14th of April, 2020

How we're responding to covid-19

The COVID-19 is constantly changing, and you probably have some questions about how the coronavirus, and the announced restrictions, are going to affect property developments over the next few months.

We’ve been monitoring this closely and wanted to address some of the potential challenges, but more importantly, the solutions we’re implementing to handle them to ensure our investors come out of this in the best shape possible.

Announced Restrictions

Restrictions to public auctions were announced on the 24th of March, but despite what you may think, this isn’t as big of a deal as it seems. We do not acquire sites through auctions, nor we do sell via auctions. All of our property transactions are conducted through private sale, and these have not been restricted. Sellers who were planning to sell via auction can simply sell privately, or utilise online auctions instead. Our sales team and sales partners will continue to conduct sales activities in compliance with any restrictions.
Thus far, all announced restrictions in regards to gatherings do not apply to us. As long as social distancing requirements are met, our office can remain open. However, we have already begun trialling working from home procedures to test and measure the effectiveness of our systems and processes and to date, we have not had any adverse effects on productivity. In the event that our office is required to close to comply with gathering restrictions, we will be able to smoothly transition to remote working. Construction sites are currently exempt from any restrictions, having been classified as an essential service by the relevant State Governments. As such our construction sites remain open, on track, and comply with social distancing requirements.
With many of our projects located interstate, we have local personnel appointed to manage those sites on our behalf. And whilst some members of our team would periodically visit these sites in person, interstate travel has been suspended till further notice. Regardless, remote visibility through video calls allow us to closely manage and monitor progress, so we do not expect any issues from suspending travel.

Other Potential Challenges

The production of materials is likely to be affected by COVID-19. Lockdowns and quarantines are common around the world, and lockdowns in China are the most likely to disrupt the production of building materials from suppliers. However, it will not be until the current reserves of materials are exhausted that these shortages will make themselves known. This may not happen for many months. Whilst there has been no direct impact on our sites due to material shortages, we are continuing to work closely with our nominated builders to identify any supplies which may be affected in future and sourcing alternate suppliers or replacement materials to use instead.

Shipping companies and the infrastructure used to ship bulk materials globally has been impacted. While shipping to Australia has not been restricted, disruptions to systems in other countries may have effects that do not manifest for some time. Again, we are working with our builders to preemptively solve hypothetical problems, by implementing contingency measures, before they become a reality.

If residential markets experience a significant decline in value the profitability of completed projects will be impacted. Thankfully property prices are quite resilient, and far less likely to be affected by volatility present in other markets. If property prices are affected the trend will be far less pronounced due to the illiquid nature of the asset class. With innovations such as online auctions surfacing, we expect that sale of property will continue throughout the COVID-19 crisis. The moratorium on evictions and changes to Australia’s foreign investment review framework may cool the investor market in the interim. Whilst we will continue to work with our extended network overseas, we have intentionally focused our sales campaigns on local buyers and owner-occupiers.
According to the Australian Banking Association, 98% of businesses with loans from an Australian bank have received some sort of relief. We have been meeting with our lenders, and will continue to meet with them, to discuss which relief measures we are eligible to receive. Banks are still issuing new loans, but they are changing their loan criteria. The option of private lending still exists, as does capital raising from investors. We will continue to source funding for projects as they approach construction so they can continue without delay. Ultimately, our focus is to ensure that each project has sufficient cash flow throughout the entire COVID-19 outbreak and beyond to maintain consistent progress.

For a financial safety net during this crisis, we recommend our Diversified Construction opportunity for reliable cash flow.

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