What sets Princeton apart from their competitors?
Looking at it another way………
What is Princeton’s true “point of difference”?
It is not possible for me to answer these questions without first providing some background context of what sets any business apart from its competitors in order to lead the pack with something so authentic and so measurable that it will either set them apart from their competitors or see them lose all credibility if they fail.
A business may have several things which sets it apart from its competitors but generally there is only one true standout point of difference upon which they will be judged. Why? Because a business which has the courage of its own convictions, will always tell existing and prospective customers what it will do differently and why their customers should use them over their competitors.
Now let’s look at four examples of companies that clearly demonstrate a true point of difference over their competitors and live and breathe that difference every day to set their business apart from their competitors and, in doing so, satisfy their client’s needs, arguably better than anyone else.
1. FedEx parcel delivery has grown to be the world’s largest parcel delivery service off the back of its simple mantra – “ON TIME” and with its tag line– “On time every time.” Isn’t – “On time” – the most important thing that we all want from a courier company? That’s the FedEx point of difference and what sets them apart from their competitors.
2. Goodyear Tyres has grown to be a market leader in Australian tyres off the back of its simple mantra – “SAFETY” with its tag line – “If it only saves you once a year – it’s a good year.” Isn’t – “Safety”– the most important thing that we all want from a set of new tyres? That’s the Good Year point of difference and what sets them apart from their competitors.
3. Bunnings Warehouse has grown to become the undisputed market leader in Australian hardware off the back of its simple mantra – “PRICE” with its tag line- “If you find it cheaper elsewhere, we will beat it by 10%.” Isn’t – “Price” – the most or one of the most important things that we want when we regularly shop for our hardware needs? That’s the Bunnings point of difference and what sets them apart from their competitors by a country mile.
4. Rolls Royce has grown to become the most iconic car brand in the world off the back of its simple mantra – “PRESTIGE AND EXCELLENCE” with its tag line – “compelling customer propositions.” Isn’t – “Prestige and Excellence” – (if you and I could afford a handmade-custom designed Rolls Royce) the most important things that we would want from the most prestigious car maker in the world? That’s the Rolls Royce point of difference and what sets them apart from their competitors, worldwide.
Princeton has been operating since 2012 and in that short period of time it has become known as a commercial lender who can think outside the box and provide – as its mantra says – “BESPOKE LENDING” with its tag line “tailored lending solutions.” Isn’t “Bespoke Lending” what we all want from a modern-day commercial lender? That’s the Princeton point of difference and what is setting them apart more and more day every day from their competitors.
Interestingly, having a parcel delivered by FedEx or a new set of Goodyear Tyres fitted to your car or buying goods from Bunnings or taking delivery of a new Rolls Royce are all examples of tangible products. In other words, you can see them, feel them and experience them for what they are and do. On that basis, one can argue that they are very transparent and much more easily compared with competitor products.
Obtaining a commercial loan on the other hand, is a great example of an intangible product (Intangible – “unable to be touched; not having physical presence.”) and so it is harder to compare with competitor products.
The money goes directly into your account and so you don’t see the cash and you certainly can’t feel the cash and you can’t use it instantly (it’s only an entry on your bank statement) like you would a product that has been delivered to your door or a new set of tyres fitted to your car or a product from Bunnings or a new car itself.
The true value of an intangible product, like a loan, is that once received, you have the financial power to then purchase goods and or services and or build something of value. All this presupposes, of course, that you can get a loan approved in the first place for the amount you want and with the terms and conditions that you want.
This is where a bespoke tailored loan would come in handy. Many borrowers make the mistake of believing that a good commercial loan is all about price. Whilst the interest rate is undeniably important, a good commercial loan is much more than having the best rate.
It is about talking to an experienced commercial lender who understands everything about commercial lending and knows firsthand that tailored commercial bespoke lending always gives the best outcomes over matrix lending to the borrower (Matrix- “prescriptive and or rigid”).
Importantly, Princeton has five very experienced commercial lenders, two internal and three externals, who form the Princeton Credit Committee. The combined experience of the credit committee members is over 150 years.
To allow all of what I have said so far to make sense, let me give you the following real examples of how Princeton has previously looked at various loan scenarios using bespoke tailored lenses.
Scenario – A borrower wanted to settle on the purchase of a large block of land and borrow 100% of the purchase price on the basis that the land has been rezoned and a DA approved since contracts were exchanged 15 months prior to the loan application being made.
