked through it, they’re, they’re definitely paying a higher price.

 

Jessica Reynolds:

So, you’re saying there there’s a classic case of risk versus reward going on here. So reducing that risk is really by having the strategy around the marketing, because you are taking a greater risk by not getting the pre-sales and then you’re getting that higher price. Is this something that you, you know, encourage, I guess I understand with lending and things like that, you’ll wanting to reduce your risk as well, as well as see people succeed. So how do you sort of balance that?

 

Dan Holden:

Yeah. So as a lender, definitely it’s I guess, a slightly higher risk to have no presales as a developer. And what we’re seeing at the moment, particularly construction costs going through the roof is people have created more risk for themselves by pre-selling because they’re pre sold at 1.9 million and now their costs have gone up and they’re, they’re literally doing it for fun, then 99 money. Whereas this, I had not had sales, they could be selling them for 2.2 closer to completion. I mean, a lot happens in 12 months. We’ve seen the market go up 15, 20% in the last 12 months. So if you pre-sold 12 months ago, your and your costs have gone up 10, 15%. There’s quite a few projects where the developer and the builder were doing it for no profit at the moment, but they’ll get it done and they’ll move on to the next project. And, you know, if nine out of 10 are profitable, you’re still overall profitable. So you’ve got to just, I guess take, take it and move on. But yeah, we’re seeing developers now who are pre-sold in in a bit of a bind. So I’m not saying pre-sales are bad. I’m saying, you know, sometimes it can work against you on we’re seeing that with with projects at the moment.

 

Jessica Reynolds:

No, your market. Excellent. So I’d like to end this with an observation and then a final questions. So my observation is I’ve been following you on Instagram for a while now, your personal account. And the thing that I have loved is you’ve recently been celebrating your wax birthday and you’ve been going from luxury, you know, island getaways to sleeping in a slag with your family. And I absolutely love when people can do that. It’s not for everyone. And I absolutely love that. So what I want to know from you is what is success to you?

 

Dan Holden:

Well, you’ve said it, yeah. Camping with the kids, having fun with the kids going that kind of stuff. And I guess post COVID, you know, so many people are able to work from home or work from their swag. Like I did up the coast last week, took kids out of school for a week and took them up camping. But I was still on the laptop couple of hours each morning and doing work. So I think that’s you know, given a lot of people, a bit of a shift of what success is that it used to be wearing a suit and gun at Eagle street and working in a big glass tower. And you know, now it’s probably a lot of people’s perceptions change on that. So yeah, I guess definitely successes. Yeah. Spending quality time with the family and friends and and also enjoying what you do, which you know, I guess quite a few of us lucky enough to do.

 

Jessica Reynolds:

Yep. No, you clearly do. You can feel your passion, you can hear it. And I can’t wait to see what you do in the next 10 years. Thank you so much for joining us. If people want to contact you, what’s the best way.

 

Dan Holden:

Yep. So Holden capital is that a website, the books available@constructivefinance.com that I use so they can log on, download the first chapter for free and have a bit of a look to make sure it’s for them and then purchase it through there. And it gets delivered through Amazon, I think within five days or whatever. So it comes out to you and yeah, we’ve also got a bit of a podcast series on there. I think we’ve done about 35 so far. I haven’t done one in about a year. I’m about to fire it up again, but in February after the break. Yeah. There’s a bit of learning in there. We interviewed some interesting developers and builders and, and different industry people. So definitely a bit to learn there as well.

 

Jessica Reynolds:

Perfect. Thank you so much.

 

Dan Holden:

Thanks Jess.

 

Jessica Reynolds:

Thanks for joining me on today’s episode of creating Australia. Don’t forget to subscribe and join us on our socials to keep updated on our latest content on creating Australia. I love talking about everything to do with people property in development. So if you have something you’d like me to explore, let me know by searching, creating Australia on Instagram or searching Jessica Reynolds on LinkedIn.