Ockham Residential

National Business Review - Interest-free finance for buyers of new Grafton apartments

Developers of a new Auckland apartment block are building without pre-sales and offering 15% interest-free 10-year vendor finance to owner-occupiers. The 60-unit Hypatia residential development in the central suburb of Grafton is being developed by Ockham Residential and Ockham Foundation, a not-forprofit charity focused on education.

One-third of the apartments will be sold under the interest-free vendor package for the six-level development. The interest-free loan is for the amount equal to 15% of the purchase price. Ockham Residential director Mark Todd says the development can start without presales as the company is well funded by private equity and the vendor finance package is a genuine business deal.

“We have set up a facility, so owner-occupiers who have a 20% deposit can take the interest-free loan, go to the bank and negotiate a 65% mortgage, instead of the usual 80% mortgage. “This will result in a weekly reduction of 18.75% on their mortgage servicing costs for up to 10 years,” Mr Todd says. The vendor finance package can be paid back at any time within the 10-year time limit either at the greater of the issued value or 15% of the apartment’s value at the time of repayment. Mr Todd says vendor finance can only be offered in a charitable environment and it has been done to benefit the Ockham Foundation. “We have been working on this concept for 18 months with tax lawyers and charity specialists.”

“The objective is to build a capital base through property, such as Dilworth has done over the past 20 years, to carry on charitable work in the education field. It was always our intention to do this when we set the business up.” Mr Todd says he and his business partner Benjamin Preston want to prove they can do something different as well as show apartment development can be profitable.
“If we are successful in proving this concept, we will use it on other projects. It is a sensible piece of business and banks like it as it lowers funding costs for buyers. Potentially it will allow us to scale up the foundation."

Entry prices for the two levels of basement parking and four levels of one, two and three bedroom 48sq m to 145sq m apartments start at $427,000, going up to $2 million for the most expensive. There will only be eight apartments at the most in the development under 50sq m. Many banks will not lend on apartments under 50sq m. Mark Todd and Ben Preston set up Ockham Investments the day after Lehman Bros crashed at the beginning of the global financial crisis. They named their company after Ockham’s Razor (a principle devised by mediaeval monk William of Ockham who suggested the simplest answer is often correct). In keeping with their theme, they have given their developments the names of famous mathematicians and physicists. The latest development is called Hypatia after a 5 century Greek philosopher and mathematician.

Mr Todd says the foundation’s money is spent on scholarships to foster a sense of justice in students for social problems. “There are myriad solutions for social problems but debate has been narrowed on the subject largely as a result of the wealth gap. “We want to encourage students to think for themselves on these and other issues,” Mr Todd says.