(NB- It may surprise you to know that many lenders including our four pillar banks will only lend a percentage of the contract price irrespective of whether the property to be purchased has genuinely increased in value or not. Princeton, on the other hand, will lend a percentage of the purchase price or valuation whichever is the higher).
Solution – In the case in question, the contract price was $1.1 million, and the borrower estimated the current value to be $1.6 million based upon the rezoning of the land and the DA approval. Princeton asked its valuer to value the property based on the new zoning and the DA approval and Princeton’s valuer – put $1.5 million as a current market valuation of the property.
Princeton decided to lend 70% of the valuation amount which was $1,050.00. The borrower accepted $1,050,00 and put in the extra $50,000 themselves to settle the contract. Importantly the borrower’s bank would only lend 65% of purchase price which was $715,000 or $335,000 less than the Princeton offer. That’s bespoke lending in action!
Scenario– A borrower had finished the construction of a large development consisting of 45 residential units and the construction financier (not Princeton) wanted the facility repaid in full. 25 units had been sold and were awaiting settlement once the linen plan had issued from Council and a final occupancy certificate for the development had been obtained.
The loan facility had only just expired, and the current lender would not extend it, in order to allow the borrower to sell the remaining 20 units, notwithstanding that the loan had been conducted in an explementary manner.
Solution– Princeton quickly determined that the 25 units which had been sold were collectively sold for the construction lenders valuation amounts (+/-) a very small variance between individual unit sales as compared to the valuation figures which were assessed 15 months prior. From Princeton’s point of view, those sales, the majority of which had exchanged in the previous six months, validated the value of the remaining units.
Princeton did the simple maths of working out what the residual debt would be to the outgoing lender once the 25 units were settled and the net proceeds paid to the construction lender.
That amount was $14.725 million. Next, Princeton’s valuer, valued the remaining 20 units at $21.750 million and so Princeton offered the borrower a loan for $15.225 million for 12 months to be applied as $14.750 million to repay the construction loan lender and $500K as an interest buffer. The loan to valuation ratio was 70%.
Princeton required the borrower to commit to two sales per month at a minimum sale price of 90% of the valuation amount of each individual unit. Out of each sale Princeton would take the full net proceeds of sale after deducting the costs of sale.
The Princeton loan was repaid after nine months with the last few unsold units discharged and the titles to the units given back to the borrower. That’s bespoke lending in action!
Scenario– A borrower wanted a 12-month loan to consolidate several property loans into one loan and then undertake an orderly sale of enough of the real property(s) to repay the debt in full. The borrower also needed to capitalise interest for the term of the loan.
The borrower was feeling stressed as his current lender was putting pressure on him to reduce the overall debt at a far greater rate than was possible, in order to achieve the maximum sale prices for the underlying security property(s), in order that the borrower could be left with a good surplus after his then current lender was repaid.
Solution – Princeton assessed that the borrower had five properties that needed to be sold. Princeton’s analysis showed that the gross realisation of the five properties should be around $6.9 million. The borrower needed $4.5 million to repay its current lender and that amount represented a loan to valuation ratio of 65.2%. Princeton then added an assessed amount to cover the interest costs on the proposed facility, assuming that one property was sold every two months.
On that basis, the Princeton loan was increased by $360K to $4.86 million so that the new LVR was now 70.43%. Finally, Princeton suggested a 12-month loan facility to allow time for the 5th property to settle.
Interestingly, all properties were sold, and the loan was repaid in 10 months and the borrower pocketed a surplus of $1.85 million. That’s bespoke lending in action!
If you have a construction project that needs funding, then call Princeton and see how they can tailor a bespoke lending solution for you. Construction projects are Princeton’s speciality and there are many ways in which Princeton can help you!
In summary, if you want to experience how bespoke lending works, call George Gadallah from Princeton directly on 0411 614 694.
John (JT) Thomas
This opinion piece is provided by John (JT) Thomas, a 45-year veteran of the financial services industry and since 1987 a specialist in commercial mortgage funds. Considered by many to be the father of the modern commercial mortgage fund sector, JT helped establish and then managed – for 17 years – what became the largest and most successful commercial mortgage fund in Australia – The Howard Mortgage Trust – with assets exceeding $3 billion. Under JT’s stewardship, investors never lost one cent of their investments and indeed, investors always received competitive monthly returns. JT was also Chair of the $40 billion mortgage trust industry sector working group.
JT has been proudly involved with Princeton for eight years and sits on both the Princeton Credit Committee and the Princeton Compliance Committee as well as being an advisor to the Princeton Board.