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The property development sector is fast running out of second-tier lenders after St Laurence found the economic environment made it too risky to lend any more.
Helen Mexted, St Laurence's general manager of funding and corporate services, said financing options for property development had become increasingly tight.
Asked where developers would get money, Mexted said this was a big issue. "You have obviously got a number of other lenders but it's quite a tough market," she said.
Strategic Finance, Hanover and South Canterbury Finance were alternative sources of money for some developers.
But the property development sector was under considerable pressure.
"There are not many lenders compared to what there were a year ago. It does certainly have an impact on the sector and it's quite a tight environment," she said.
St Laurence, the property-based funds management and finance company with more than $1.2 billion in assets, also manages listed entity National Property Trust. National's shares closed down 1c to 49c yesterday, down from a 52-week high of 78c.
The business has funded many large real estate projects, particularly office and retail developments and subdivisions.
This month, St Laurence Property and Finance and Auckland developers Greenstone Group announced a joint venture to develop a $300 million property development on the edge of the 110ha Mt Wellington quarry in Auckland.
John Dakin, chief executive of the Goodman Property Trust's manager, said trading banks might now consider filling the gap left by second-tier lenders but would charge higher rates to compensate for higher risks.
The exit of a large business like St Laurence from the sector could have grave implications, he said.
"This is serious and we think there will be less competition in the development business. That's not saying there won't be any competition but a number of businesses which previously had easy access to capital won't have that any more," Dakin said.
Goodman, with more than $1 billion of assets, is not funded by second-tier lenders but gets money from major trading banks.
Dakin said the almost complete loss of an entire sector of lenders had changed the development scene.
"It's remarkable how rapidly a number of finance companies have gone down," he said, predicting harder times for at least the next two years.
"We've had a big party and now we've got a hangover."
